Amentum Holdings, Inc. (AMTM) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A reveal a strong financial performance with record backlog and pipeline, optimistic growth in nuclear and space markets, and strategic margin improvements. Despite some management vagueness, the positive guidance on revenue and profit growth, especially in the nuclear sector, and the expectation of higher-margin work indicate a positive market reaction. The company's strategic focus and robust growth potential in key markets like nuclear and space further support a positive sentiment.
Key Financial Performance
Revenue $3.2 billion, reflecting normalized growth of 3%. The growth was driven by the ramp-up of new contract awards in critical digital infrastructure and Space Systems and Technologies markets.
Adjusted EBITDA $263 million with robust margins of 8.1%, a 40 basis point year-over-year increase. This was enabled by strong program performance, reduced indirect spending, realized cost synergies, and disciplined expense management during the government shutdown.
Adjusted Diluted Earnings Per Share $0.54, up 6% year-over-year. This increase reflects lower interest expense driven by the company's debt reduction initiative.
Digital Solutions Revenue $1.34 billion, representing 4% growth on a reported basis and 8% growth after normalization. Growth was driven by the ramp-up of new contract awards, particularly in commercial programs and critical digital infrastructure.
Global Engineering Solutions Revenue $1.9 billion, with underlying revenue consistent with the prior year after normalization. Revenue from new contract awards offset the expected ramp-down of certain historical programs.
Global Engineering Solutions Adjusted EBITDA $160 million, reflecting an 80 basis point year-over-year increase in adjusted EBITDA margins to 8.4%. This was enabled by prioritizing higher-margin growth opportunities, disciplined program execution, and cost synergy initiatives.
Free Cash Flow A use of $142 million in the first quarter, impacted by an additional pay cycle and temporary collections timing due to the government shutdown and holiday closures. Collections rebounded strongly in the first 5 days of the second quarter.
Backlog $47 billion, growing 4% year-over-year. This includes $7 billion in funded backlog, up 23% from the last quarter. The growth reflects consistent performance and strategic wins in high-margin markets.
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Operating Highlights
Nuclear Energy: Amentum secured nearly $1 billion in awards in Q1, including partnerships with Rolls-Royce for small modular reactors in the U.K. and Czech Republic, a $730 million contract with EDF Nuclear Power in the U.K., and a $207 million contract in the Netherlands for planning and engineering services for power plants.
Space Systems and Technologies: Amentum is positioned in a $90 billion market projected to grow 9% annually. They are involved in satellite systems, launch operations, and satellite communications, with contracts supporting missile defense, human exploration, and deep space R&D.
Digital Engineering: Awarded a $995 million U.S. Air Force contract for unmanned sustainment and a $120 million DISA Compute-as-a-Service contract for scalable computing power.
Global Nuclear Energy: Amentum is expanding its role in nuclear energy markets in the U.S. and Europe, leveraging technical expertise and securing significant contracts.
Space Systems: The company is capitalizing on growth in satellite systems, launch operations, and satellite communications, driven by increasing demand for integrated systems and mission operations.
Revenue Growth: Achieved $3.2 billion in revenue, reflecting normalized growth of 3%.
Backlog Growth: Industry-leading backlog grew 4% to over $47 billion, with $23 billion in proposals awaiting award.
Operational Efficiency: Adjusted EBITDA margins improved to 8.1%, supported by cost synergies and disciplined expense management.
Strategic Partnerships: Partnership with Rolls-Royce for small modular reactors and other collaborations in nuclear energy and space systems.
Focus on High-Margin Markets: Prioritizing growth in nuclear energy, space systems, and digital infrastructure, which offer attractive margin profiles and long-term growth potential.
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Risk or Challenges
Government Shutdown Impact: The longest government shutdown in history negatively impacted the company's performance during the quarter, affecting revenue and cash flow timing.
Collections Timing: Temporary delays in collections due to the government shutdown and holiday closures resulted in a use of $142 million in free cash flow for the first quarter.
Supply Chain and Program Ramp-Downs: Revenue from new contract awards was offset by the expected ramp-down of certain historical programs, which could impact overall revenue growth.
Regulatory and Protest Delays: Approximately $2 billion in proposals already won are under protest or awaiting corrective action, delaying revenue realization.
