Amentum Holdings, Inc. (AMTM) Q3 2025 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Good morning, and welcome to Amentum's Third Quarter Fiscal Year 2025 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] I would now like to turn the call over to Nathan Rutledge, Senior Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. We hope you've had an opportunity to read the press release we issued yesterday afternoon, which 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 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 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 S-X, as well as non- GAAP financial measures, which we believe provide useful information for investors. Both our press release and supplemental presentation slides include reconciliations to the most comparable GAAP measures. 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 Arnette, Chief Operating Officer. With that, moving to Slide 3, it's my pleasure to turn the call over to our CEO, John Heller.

Thank you, Nathan, and good morning, everyone. We appreciate you joining us today to discuss our third quarter results and update you on the progress we've made executing our long-term strategy. As we enter the last quarter of our first year as a combined company, I'm incredibly proud of the continued momentum across the business. We're seeing benefits from our integration efforts and mission-focused portfolio converge with tailwinds from global trends and an improving budget environment, and we're excited about the bright future ahead for Amentum. I want to begin by acknowledging the extraordinary efforts of our team. Across the globe, Amentum employees are working side-by- side with our customers, delivering on complex missions with dedication, agility and excellence. Their commitment is at the heart of everything we do, and it shows in our results. Our team's resilience and innovation have resulted in strong performance for the quarter and have enabled us to provide updated guidance, which reflects underlying organic increases. Key highlights, which Travis will discuss in more detail shortly, include revenues of $3.6 billion, reflecting 2% growth, adjusted EBITDA of $274 million, marking 7% year-over-year growth and free cash flow of $100 million. During the quarter, we also successfully completed 2 divestitures, our Rapid Solutions business, which was originally announced in April, and our non-core New Zealand facilities maintenance business. These divestitures demonstrate a continued focus on optimizing our core business to align with long-term growth priorities. As a result of these actions, along with our strong year-to-date operational performance, we have made significant progress in reducing our net leverage ratio to 3.5x, ahead of our original expectations. Additionally, I am pleased with what we've accomplished on the operational front. We remain on track with our integration plans and have a clear line of sight to achieving at least $30 million in net run rate cost synergies by the end of this fiscal year. Now I would like to take a moment to discuss key global trends as well as updates to the budget and policy environment impacting our market. Please turn to Slide 4. The fiscal year '26 budget reconciliation bill or the One Big Beautiful Bill, along with recent executive orders, represent generational investments in national security and other critical areas that are well aligned with Amentum's portfolio of advanced engineering and technology solutions. The bill includes $150 billion in additional defense spending and $133 billion in supplemental funding for border security, both to be deployed over the next 2 years. It also contains sweeping investments in NASA's human spaceflight and infrastructure modernization as well as steps to reduce regulatory friction and accelerate execution across enduring mission areas. Let me highlight a few areas where we are excited to continue and expand our advanced solution offerings in an agile and efficient manner to help our customers execute their key mission priorities. Today, we deliver real-time detection, tracking and response solutions that support the war fighter's ability to counter emerging threats, including hypersonic systems through our IRES Contract with the Missile Defense Agency. With a $25 billion initial investment in the Golden Dome initiative, the U.S. is doubling down on integrated layered defense, and Amentum is poised to immediately scale our contributions. Next, our teams are delivering unmanned and counter unmanned integration solutions, including advanced sustainment, AI-enhanced mission assurance and real-time testing for several key customers. With multibillion-dollar funding secured for air and sea-based unmanned solutions, Amentum is positioned to drive the next evolution of autonomy and aerospace dominance. In the Pacific region, Amentum is supporting mission preparedness through programs such as ITEAMS, where we're driving agility and innovating command and control systems for the Department of Defense, with billions of dollars aimed at bolstering INDOPACOM's posture, we're ready to continue enabling deterrence. Amentum is at the heart of America's space infrastructure, powering the next era of human exploration and space superiority. Our engineers are modernizing launch vehicle systems, ground infrastructure and other mission-critical facilities that support lunar missions and deep space exploration, backed by $10 billion in new funding for NASA's spaceflight and modernization efforts, we're accelerating launch readiness and reinforcing U.S. space leadership. Next, from AI/ML-enabled decision environments to cyber-hardened cloud migration and digital twin infrastructure, Amentum is working with our