Amentum Holdings achieves $14.4 billion revenue in FY 2025, expects 3% growth in FY 2026 amid strategic wins and strong backlog.

Ladies and gentlemen, thank you for standing by. Good morning and welcome to Amentum's fourth quarter and full fiscal year 2025 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 now like to turn the call over to Nathan Rutledge, Senior Vice President of Investor Relations. Please go ahead, sir.

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 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. In addition, we will discuss pro forma financial measures prepared in accordance with Article 11 of Regulation SX as well as 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 pro forma and 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 three, it's my pleasure to turn the call over to our CEO, John Heller.

Thank you Nathan. And thank you everyone for joining us today. Fiscal year 2025 marked Amentum's first full year as a public company. A transformational year that helped define who we are, our differentiated position in the marketplace and where we're going. It was a year of disciplined execution, strong performance and meaningful progress across every. Part of our business. I am so proud of our people and what we've accomplished together. At Capital Markets Day in August of last year, we established our objective to successfully integrate and deliver end to end advanced engineering and technology solutions to government, international and commercial customers across key end markets including defense, nuclear energy, intelligence and space. And we're executing exactly as we had envisioned. As a result, Amentum has established a solid foundation for sustainable growth. This morning I will detail how Amentum has proven our ability to operate with agility and deliver for our customers and create long term value for our shareholders. I will focus on three key areas. First, an overview of how this exceptional year unfolded and how it positions Amentum for a promising future. Second, highlights from an impressive quarter including strategic awards and key performance metrics. And finally, our strategy to drive Amentum's growth in fiscal year 2026 and beyond. Let's begin on slide four, which captures the core of our fiscal year 2025 performance centering around Amentum's people, operational excellence, financial performance and effective execution of our strategy. First, our people fiscal year 2025 tested our resilience and our people delivered against the backdrop of evolving customer priorities. Our team stayed focused and delivered without pause. Our leadership maintained its steady focus on the fundamentals protecting the long term health of the business, ensuring continuity for our customers, and ensuring that our people continue to thrive regardless of the market environment. Through a dynamic operating environment, our teams continue designing and delivering critical solutions for our customers. That resilience is reinforced by our ability to to hire thousands of skilled professionals worldwide, maintaining attrition well below the industry average, and in our continued recognition as an employer of choice. We take pride in being a company where people want to build their careers while having a positive impact on our world. To that end, we're continuing to expand our Centers of Excellence which provide specialized technology to drive innovation and progress. For example, we recently opened our Nuclear center of Excellence in Oak Ridge, Tennessee which serves as a strategic hub for nuclear expertise for North America. We've launched Technical Connection Teams and mobilized an AI expert community network supporting upskilling and innovation at every level across the globe. The integration of our legacy businesses was one of the most significant in our industry's history, a massive undertaking that demanded focus, collaboration and discipline across every part of the company. Thanks to our team, we have exited all transition service agreements, completed all of our key integration milestones on time and within budget, and are on track to deliver at least $60 million in net run rate synergies by the end of fiscal year 2026. That operational readiness anchored in the strength of our people and culture was one of momentum's defining advantages and it translated directly into strong financial performance. As a result, we met or exceeded guidance across every key metric, underscoring our consistency and discipline. Starting with revenues which increased to $14.4 billion, representing pro forma growth of 4%, adjusted EBITDA of $1.1 billion, an increase of 5% year over year. Adjusted diluted earnings per share of $2.22 was up 11% and free cash flow of $516 million, supporting acceleration of our debt reduction objectives, bringing net leverage to 3.2 times. These results demonstrate the strength of our operations and the reliability of our business model, and taken together, this year's achievements underscore the strength and breadth of our platform. In short, we executed with precision and strength, delivering on our commitments while positioning momentum for sustained success. Please turn to Slide 5 Our disciplined execution and focus on growth translated into a series of strategically significant wins that strengthen our position across key markets. During fiscal year 25 we submitted $35 billion in bids, achieving a full year book to bill ratio of 1.2 times and a quarterly book to bill ratio of 1.6 times. Our backlog grew 5% reaching over $47 billion and at year end we had $20 billion in proposals awaiting awards. Our quarterly book to bill ratio was driven by $6.4 billion in total bookings, reflecting continued demand in several strategically important wins including the U.S. space Force range contract, a new $4 billion 10 year single award IDIQ. This award, now adjudicated and booked into backlog, is one of the largest services contracts ever awarded by this customer. It cements Amentum's leadership in space systems and technology and solidifies our position in this fast growing market. In the uk. Sellafield selected Amentum as a remediation partner for the site under a $1.8 billion 15 year contract where we are leveraging our advanced decommissioning solutions, systems engineering and next generation nuclear material processing and disposition capabilities. Another exciting win came from the civilian side of our space portfolio with the NASA Cosmos contract which is a nine year $1.8 billion joint venture award to deliver critical mission operations, systems and training solutions, supporting NASA's current spaceflight programs and enabling future deep space exploration. In the quarter, we were notified that this award is being protested, therefore it is not included in our fourth quarter backlog or book to bill results. We are confident in the strength of our