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 Joe DiNardi, Senior Vice President of Investor Relations. Please go ahead.

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've also provided presentation slides to facilitate today's call, so let's move to slide two. 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 factor 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 statements 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 three, it's my pleasure to turn the call over to our CEO, John Heller.

Thank you, Joe, and thank you everyone for joining us today. I'll begin with a discussion of our third quarter results and updated outlook, followed by a review of our business development performance and how we're executing our strategy to create long-term value. I'll 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's 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 67 cents, 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 26 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 four, 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 1.1 times and trailing 12 months of 1.3 times, an ending backlog of $48 billion. and others. Funded backlog increased 10% year-over-year to $6.2 billion. Our key reading indicators remain strong, with pending awards of $32 billion, including two-thirds new business to momentum, 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 for 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 buildouts 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. And 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 Mentum provides research, engineering, and modernization for advanced aeronautics development. Turning to slide five, 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 and certain instances of procurement delays, we believe that the underlying drivers of demand, including a well-supported Department of War 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 source 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 2017. 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 and 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 six. In prior quarters, I have focused on three accelerating growth markets, nuclear energy, digital 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 seven, 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, momentum 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 eight. 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 cementum 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 UK 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 two-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 a clear revenue synergy with our merger and could not have been won without the global reach, capabilities, and customer access of the combined entities. 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 a momentum 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.

Thank you, John, and good morning, everyone. I'll now discuss the third quarter financial results, which demonstrate continued strong operational performance, improving profitability, and solid cash generation. I'll also review our capital structure highlights, as well as our updated fiscal year 26 guidance and preliminary expectations for fiscal year 27. With that, let's begin with an overview of our financial performance on slide nine. As John mentioned, Third quarter revenue totaled $3.5 billion and came in slightly below our expectations as a result of the impact from process 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 mixed shift and strong operational performance. Adjusted diluted earnings per share of 67 cents 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 transition at Devastature 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 and 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 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 three 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 three 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 26 full-year outlook. Based on year-to-date performance and our current visibility into the fourth quarter, we are updating our fiscal year 26 guidance. We now expect revenue between $13.8 and $13.95 billion, which removes contributions from new business awards under protest and our latest expectations on material 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 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 25 actuals. We are also increasing guidance for adjusted diluted earnings per share to a range of $2.40 St. Mary's, and a number of others. We are maintaining our free cash flow guidance between $525 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. Let's turn to slide 13 to discuss our preliminary views for fiscal year 27. From a revenue perspective, as John indicated, we now expect a 3% impact from NASA's workforce directive. In addition, consistent with our commitment to allocate resources to higher return opportunities, we've made an intentional decision to exit a few no-to-low margin programs, notably in domestic-based operations, that 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 accreted 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 improvements 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.

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're 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. Thank you.

I wanted to start out, if I could, looking forward as your commitment to de-lever to a reasonable range comes to a conclusion. How are you planning to deploy your capital as you look into the following fiscal year.

Hey, Toby. Good morning. How are you? Travis here. Well, thanks for your question. Obviously, we're pleased with the progress we've 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 three 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 market state. So really pleased with the progress. As you can imagine, we've 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. So in terms of how we deploy the capital, I've stated in our prepared remarks, it should and will be determined based on what presents the best long-term return for Inventum and our shareholders. So that obviously requires we be realistic and disciplined about Both, you know, amensums, risks, and opportunities, but also about those of the companies we would look to potentially acquire from an M&A perspective. And I think also it should require that we take, you know, a responsive look at where stock price and valuation are and taking a look at things like intrinsic value and making sure that we're obviously taking that into consideration as we make those decisions. So, as appropriate and as we move throughout the year, We'll 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.

And what I would add to that, Toby, is John, thanks for the call. We're 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're getting, all organic. So I think what we're showing is the enterprise of Amentum has the ability to go to market in our core growth areas today with the organic investments we're making and does not require and the rest of the board. Thank you. And I was wondering if you could, it might be early I know, but you gave a preliminary look at fiscal, the next fiscal year

Do you expect top-line organic growth in the fiscal year after that? And 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.

Yeah, so 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 hadn't 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 27 has that trend continuing. And then directly at your question, Looking ahead, as John really highlighted in his prepared remarks and obviously in response to your prior question, we're 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. And at the same time, we're 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. So, you know, all together, when you look at the portfolio next year, you know, aside from, you know, the impact we're seeing from NASA, it's growing at that mid-single-digit rate. And, you know, we're really excited about the trajectory and what that means for Amentum in the medium and long term.

And we're really just keeping our heads down on our strategy, and it's working well. The combination of business development momentum, we're seeing margin expansion. We're generating very strong free cash flow. 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've already done that, which means even with several months to go in the year, we've already exceeded what we did last year. So 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're managing the business and where it's going to go from here.

Your next question comes from the line of Seth Seifman with JP Morgan. Seth, your line is open. Please go ahead.

Good morning. This is Rakawan 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?

Yeah, good morning. Obviously, you know, it's a little bit early to get into any segment-specific guidance, but what I would say at a macro level is is, you know, 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 those segments.