customers, modernizing national security IT for real-world applications. The decision to allocate billions for next-gen federal infrastructure reinforces what we've known all along, the mission demands leading-edge solutions and Amentum is delivering them. Finally, we are excited about the administration's focus on the future of energy dominance as demand for reliable baseload power explodes driven by AI, electrification and geopolitical risks, Amentum is already at work across the nuclear life cycle. From advanced reactor engineering to nuclear remediation, we operate the core of U.S. and allied energy security strategies. The administration's made executive orders, along with funding in the reconciliation bill, aim to remove regulatory barriers and inject capital into small modular reactors, fuel supply chains and licensing, areas where Amentum is already moving fast. I have more to say about the role we're playing in the global nuclear renaissance shortly, but the key takeaway is this: Amentum isn't preparing to lead, we are leading. Across all of these areas, our work is embedded in today's most important missions, and we're scaling up as our customers and Congress prioritize the areas we've built our business around. We're ready to meet the moment with speed, precision and unmatched technical debt. Let's move on to Slide 5, highlighting the continued strong demand for Amentum's mission-focused solutions across our diversified markets. We reported $3.4 billion in net bookings this quarter, resulting in a third quarter and a year-to-date book-to-bill of 1x. As noted before, awards to unconsolidated joint ventures are excluded from our reported book-to-bill, including Amentum's proportional share of joint venture revenues and bookings, our third quarter and year-to-date imputed book-to-bill were 1.8x and 1.4x, respectively, which highlights the significance of key awards that will generate meaningful earnings and cash flow for years to come. Finally, we ended the quarter with $29 billion in pending awards and a total backlog of $45 billion, representing 3.2x our annual revenue. Our strong bookings this quarter reflect not only growing demand, but also our ability to win in the markets that matter most. We're executing against a high-quality pipeline translating into strategic wins, and we remain on track to achieve our $35 billion submits target. Now let me walk you through some examples from Q3, highlighting this progress. First, we were awarded the $4 billion Space Force Range Contract or SFRC, which deepens our partnership with the U.S. Space Force and significantly expands our presence in space operations. Through this work, Amentum will modernize and maintain range infrastructure supporting launches on both the Eastern and Western ranges. The SFRC positions us at the center of commercial and national security space integration, enabling direct relationships with commercial launch providers. It also expands our footprint in Colorado, Florida and California, 3 critical nodes of U.S. space activity. Recently, we were notified that this award is being protested. Therefore, it is not included in our third quarter backlog or book-to-bill results. We are confident in the strength of our bid and look forward to its resolution. Next, demonstrating our global nuclear leadership, Amentum through an unconsolidated joint venture was selected to deliver comprehensive nuclear engineering and technology solutions for Canadian Nuclear Laboratories. This award, which is a continuation and expansion of work we do today has a 6-year base and an extension period of up to 20 years and is valued at approximately CAD 1.2 billion annually. It underscores Amentum's nuclear solutions and strengthens our position across nuclear energy from environmental remediation and waste management to the advancement of SMR technology. It also reinforces our cross-border solutions and supports our broader commercial nuclear growth strategy. Also in the quarter, Amentum secured 2 new Intelligence awards supporting classified customers totaling over $500 million. We're proud to support these customers by leveraging a broad range of advanced engineering and technology solutions, including mission- critical data modeling and analysis. Finally, we benefited from over $2 billion in bookings from on-contract growth modifications and extensions from existing customers. While big new awards are exciting, Amentum's significant growth from modifications highlights our ability to win and expand scope across priority areas and validates the value Amentum delivers to our customers every day. While I am proud of these recent awards, I am also excited about what lies ahead. Let's now turn to Slide 6 and take a closer look at the global nuclear resurgence. Amentum brings advanced engineering and technology solutions to some of the world's most complex challenges. One of the profound changes shaping our world today is the exponential growth of AI and compute infrastructure. Demand for computing power is skyrocketing due to the rise of autonomous systems and industrial applications supporting manufacturing. This surge boosts energy requirements, accelerating the need for enhanced grid capacity and resilience. In the U.S., local grids face shortages linked to data center expansion. Globally, the energy trilemma, security, affordability and sustainability is intensifying. Global electricity demand is expected to increase by 25% by 2030 and double over the next 25 years. Global data center demand investment is expected to exceed $5 trillion through 2030. Bringing new nuclear power plants online and extending existing infrastructure is critical to meet this demand. Nuclear power is the only scalable and reliable baseload energy source