bid and look forward to its resolution. And finally, we secured nearly $700 million in awards providing a range of advanced engineering and technology solutions for intelligence customers, including a win developing and delivering AI enabled software coding solutions. Together, these results underscore the trust that our customers have placed in Amentum to execute complex programs at scale and we enter fiscal year 2026 with strong momentum, preparing to bid at least $35 billion. Turning to Slide 6 fiscal year 2025 brought significant change not just in Washington, but across the globe and throughout our industry. The transition to a new administration introduced a new set of priorities and objectives impacting contracting timelines, funding cycles and future spending direction. For Amentum, this environment reinforced the strength and resilience of our business model. Our work is anchored in mission critical long duration programs that are essential to national defense, energy security and space superiority. Our diverse portfolio, which includes 20% of revenue tied to commercial and international work, provides a degree of insulation from sector volatility. Combined with our strong backlog and robust pipeline, we have high visibility into future revenues. This structural agility allows Amentum to rapidly adapt to shifting priorities and while delivering consistent results for customers. As the government refocuses on efficiency, speed and accountability, Amentum is well positioned. Our scale, performance record and proven operational discipline make us a trusted partner to our customers. For investors, that combination represents a low risk, high visibility opportunity at a time with consistency and reliability are at a premium. Simply put, momentum represents stability in a period of transition. Let's turn to slide 7 to discuss Amentum's growth strategy. Our core growth areas, where we have long standing leadership positions across large, stable mission critical areas, provide dependable revenue, strong cash flow and predictable returns and they remain central to the steady performance that defines our company. These areas, underpinned by several core capabilities are deployed across multi year, often multi decade programs and some notable areas include RDP and E intelligence, operations and analysis, homeland security and border protection, environmental remediation and defense engineering, logistics and modernization. As an example, you can see this in work on our ITEAMS program in Indopacom where we're strengthening C5ISR capabilities for the US Armed Forces by applying rapid prototyping and digital engineering methods to accelerate speed to mission. It's also reflected in our support to the Naval Surface Warfare Center Crane where we integrate next generation sensors and applied model based systems engineering to enhance reliability and life cycle management. Whether we're leveraging machine learning solutions in support of customers across homeland and national security missions, delivering digital engineering tools on behalf of intelligence customers, or deploying advanced environmental solutions around the world, our core growth areas deliver consistent performance and create the platform from which the rest of our business continues to scale turning to slide 8 complementing that foundation are our accelerating growth markets powering our future growth space systems and technologies, critical digital infrastructure and global nuclear energy. They are growing rapidly, fueled by generational investments in national security, energy resilience and advanced technologies such as AI, robotics and automation. They are also margin accretive, relying on advanced engineering, AI enabled integration and high value technical expertise. And they are global, creating opportunities across the us, uk, Europe and other allied nations where Amentum's credibility and scale make us a natural choice for government and commercial customers seeking a trusted partner. Now let me provide a bit more detail on these markets. First, the rapidly evolving market for space systems and technologies is generating demand signals from both the national security community and a fast growing commercial sector. Our work in launch infrastructure, systems integration and spaceflight operations positions momentum at the intersection of government and commercial space supporting missions that will define the next generation of space exploration and defense readiness. Next, we're excited about our growing work providing digital infrastructure solutions. Here we're supporting advanced telecom systems, deploying next generation data center solutions and engineering the backbone of networks for national security and commercial customers alike. For example, commercial awards in fiscal year 2025 encompass the design, deployment and optimization of 5G networks and critical infrastructure management through strategic partnerships and capabilities including MDSE enabled platforms often leveraged from work in. Our core growth areas. We're future proofing networks and data centers to meet the demands of low latency data intensive mission environments. By combining our engineering depth with turnkey connectivity and resilient cloud architectures, Amentum is positioning itself as a trusted provider of mission critical digital infrastructure for the world's most demanding users. And finally turning to slide 9 as I reviewed during last quarter's call, Amentum is well positioned to lead the next generation of nuclear power. Our teams deliver full life cycle nuclear engineering capabilities including design and licensing to construction, operations, modernization and life extension and decommissioning. The global resurgence of nuclear energy driven by energy security needs and the explosive demand from artificial intelligence and next generation manufacturing is creating a market with substantial tailwinds. For Amentum, this represents a multi decade opportunity for sustained double digit growth and meaningful margin expansion. I look forward to providing future updates on our work in the nuclear market and diving deeper into the space systems and technologies in critical digital infrastructure markets on future earnings calls. When you combine the durability of our core growth areas with the momentum of our accelerating growth markets, the result is a portfolio that delivers both stability and scalability. Our lower risk long cycle businesses generate the cash flow and institutional strength that allow us to incubate high growth opportunities without compromising financial discipline or balance sheet flexibility. This is how we think of a mentum strategy for growth a well positioned portfolio that consistently delivers growth, margin expansion, sustainable free cash flow and compounding returns year after year. With that, I'll turn it over to Travis.