Economic and Market Uncertainties: The company faces uncertainties in global markets, including potential economic downturns and geopolitical risks, which could impact demand for its services.
Debt and Leverage: The company is focused on achieving a net leverage of less than 3x by year-end, but high leverage could limit financial flexibility in the short term.
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Guidance & Outlook
Revenue Expectations: Reaffirmed fiscal year 2026 revenue guidance in the range of $13.95 billion to $14.3 billion, reflecting healthy underlying organic growth.
Adjusted EBITDA: Guidance for fiscal year 2026 adjusted EBITDA is between $1.1 billion and $1.14 billion, with expectations of quarterly sequential increases.
Adjusted Diluted Earnings Per Share: Guidance for fiscal year 2026 adjusted diluted earnings per share is between $2.25 and $2.45.
Free Cash Flow: Guidance for fiscal year 2026 free cash flow is between $525 million and $575 million, with approximately 25% of to-go free cash flow generation expected in the second quarter.
Market Trends and Growth: The space systems and technologies market is projected to grow around 9% annually over the next 5 years, driven by higher launch cadence and increasing mission demand. The global nuclear energy market is showing robust demand signals, both overseas and in the United States.
Capital Deployment: Targeting net leverage of less than 3x by the end of fiscal year 2026, enabling a more flexible and opportunistic capital deployment posture.
Backlog and Pipeline: Backlog of $47 billion, including $7 billion in funded backlog, up 23% from last quarter, with 95% of revenue expected to come from existing or recompete business.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you discuss the free cash flow progression through the year and the potential impact of selling receivables?
A:The Q1 cash performance was impacted by timing-related factors, including an additional pay cycle and a government holiday closure. Collections in the first week of Q2 were $100 million higher than the same period last year, indicating a rebound. The company is confident in achieving full-year guidance with a midpoint of $550 million in free cash flow. Q4 is expected to be the strongest quarter due to alignment with the government fiscal year-end. The company also leverages an AR factoring program to manage working capital.
Q:Can you refresh the award outlook by end market, particularly focusing on unfunded awards?
A:Funded backlog increased to nearly $7 billion, a 23% rise from Q4. The company has $23 billion in pending awards and expects to submit over $35 billion in bids this year. Key awards are anticipated from accelerating growth markets, including over $1 billion in awards in the global nuclear energy business. The company has achieved five straight quarters of book-to-bill ratios of 1x or greater.
Q:How will the recent nuclear business announcements contribute to revenue and profit growth?
A:The nuclear business, representing over $2 billion of the $14 billion portfolio, is expected to contribute positively to margins over time. Recent awards include contracts with EDF, the Netherlands, and Rolls-Royce. The U.S. nuclear market is accelerating, with projects like SMRs gaining momentum. However, it may take 2-5 years for peak revenue opportunities to materialize due to the long timelines of nuclear projects.
Q:Is there an embedded favorable mix shift from a margin perspective in the bids and pipeline?
A:The company is prioritizing higher-margin work in both accelerated growth and core markets. There is a shift towards a higher percentage of fixed-price work, as reflected in the contract mix composition in the 10-Q. This strategic shift is expected to unfold over time.
Q:How should we think about the cash requirements for joint ventures going forward?
A:Q1 saw abnormally large contributions to equity method investments due to ramp-ups in joint ventures like Fort Smith and Hanford. This level of contribution is not expected to continue throughout the year. Returns of contributions are also anticipated as programs mature.
Q:What drove the nearly 100 basis point margin improvement in Global Engineering Solutions?
A:The improvement was driven by prioritizing higher-margin work, mix benefits from the government shutdown, cost synergy initiatives, and strong program performance. The company expects full-year margins to align with the midpoint of guidance, with a potential top end of 8.2%.
Q:How applicable are your nuclear capabilities to industrial gas turbine power projects?
A:The company is focused on nuclear infrastructure and does not see industrial gas turbine projects as a primary opportunity. The focus remains on bringing nuclear projects online to meet long-term energy needs.
Q:Can you discuss the structure and potential of the DISA Compute As-a-Service contract?
A:The contract is outcome-based, providing scalable compute capacity and power for DISA. It aligns with the government's modernization efforts and could be a replicable model for other opportunities.
Q:What is the impact of the government shutdown on margins and revenue?