Great. Thank you. And then 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?

Well, we have a strong pipeline of opportunities that we're working globally. We certainly see opportunities in countries like Saudi Arabia is open to Amentum with our brand, global brand. We definitely get inbounds and understand where growth is going to happen in the near term. And we are very active. Obviously, we've been involved in 17 nuclear power plant construction projects in the UK. We have a great brand in Europe, working in various countries across Europe now with our Rolls-Royce partnership. So we're very well established in the European continent in 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.

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

Hey, thanks for the question. For 27 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 over, call it, the next six to 12 months? And then if, I know you didn't want to go into segment detail, but maybe talk about just the level of on-contract growth that you're assuming as part of that number. Thank you.

Hey, good morning, Colin. This is a few months earlier, obviously, than we provide outlooks in the prior years. But 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 FY27 to come from existing or follow-on work. So that's a really good place to be in terms of a level of visibility. This early, FY26 isn't over yet, so we've still got a few months to go in terms of the $32 billion of pending awards that John mentioned, and seeing how those get adjudicated in the coming months will obviously have an impact on FY27. Both are really good about the visibility we have as we sit here today, and we'll continue to keep you updated as we move throughout the year.

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've seen some new business delays, award delays because of that, which we deem is 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. And then, of course, we've had a significant number of protests on new business, new, 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 the middle, this time next year. So we still have some time for that to continue to play out. But overall, I think it'll be real positive for the profitability of the business.

Got it. Got it. Thank you. And then maybe if we could talk about portfolio shaping. Travis, if you could 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.

I think there's an inherent portfolio shaping going on in what's happening organically in the business right now. I mean, some of our current contracts, we're seeing increments or sub-elements of the contract effort shift, as John mentioned, to higher margins, some 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 OTAs, other transactional authorities, and commercial service offering type procurements. And our team's been very responsive to that. So I think even without some kind of inorganic type activity organically, that shift is happening. And as John mentioned, it's coming through in the contract mix as we see more and more of the portfolio migrate towards fixed price. So there is kind of this steady trend of organic portfolio optimization happening.

Yeah, and I think Travis mentioned this, you know, a lot's changed in the last 24 months. And you think of FY25, that was a year of integration. Our business development pipeline was pretty much already set before the merger. But we've had now almost two years to really work with the combined enterprise that the new momentum represents, which has opened the doors to a lot of opportunities. Thank you for joining us today. 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 I think in the long term, we're excited about where that growth will come from.

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

Thank you. Morning.

Morning.

Morning.

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? I mean, is that NASA that just needs to come out and otherwise, you know, 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?

Yeah, so as we talked about before, you're always going to see some kind of quarter-to-quarter fluctuations in terms of both funded and unfunded backlog. But at a high level, you know, we're really pleased with, as John mentioned, the business development performance and getting to that kind of $48 billion in backlog. And as you noted, you know, funded backlog is up 10% year over year. We've always said kind of, you know, despite the kind of fluctuations you can see from quarter to quarter on that, you know, we feel comfortable in that five to six, you know, five to six to $7 billion worth of funded backlog range, range providing, you know, the right visibility we need. St. Mary's, and a number of others.

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%.

Sure. Maybe I'll just back up and level set quickly and kind of get to the specifics of your question. But as John mentioned, NASA is taking... This initiative to bolster the scientific engineering expertise as they think about a bigger mission set, more bold mission set into the future, you know, programs like Moon to Mars and all of that. And so 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. But 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 we now, you know, NASA's firmed up their plan. They've shared the plan with us, and we have a detailed view on that. You're correct. The insourcing goes to the upper bound of what we originally thought could possibly occur, but now that we understand and kind of sum it up the impacts, we have good visibility on the 3% impact, and we're confident in that estimate. Just to better characterize, we don't have all the contract actions in hand. Some contract mods right now are in negotiation and progress, and Nass has 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 a minimum, so the EBITDA impact will certainly be less than the revenue. And it's also true that some of the remaining work on our contracts will transition to Fairfax price consistent with the St. Mary St. Mary St. 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 IEIQ mechanisms that will allow NASA to mobilize momentum as these big missions come into reality. So we absolutely see continuing opportunity in the mid to long return.

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

Hey, guys. Good morning. I want to do a 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 27? Or could it also be a headwind early next year? Thanks.

Sure. Yeah, so you, I think you covered well the dynamics that we're seeing as we look to close out fiscal year 26, you know, roughly, you know, $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 kind of Concentrated in one particular area or another. And just the timing that it's taking to get through the process, including some that are in corrective action, you know, just having that impact on the year. And then, you know, 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 FY26. I would say that as we look into Q4, you know, 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 is seasonally, you know, our highest revenue-generating quarter, so the 26% contribution for the full year that you see there is consistent with historical trends. And 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 the 27. As we put those preliminary expectations out there for 27, we've contemplated, you know, our latest thinking and views and what we're seeing in terms of the award environment, in terms of what we're seeing and how long it takes to get through protest or corrective action. So I think we've factored that in in an appropriate way and how we see 27 play out.