Thank you John and good morning everyone. I'm excited to discuss with you today another outstanding quarter performance that caps off what has been an exceptional first year for Amentum as a publicly traded company and to share our outlook for fiscal year 2026, which reflects momentum we're seeing across the business and underlying growth across all key metrics. As John noted, our strong finish to the year demonstrates the continued resilience of our diversified portfolio and was enabled by the extraordinary efforts of our dedicated employees around the world. Their unwavering commitment to execution and operational excellence deliver both exceptional outcomes for our customers and financial results that surpassed our expectations. With that, let's begin with an overview of our financial performance on Slide 10. I'd like to again highlight that while our GAAP results provide an accounting view of Amentum's legacy business excluding cms, today's discussion will focus on our non GAAP results. Compared to the pro forma results from fiscal year 2024, these figures offer a combined view of the new Amentum business and provide performance insights on a more comparable basis. Revenue Amentum accelerated to end the year with $3.9 billion for the quarter and $14.4 billion for the year. The strong performance was driven by continued demand and year over year increases in both digital solutions and global engineering solutions and exceeded our expectations as a result of non labor timing and higher customer spend ahead of the government shutdown on an underlying basis. After normalizing for the previously disclosed additional working days, joint venture transitions and divestitures, revenue growth was approximately 4% for the quarter and 2.5% for the full year. Adjusted EBITDA of $300 million in the quarter resulted in $1.1 billion for the full year, representing annual growth of 5% and adjusted EBITDA margin expansion of 10 basis points. Full year margins, which were impacted by a higher non labor mix in the fourth quarter, benefited from strong operational performance in both segments and from our cost synergy initiatives. Adjusted net income was $154 million for the quarter and $542 million for the year, which generated adjusted diluted earnings per share of $0.63 for the quarter and $2.22 for the year. Adjusted EPS grew 11% year over year, consistent with the strong revenue and Margin expansion performance Moving to our reportable segment Results on Slide 11, Digital Solutions generated revenues of $1.5 billion for the quarter and and $5.5 billion for the year, representing 11% and 7% growth respectively. The year over year increases were driven by the ramp up of new contract awards led by continued strength in the commercial digital infrastructure market and additional working days, which more than offset expected contract ramp downs and the divestiture of Rapid Solutions. 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%. Turning to Slide 12, 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. The year over year increases were driven by new contract awards, growth on existing programs and additional working days, which more than offset the expected contract ramp downs and the impact from JV transitions. In the fourth quarter, 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%. Turning to Slide 13 to cover our cash flow and capital structure highlights fourth quarter and full year free cash flow of $261,516 million respectively, were slightly better than our expectations and reflect strong cash earnings and our continued unwavering focus on working capital efficiency. This performance enabled additional debt repayments of $550 million during the quarter, bringing full year repayments to $750 million and reducing our net leverage to 3.2 times. We ended the year with $437 million in cash, an undrawn $850 million revolver and no near term maturity. With an enhanced balance sheet position, we now have an accelerated and clear path to achieving net leverage of less than three times by the end of fiscal year 2026. Looking ahead, we will remain disciplined in our approach, maintaining a prudent capital structure that enables flexible and opportunistic deployment. Whether we are investing to drive sustained organic growth, reduce debt, pursue accretive strategic acquisitions or return capital to shareholders, our goals are the same maximize free cash flow per share and deliver strong compounding shareholder returns. Simply stated, we're committed to retaining the financial strength that enables momentum to grow, invest and create long term value while doing so with precision, prudence and purpose. On slide 14, let's now discuss our fiscal year 2026 outlook based on our bottoms up forecast process for fiscal 2026, we expect revenues in the range of 13.95 to $14.3 billion or 3% growth at the midpoint after normalizing for the additional working days. JV Transitions and Divestitures previously mentioned, the ramp up of new program awards and on contract growth is expected to more than offset the wind down of certain historical programs and impacts from the federal government shutdown. While the majority of Amentum's work is mission critical and continued without interruption, our guidance contemplates an approximately 1% impact as a result of reduced spending in Q1 on certain programs and from delays in award decisions. With less than 10% of revenues expected to come from new business and with $20 billion of submitted bids awaiting award decision, we have good visibility and are confident in our position. Starting the fiscal year, we expect adjusted EBITDA in the range of 1.1 to $1.14 billion, reflecting underlying growth of 5% at the midpoint, driven by margin expansion of approximately 20 basis points. As we realize the benefits of our cost synergy initiatives as well as contract mix and operational improvements, we expect adjusted diluted earnings per share of $2.25 to $2.45, up 12% at the midpoint on an underlying basis which assumes 245 million weighted average shares outstanding and a tax rate of about 24.5%. And finally, we expect free cash flow of 525 to $575 million or 12% underlying growth at the midpoint driven by higher cash earnings and reduced interest from our debt reduction initiatives. As it relates to timing, we expect first quarter revenues and adjusted EBITDA to be consistent year over year on an underlying basis, followed by quarterly sequential increases as newly awarded programs, including the key awards John mentioned earlier, ramp up throughout the year. Free cash flow is also expected to follow normal seasonality, with the majority generated in the second half of the fiscal year as a result of fringe benefit and payroll timing and as a result of expected strong collections in the fourth quarter. Given our alignment with the government fiscal year end, additional key assumptions for our guidance are included on slide 14 in today's presentation posted on our Investor Relations website. Wrapping up on slide 15 as we conclude a transformative year for momentum highlighted by exceeding our financial commitments in a dynamic market environment, advancing our growth objectives with key strategic wins and a 1.2 times book to Bill and surpassing our cash flow and deleveraging expectations, we are excited about the road ahead. Our portfolio is strategically aligned with enduring global trends, customer priorities and tailwinds in accelerating growth markets. While pleased with our current progress and achievements, we remain focused on delivering our strategic objectives and driving long term value for all stakeholders. With that operator, please open the line for questions.