A:The government shutdown caused a $150 million impact in Q1, but this is not expected to recur. Additional working days in subsequent quarters and ramp-ups of new contracts are expected to offset this impact.
Q:What are the key indicators for tracking progress in the space market?
A:The company is focused on missile warning systems, missile defense, space domain awareness, and command and control. Recent wins include the U.K.'s hypersonic program and the COSMOS contract with NASA. The company is well-positioned in durable spending areas and holds key contract vehicles like Shield.
Q:What is the timeline for U.S. nuclear market acceleration?
A:The U.S. nuclear market is expected to see significant progress by 2026, driven by SMR development and strong government and commercial support. The company is well-positioned to capitalize on this resurgence.
Q:What are the opportunities and challenges in NASA contracts under new leadership?
A:The company is aligned with NASA's goals under new leadership, focusing on cost constraints and schedule imperatives. Current roles include supporting the Artemis II mission. The company sees opportunities in NASA's focus on rebuilding internal talent and modernizing contractual provisions.
Q:How are you positioned in the Golden Dome Shield contract?
A:The company is already contributing to missile defense and space domain awareness through existing contracts. It holds a position on the Shield contract and expects increased activity by 2026.
Q:What is the book-to-bill ratio for accelerating growth markets?
A:Accelerating growth markets have contributed significantly to the company's book-to-bill performance, with highlights like $1 billion in nuclear awards in Q1. The company continues to see robust bookings in both core and growth markets.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the size of each of the four space end markets, citing challenges in segregating revenue. They also did not provide a detailed breakdown of the book-to-bill ratio for accelerating growth markets, instead offering general statements about their contributions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Amentum contract
SATCOM
Slide Amentum
Slide discussion
Space Systems
Systems Technologies
architecture
cadence
communication
constellation
demand mission
demand satellite
duration
economy
effort
energy market
energy space
engineering sustainment
experience
exploration
launch system
launch volume
life cycle
market Amentum
market Slide
market demand
missile warning
mission space
orbit
outcome
position Amentum
proposal
propulsion
role partner
satellite launch
security mission
space infrastructure
space missile
sustainment mission
tracking
AMTM Transcript
Amentum Holdings, Inc. (AMTM) Q1 2026 Earnings Call Transcript
Positive2-10
The earnings call summary and Q&A reveal a strong financial performance with record backlog and pipeline, optimistic growth in nuclear and space markets, and strategic margin improvements. Despite some management vagueness, the positive guidance on revenue and profit growth, especially in the nuclear sector, and the expectation of higher-margin work indicate a positive market reaction. The company's strategic focus and robust growth potential in key markets like nuclear and space further support a positive sentiment.
Amentum Holdings, Inc. (AMTM) Q4 2025 Earnings Call Transcript
Positive11-25
The earnings call summary and Q&A indicate a positive outlook with raised revenue and EPS guidance, strong market positioning in space and nuclear sectors, and strategic investments in growth markets. Despite some management ambiguity on divestitures, the overall sentiment is optimistic, with expectations of margin expansion and revenue growth in accelerating markets. The raised guidance and strategic contracts like the Space Force Range contract further support a positive sentiment.
Amentum Holdings, Inc. (AMTM) Q3 2025 Earnings Call Transcript
Positive8-7
The earnings call summary and Q&A reveal strong financial performance, strategic growth in key sectors, and positive guidance. The divestiture aligns with core strategy, and new contracts, especially in intelligence and nuclear markets, highlight growth potential. Despite some uncertainties, management's confidence in margin expansion and cash flow growth is clear. The positive sentiment is supported by strong revenue growth, high book-to-bill ratios, and robust pipeline opportunities. However, the lack of specific guidance for FY 2026 tempers the outlook slightly, leading to a positive but not strong positive rating.
Amentum Holdings, Inc. (AMTM) Q2 2025 Earnings Call Transcript
Unknown5-9
The earnings call presents a mixed picture: while there is modest revenue growth and positive cash flow guidance, concerns about debt management, integration risks, and a slowing award environment persist. The divestiture of Rapid Solutions is a positive step for liquidity, but management's vague responses regarding future revenue and joint venture transitions raise uncertainties. Given these factors, the stock price is likely to remain stable, resulting in a neutral sentiment.
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