Okay, fair enough. Thanks for that. And maybe just zooming back a little bit, like what needs to happen to kind of bring this all together, right? You've had having 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?

Yeah. We talked a lot about nuclear. I think we have seen consistent success there over the past two years. We feel really good about the outlook of our pipeline and the opportunities. But I think seeing those mature over the next couple of years to be funded into construction, and 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, but it represents a very significant opportunity for Amentum and our partners. But and 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. But a project like that is going to take years to see matriculate into something that really impacts the business. So 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 can see more projects awarded and brought online into the future.

Your next question comes from the line of Trevor Walsh with Citizens. Trevor, your line is open. Please go ahead. Great. Good morning, everyone. Thanks for taking my questions.

Maybe just a couple higher level, more macro for both the digital infrastructure and the nuclear opportunities. Love to hear your opinion or thoughts on this, Steve, but great to see the digital infrastructure wins overall that you know 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 – I would say that

You know, as a practical matter, we have a great track record of being able to find entree with a client, demonstrate significant value add, and then scale with a client. And so we're 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 entree with a second and 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 St. Mary's, and so forth. And I think we've been able to bring a little bit of an improved solution of that, where kind of engineering with systems integration, being able to stitch all that together in a way that, you know, optimizes schedule and minimizes delivery risk for the project. And so there's just a real receptive market there. So we absolutely see the continued opportunity to scale. And to your point about resource allocation, we are incrementally biasing resources there. We continue to make Kuhn, and many other 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 infrastructure.

Awesome. Thanks for the call, Steve. That's great. Maybe just one quick follow up, and John, maybe best for you. Appreciate the perspective around the kind of anticipated growth rates for the nuclear energy revenue opportunity. And I understand kind of the dynamics of these deals and these contracts just generally where, you know, in the planning stages, revenues may be, you know, kind of a little bit, you know, smaller scale or slower to develop. And then as the project really kicks off, it kind of in the back years is when you really see the top line impact. Are there any other 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.

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 and we see other opportunities. I think the real and that we are starting to see some progress with the Savannah River announcement would be, I think, a tremendous milestone. But that is progress in the United States. 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. So 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. So 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. So that's going to be a key milestone. The Savannah River project is one of those engagements that can get two 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 Momentum. 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. But there are other OEMs that are putting tremendous investment, and the US 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 United States. So as we see continued progress and start to see some additional SMR projects greenlit, that will point to a real window of opportunity for our business to really accelerate.

Your next question comes from the line of Mete Robert with RBC Capital Markets. Mete, your line is open. Please go ahead.

Yeah, hi. Was this maybe for Ken Herbert with RBC?

Hey, Ken. Hey, Ken. Good morning.

Yeah. Yeah. Hey, good morning. I 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 Higgins, et cetera. Are you seeing 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?

Thanks for the question. I think that if you look at today at the portfolio, it has – it's actually shifted just incrementally less, but, yeah, approaching 50 percent of the portfolio and Steele, and a number of other people. We're very much engaged in enduring no-fail missions. 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 DeMille, and a number of others.

Or that might be a little ambitious.

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 the mentum from what we're hearing in terms of the overall defense spending. If that were to occur, it would certainly be a tailwind to how we're viewing that part of the portfolio. And we do think As I said earlier, that a lot of the things we're doing and the capabilities that we have are directly aligned with what this administration is trying to accomplish. So obviously, we're 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 infrastructure. So I think our expectation naturally over time is that this will make up a larger percentage of the portfolio. But as Steve said, that's not to say that we don't see growth opportunities across our core, including in national security.

And Ken, we really love this question because it gets to kind of the strategy. And I think this touches on one of the real differentiators and strengths of Amentum, and that is our global presence. And that Amentum is a true global company if you think about the peer set. We have 7,000 employees in the UK. When you look all across Europe, Australia is a huge presence for us. Australia announced that they're moving ahead with infrastructure projects for the upcoming nuclear infrastructure that they're going to have with, you know, nuclear subs. Dementum's going to be a part of that. I mean, our position in Australia, our position in the UK, our position across Europe on a defense standpoint. So when we think of defense, and you asked that question, We're thinking globally. And we, of course, we're not trying to be in every country in the world. We have a great presence in the UK. 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're going to be focused there. But we like the broader opportunities that exist in that defense market.

As a reminder, if you would like to ask a question and join the queue, please press star one to raise your hand. Your next question comes from the line of Andre Madrid with the U.S. Bancorp BTIG. Andre, your line is open. Please go ahead.

Yep, thanks. Good morning. I was wondering if you can comment on what specific budget scenarios are contemplated in the 27 preliminary outlook. I know you kind of I touched on it slightly there, but I wanted to hit on it a bit more pointedly.

Yeah, so our base case is, I'll say, stable budget environments. And 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. So I'd say, especially within kind of the range of outcomes that we anticipate, we factored in You know, a relatively consistent budget environment.

Got it. And then on the exiting of low to no margin work, I think you mentioned that this is, you know, 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. So or is this just purely based on the margin profile?

It is not related at all to the global threat environment. It's domestic here. And 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 loaded no margin kind of base operations programs here in the U.S. And 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.

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