Thank you ladies and gentlemen. We will now begin the question and answer session.

Thank you.

To ask a question you may press a star followed by the number one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press a star followed by the number two. Your first question comes from Colin Canfield with Cantor. Please go ahead.

Hey, thank you for the question. You discussed perhaps the level of kind. Of timing or one time margin in cash flow that enters in the quarter and then how much Section 174 benefits were included in fiscal 4Q versus the guide and then maybe talk through if there are any kind of pull forward or push out dynamics around margins in cash related to the merger. Thank you.

Hey Connor, good morning. A little bit to unpack there. Obviously all focused on cash maybe starting at the top. Obviously we're pleased with our year end cash performance which as I said in our prepared remarks, you know, slightly exceeded our expectations as a result of the strong revenue performance that we saw in the year as far as one time items in the quarter. Obviously we talked about the additional working days which generated additional cash around $20 million is the impact from that. So that would be kind of an item to normalize as we head into FY26 and then moving into FY26. We're obviously really excited about the cash flow trajectory. We're expecting as I said 12% growth at the midpoint of our guidance on underlying basis. And we do expect to receive some benefits from the OBBA tax law changes around immediate expensing of R and D, also smaller benefits but still benefits around fiscal interest and capex bonus depreciation. So altogether that's about a $35 million benefit to tax cash payments and FY. So put all that together and again just you know right along where we expected to be at this point driving that double digit free cash flow growth that we committed to a capital markets day and excited to continue to head in that trajectory. Got it. And then maybe level setting us on the multi year margin progression in terms of the synergy targets. I think one of the thesis that kind of folks are focused on is essentially shut down related dynamics pushing everything one year to the right but still fundamentally happening. So, so perhaps if you could talk through kind of how you think about FY26 margin progression, the synergy contribution and perhaps kind of the multi year framework set out at the investor day. Sure. So as we talked about at capital. Markets day, our goal, kind of a. Long year, you know, long term goal by FY28 is to get to 8.5 to 9% margins. And as we sit here today, we're exactly where we thought we would be. You know, cost synergies were obviously part of it, but we drove 10 basis points margin expansion in FY25 in our actual results. And the midpoint of our guide for FY26 is another 20 basis points. So you know, all in all, 30 basis points in the first two years together is exact exactly the trajectory we thought we thought we would be on. And then as we head into FY27, obviously we'll have the full year impact. From all of our cost energy initiatives. And as John said, we're on track with all of our integration activities, including cost synergies and will exceed $60 million in net run rate cost synergies by the end of FY26.

And I think the other part that we talked about on the call and we introduced for the first time out of our overall two pronged strategy of growth and that to us is really what this story is all about. As we started out a year ago, we knew this would be a transition year this year, you know, integrating, identifying the real opportunities, the white space opportunities, the growth opportunities that neither of those of the companies we put together could go after. And we really strongly set our sights on putting a strategy together that can leverage the broad enterprise of momentum. We talked about our core markets which were very, you know, we're leaders across those core markets which gives us great opportunity for sustained growth. But it's about the accelerating growth markets that we've identified. They're strong already. We're leaders there as well. But it's only 4 billion of the $14 billion company. And we think there the growth opportunities are stronger and the margin accretion opportunities are also stronger. So driving focus in those three accelerating growth markets across space systems and technologies, critical digital infrastructure and global nuclear energy all will result in margin improvement. And that's, you know, that's why we're still very excited about the targets we set out and the goal of 8.5 to 9% by 28.

Got it. Maybe speaking in a third. If you could just update us on how you think about kind of the timing, magnitude and multiple of any potential divestitures as well as the timing and magnitude of the upcoming SLS award. Thank you. I'm sorry, repeat the second part of the question. The what award? I didn't catch all of that. Oh, sorry. SLS. So there's 4 billion in the reconciliation bill. It's been three years since we've gotten a pretty major SLS award and the competitive dynamics of that race are obviously a national security focus as well. So I just want to make sure we're level set on.

Happy to. Yeah, thank you for the repeat. Happy to provide just a little bit of color on the Space Force Range contract. It is a topical issue for us right now because we've gotten through successfully protest period. And our teams are busy work right now, today, even as we prepare to assume operation for that large contract in December. So really excited about the Space Force Range contract. Really just a quick synopsis at the top level we're on that contract about making sure the US has assured access to space. Actually there was a great article just yesterday in the SpaceNews publication where they interviewed Colonel Chapman, who's the commander of Space Launch Delta 45. And he talked about how the launch cadence just continues to ramp. And both on the eastern and western range, we're working with Apollo era infrastructure. He highlighted how Congress has appropriated nearly $1.5 billion be invested between now and 2028 to begin to upgrade that infrastructure. And so for us at Mentum, we're coming in at an exciting time to that contract. So we're there certainly to maintain and sustain and support this launch cadence, but we're also there to engineer, upgrade and integrate all the capabilities needed for the future. So very excited about how that's going. To play out beginning in December. Phase in underway.

Yeah. So you know, just to be clear, that contract cleared protest. We are executing on that contract today and Steve mentioned very excited. The first part of your question just about portfolio shaping. We were excited to have the opportunity with rapid solutions in our New Zealand business and you know, non core, very clear non core elements of the business. But I would say today we're very excited about our entire portfolio. The capabilities we put together, we're leveraging across our entire business. You know, very important for us as we look at the company as an enterprise and don't create silos. And we're leveraging across all different capability areas as we look at every opportunity we're bidding. So right now we're excited about the portfolio we have. Obviously we go through strategic planning every year. We look at where the largest growth opportunities are and we will obviously look if there are any non core assets and identify those. But I would say right now we're real excited about what we've put together and it's working.

Thank you. And the next question comes from Brian Gizwale with Raymond James. Please go ahead.

Yeah, good morning. Thanks for taking my questions and nice job on the print here. I want to dig in a little bit to these growth areas. John, if I could. Can you remind us, you know, how you play throughout the entire kind of nuclear life cycle, how big that business is today and maybe as you lay out these broad ambitions for nuclear power in the future that have been put forward when you'll start to see some of those things inflect for your business. Yeah, sure. We highlighted this last quarter as well. So I do, I would reference everyone. To go back to that quarter.

There's a additional slide there. But we kind of brought in one of the slides from last quarter into this quarter that kind of actually helps answer that exact question. So for us, what I would say is we play mission critical role across the entire nuclear energy life cycle. So it starts with design into construction and commissioning, all the way through operation, maintenance and decommissioning. And it's really across all sectors of the industry which starts with new development, construction and operation of gigawatt size reactors. It also covers SMRs. A lot of activity in the marketplace today around the world on developing that capability, that new design capability so that we could have small modular reactors existing in the United States and around the world. And we're working with a large number of these developers to help bring those capabilities to the market. That's going to take some time. A lot of engineering work right now through likely this decade. But then the other area is really on plant life extension and upgrades. We're seeing the Three Mile island news other areas across the United States where we want to ensure that we have the electricity we need to fuel the AI data center demands and other demands of robotic manufacturing and just overall electricity demand generally. It's important part of the economy. It's been deemed a national security priority by this administration and we're seeing a lot of good policy coming out of this administration that's driving this renaissance within the US. Great, really helpful. I want to talk also maybe about one of the other growth areas that we're really excited about on the space side of things. Can you maybe help us understand how much of that business is commercially oriented in defense given there's just so much activity in both those areas and Maybe if you could help us think a little bit about how Golden Dome from a ward presence in a launch activity perspective would drive your business and maybe the timing of that, whether that's, you know, part of 26 or part of an unfolding 27 story that's yet to yet to reveal itself. Yeah, the Today at Edmonton, we're just super excited about where we're at in this market and the continuing accelerating growth opportunities. Just to start. I think most people are familiar with the leading presence we have supporting the government with NASA and the whole civilian space exploration and all of those activities. A lot of momentum colleagues right now preparing for the Artemis 2 mission that's scheduled for early 2026. And we're excited to be such a critical player in putting astronauts back in space and really excited about the preparation for that mission. Everything from integrating the vehicle launch control software, mission control software, and I think that our recent win on Cosmos, where we'll have now an omentum team at NASA Johnson Space center becoming engaged in mission operations and all of the things that extend through the complete life cycle of the mission, kind of speaks to our strength in supporting that customer and their missions. Of course, that contract currently is undergoing corrective action, so we're not underway yet. But that's a really good one. As far as your question about Golden Dome, just to give a bit of insight there, we really think we have a great right to win in terms of being a part of the solution that the US Government is developing today. We're heavily engaged with the Missile Defense Agency in helping to take the missile defense system digital, if you will. It's allowed us to deploy things like the hypersonic next gen satellites for detection. We're doing things like virtual engineering, digital methods to integrate new technologies into the system, that capability and that expertise. We're also deploying for the NORAD mission, which is the North American Aerospace Defense Command. And so we're really excited about those capabilities. And the way Golden Dome comes to life for us is right now the government is moving out on a shield procurement. Shield is the acronym for a large Indefinite Delivery/Indefinite Quantity (IDIQ) vehicle. It will be a multiple award vehicle, $150 billion. We are engaged in that procurement like many other in the industry. And so our proposal is in. We're looking forward to the adjudication of that. And I think that specific to your. Question, as we get toward deeper into FY26, we'll begin to see specific task orders and tasking come out under that shield vehicle. So we're excited about the opportunity There. So really cutting across national security as well as civilian space. There's a lot for us to draw on in the portfolio. I think the last thing I would mention and it comes into play even with our new Space Force range contract. John, hit it in the prepared remarks. But so many of these contracts put us at the intersection of government and commercial space and we have a great track record of working with those commercial partners. So we think that proven capability is going to be instrumental for the government to accomplish all of their objectives that. They have for the space domain.

Thanks very much. I'll jump back in the queue.

Thank you. And just a reminder again, please limit yourself to one question, one follow up. The next question comes from Toby Sommer with Truist. Please go ahead. Toby. You might be on mute.

The company has reduced leverage faster than we anticipated. When do you think you'd be at. A point where you may be able. To go on offense with capital deployment and start incorporating inorganic growth into the story? Hey Toby, good morning.

Yeah, certainly we're pleased with the leverage. Trajectory sitting at 3.2 times here one year in to our merger and public company transition ahead of where we thought we would be. I'd say we remain committed to getting to that target that we sent out at Capital Markets day last year of less than three times on debt levered. And we're on track to do that by the end of FY26. As you know, our kind of cash timing 2H will be back half weighted. So we'll get there in the second half of FY26. And so obviously now, you know, it's right around the corner. Right. So we're starting to shift our focus into what that could look like. It will be obviously dependent on what opportunities are out there and available at that point in time. But as I said in my prepared remarks, regardless of, you know, what we do at that given point in time with our capital deployment strategy, you know, we'll be looking to maximize free cash. Flow per share. Could be part of that, but it also could be continue to pay down debt or returning capital to shareholders. Certainly as we get out of this. Kind of two year restriction period of. The rnc, looking at share buybacks when it's trading at something below the intrinsic value of the stock could be an option. So we look forward to getting there in 2H26.

What I would put a bow on that discussion is really the fact that we have these accelerating growth markets that we see as organic opportunities given the what we've created in the new momentum. And we think we can leverage and exploit those three areas of space systems and technologies that Steve talked about and the opportunities that are upcoming there that are organic. The critical digital infrastructure, which we will talk about on future calls, we haven't dived into that, but really about helping the AI economy succeed, cybersecurity and then global nuclear energy, which again we feel very confident that we have the organic capabilities to exploit. That doesn't mean we wouldn't look at M and A in the future to help us accelerate those, but we're confident we can win and grow in those areas today.

Thank you, I appreciate that. And I just sort of have a modeling question since some of the growth areas have already been discussed of interest us other timing or mix issues for. Us to contemplate near term and modeling. The quarterly cadence of revenue and ebitda across fiscal 26.

So just as we look at the time phasing throughout FY26 Q1 will obviously have the impact from from the government shutdown, but that will normalize throughout the year. So we do expect quarterly sequential increases in both revenue, profitability and cash flow. For that matter, maybe just to provide. A little bit more color, we see Digital Solutions as the predominant driver of growth for the company in FY26. Obviously Space Force range contract is in that segment and that'll be ramping up as we grow throughout the year on that contract. And some margin expansion in Digital solutions may be a little bit more modest than what we expect to see in Global Engineering Solutions, but we do expect some revenue growth in Global Engineering Solutions as well due to continued ramp up of some new work as well as on contract growth. And that's where we believe a lot of the margin expansion will come from in FY26. So you can think about FY26 kind of quarterly sequential increases as we move throughout the year. Thank you very much.

And the next question comes from Mariana Perez Mora with Bank of America Fisk ahead.

Good morning everyone. Morning. I wanted to follow up on the nuclear opportunities and the prepared remarks you mentioned double digit growth and margin accretive type of work. When you talk about these margins, are they accretive because they are coming like significant EBITDA pure to the contract or is mostly because a lot of them come through non consolidated like joint venture type of EBITDA added to the segment and then as a follow up to that when we think about these opportunities, how fast can they actually come? For example, on the 20 billion that you have in the pipeline expecting to be awarded, how Much of that is related to nuclear. Yeah, I'll take the first part of the question.

Marina, Good morning, John. Maybe you can tackle the second part of that. When we look at the front end nuclear energy market, it's more of the former as it relates to margin expansion, not unconsolidated joint ventures. A lot of that work tends to come not only in the US commercial, but also international. Right. And due to the nature of the work and our capabilities and what we're providing there, it does tend to be margin accretive to the overall portfolio. Not to say that especially on kind of back end environmental remediation, decommissioning, there could be, could be some joint venture opportunities that could also be margin accretive. But as we look to the future. And where we expect the growth to. Come from out of that part of our portfolio, it's certainly not JV consolidation, it's more of the nature of work.

Yeah, we talk about this market, the global nuclear market. First of all, we are in this market today, globally, in the United States, all across Europe, Japan. We are currently delivering capability across that entire life Cycle represents about 17% of our business today. So very substantial. We are a leader both in the United States and across Europe and recognized and brought into Japan because of the work that we have done in our history. So for us, it's a real business delivering real strong margins today. As we talk about kind of the. Nuclear renaissance that is happening, driven by real demand for electricity and AI and the expansion of data centers to enable our AI economy, the demand is real, but nuclear takes time. You have to do significant design work. Planning and then you go into construction. In the gigawatt sized plants which we have traditionally worked. We've been involved in every nuclear power plant constructed in the UK in its history. We have great expertise in the United States. We've just not seen an industry that has been operating on a regular cadence. But there is absolute support from the current administration as well as industry and that there's to bring more of this capability online. So President Trump laid out executive order saying wanted to see 10 more gigawatt plants under construction by 2030. I think that's a achievable goal, but it will take a lot of work. And we are one of the leaders that is capable of supporting that achievement, working with the companies in the industry that have the designs that could be used and to deliver that on smrs. It will take a little longer. We are in the phase of working with companies to actually put the designs together and then Approve those designs so that they can be certified and approved. Designs that can then move into construction. So that's going to take more or. Less the rest of this decade to move the SMR capability to a point where we would see projects going into construction. But there will be quite a bit of engineering work between now and then.

Thank you so much. And then as a follow up to margins, fourth quarter and fiscal 26 margins came a little bit lighter than expected according to what you said in the investor day. Besides the nuclear opportunity that will come with this accretive margins, what are the other drivers that will get you to the 8.5 to 9% that you expect to have by 28?

Certainly, as John talked about, the accelerating growth areas in aggregate, not just global nuclear energy, but also critical digital infrastructure in space systems and technologies in total are margin accretive to the portfolio. And as we see those outpace growth of the rest of the portfolio in our core growth areas, that will lead to margin expansion. In addition to obviously the cost synergy initiatives that we've talked talked about and a little bit of Q and A on that today that those will drive, call it 30 to 50 basis points as we move in through FY27 into FY28. So those combined are the predominant drivers of the margin expansion.

Thank you so much.

The next question comes from Andre Madrid with btig. Please go ahead.

Yep. Good morning everyone. Thanks for my question. You know, Doge came to an earlier than expected end. It seems, you know, probably eight months. Ahead of schedule there. I think previously you were anticipating that maybe there's going to be 1% headwind going into 26 based on policy changes. I see that there's a 1% headwind based on the shutdown. Is it just shifting towards that where it's like maybe you could have clogged some back on the policy shift side given the end of Doge. But it's now the headwind from the shutdown. I'm just trying to understand the moving pieces there. Should we expect kind of both layered. On top of each other or. So.

I would, I would think about them. Andre is not related at all. You know, we obviously went through the administration change, Doge, all of that and throughout 25. And we did call out the approximate 1% impact of the portfolio that was back half weighted. We'll see some noise of that continuing and kind of throughout the first quarter or two here of FY26, but nothing significant to call out and separate and independent of that as we see in times of government Shutdown in the past, obviously this one was a little bit extended, you know, more than we've seen in the past. But you know, some disruptions to spending on contracts and then some delays in the procurement environment is the 1% that we called out for this fiscal year. With all that being said, still feel good about the trajectory of the underlying business, you know, excluding that government shutdown impact, you know, 4% growth at the midpoints on revenue above mid single digits on EBITDA and obviously double digit on EPS and free cash flow despite those dynamics that are, you know, occurring.

Got it, got it. And then maybe, I mean just in terms of debt pay down, you're still. Got a ways to go, a little. Ways to go until you get to. Less than three turns. I mean, how should we think about. The pace of that through the year? Is it also, you know, are you guys thinking of going a step further? Should we think it's, you know, still. A sizable portion of free cash flow. For the year or.

Yeah, so the predominance of our cash flow as will follow normal seasonality and be generated in the second half of FY26, which is when you'll see us start to get to below the three times net leverage that we talked about.

Got it, got it. Maybe I could squeeze one more in. I mean you talked about organic investments. I mean which areas do you think are poised for the most?

Well, we talked about our core markets. We still very comfortable with our core markets. So we're looking at investing there as well as those three accelerating growth markets. So all of those areas still represent. Real estate strengths to the business. And yes, I think we highlighted in the strategy where we're focused, those are our priority areas. Got it, thanks.

And the next question comes from Ken Herbert with RBC Capital Markets. Please go ahead.

Yeah, hi, good morning. I wanted to see first on the, the 26 and maybe midterm growth outlook, can you, can you get more specific on what kind of growth you're expecting in I guess from the accelerating growth portfolio as you outlined it here? As we think about sort of the 3 to 4% organic growth in 26, are you @ the high single digits for that market, the accelerating growth businesses and then maybe how much does that accelerate into 27 and 28? Yeah, so I'll start and then John, you can feel free to add in. So for FY26, obviously absent the government shutdown as we've talked about from a revenue perspective, expect, you know, underlying growth of 2 to 5% or sorry, 3 to 5%. Right.

And that's kind of right in line with where we thought we would be at this point in time. And then as we kind of transition and start to benefit from all the pipeline and things that we bid as a newly merged company in the accelerating growth markets that John mentioned in his prepared remarks, obviously we think that will accelerate not only as we move through FY26, but also into FY27 and beyond. So those will start to tick up. And you know, awards such as Space Horse Range, we mentioned a Sellafield Award is also in this accelerating growth markets. Those will continue to ramp up as we move into the back half of 26.

Yeah. Steve talked about some of the opportunities I think that we're seeing in the space market that we think will adjudicate this year and therefore impact next year in a more significant way. And I think the same as we think about the global nuclear energy market, we continue to see an uptick in activity which will accelerate this year through next year. So we should see a higher pace of activity in that market as we think about 27 and 28 as well. And then, you know, the digital infrastructure, we have strong activities in working with the hyperscalers on helping with design and development of upgrades to data centers, as an example on telecom, you know, outfitting 5G networks and beyond. So we see areas like this will also continue to expand for us as we continue to reach into other hyperscalers with these capabilities and push the growth of those into 27 and 28 as we kind of break into new customers with these offerings. Great, that's helpful. And just if you could remind us what's the recompete risk or recompete exposure you have here as part of fiscal 26.

We'Re really confident in kind of the composition of revenue. In our FY26 guidance. Over 90% of it will be coming from firm and follow on work. So less than 10% from new business and it's less than 5% recompete risk. Great, thanks. Thanks Travis.

Thank you. And that is all the time we have for questions. I would like to turn it back to John Heller, CEO for closing remarks.

Thank you. As we enter a new year, we're encouraged by our performance and confident in the path forward. Our strategy remains firmly aligned with long cycle, mission critical markets and we remain agile to meet the evolving needs of our customers. I want to extend my sincere thanks to our employees, particularly those who were impacted by and those who worked tirelessly to support our customers during the government shutdown. Their resilience and professionalism exemplify what makes Amentum a trusted partner. We are well positioned to capture growing demand in our core growth areas and our accelerating growth markets and to deliver sustainable long term value for our shareholders. Thank you for your continued interest in momentum. We look forward to sharing our progress in the quarters ahead. We wish everyone a safe and joyful holiday season.

Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect it.