that can meet these demands. With our long history of providing engineering solutions to the nuclear industry, including the deployment of new gigawatt power plants and research and design for small modular reactors, Amentum is well equipped to lead as this market continues to grow. Amentum is delivering solutions that fuel the nuclear resurgence across key submarkets. Please turn to Slide 7, which provides a visual overview of our comprehensive nuclear solutions built over more than 50 years. We cover the full life cycle from planning, design and licensing to construction, operations, modernization and life extension and decommissioning. We have deep expertise and an integrated approach to these long-term priorities. To that end, in May, we opened our Nuclear Center of Excellence in Oak Ridge, Tennessee, which will serve as a strategic hub solving the challenges facing the nuclear resurgence through our advanced engineering and technology solutions. While much of our current work focuses on gigawatt reactors, we're increasingly applying that same expertise to next-generation nuclear technologies, including SMRs. SMRs provides scalable power with enhanced flexibility and safety features, ideal for data centers and high-density compute zones driving the AI revolution. We are deeply embedded in this ecosystem, working with developers and governments across the U.S., U.K. and Europe to accelerate deployment and enhance grid reliability. We support flagship programs like Sizewell C in the U.K., new starts in Poland and throughout other European countries and early-stage deployments in North America. To strengthen our differentiation, we've developed our own solutions, including proprietary software that enables high-resolution simulation of reactor physics. This tool was used by regulators and operators worldwide, accelerating the adoption and construction of gigawatt reactors and SMRs. We estimate that the current addressable market for Amentum's nuclear solutions is approximately $20 billion. And based on projections for growth in the market for new builds, we expect it to more than double in size within the next decade. When we think longer term, the market size could experience a tenfold increase by 2050 if estimates for new builds are realized. With the backdrop of growing global demand, a robust pipeline, including partnerships with key OEMs and converging policy support, we are executing a strategy to capture a significant share of this fast-growing market. For gigawatt plants, Amentum delivers full life cycle solutions, including design and regulatory support, program management and life extension. For SMRs, today, Amentum is focused on supporting design and regulatory efforts, and we are positioned to provide the same solutions that we provide to customers for new gigawatt builds. These same engineering and capabilities are directly applicable to reactor life extensions. In the past 5 years alone, commitments have been made to prolong the operational lives of more than 60 reactors globally. While it's too early to set long-term financial targets, one thing is clear, nuclear will be a critical engine of global growth at Amentum. The tailwinds, growing global demand driving policy and technology have aligned to uniquely position Amentum for continued leadership. And with that, I'll turn the call over to Travis to discuss our financials in more depth.

Thank you, John, and good morning, everyone. I'm excited to discuss with you today Amentum's strong third quarter performance, the significant progress we made to accelerate our deleveraging objectives and strengthen the balance sheet and to share our updated full year guidance, which, as John mentioned, represents increases for all guidance metrics on an underlying organic basis. Our results highlight the importance and consistency of Amentum's business through what has been a dynamic period for our industry and reflects the continued strength of our execution, disciplined operational focus and progress against our strategic and financial priorities, in particular, reducing our net leverage by more than a half turn in our first 9 months as a public company. With that, let me walk you through our financial performance on Slide 8. 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 the third quarter of fiscal 2024. These figures offer a combined view of the new Amentum business and provide performance insights on a more comparable basis. Third quarter revenues of $3.6 billion reflects 2% growth and were driven by continued strong demand and year-over-year increases in Digital Solutions. Adjusted EBITDA was $274 million, reflecting 7% year-over-year growth and was driven by a 30-basis-point increase in adjusted EBITDA margin to 7.7%. Strong operational performance in both segments, along with benefits from our cost synergy initiatives were catalysts for profit performance in the quarter. Adjusted diluted earnings per share were $0.56, up 10% from a year ago, with revenue growth and strong operating performance more than offsetting higher interest expense. Moving to our reportable segment results on Slide 9. Digital Solutions generated revenues of $1.4 billion, representing 12% growth. The year-over-year increase was driven by the ramp-up of new contract awards, led by strength in the commercial, digital infrastructure market. Adjusted EBITDA increased to $114 million, reflecting a 60-basis-point increase in adjusted EBITDA margins to 8%, the result of higher revenue volume, favorable contract mix and improved operational performance. Global Engineering Solutions generated revenues of $2.1 billion and reflects the expected ramp down of certain historical programs partially offset by the ramp-up of new contract awards and growth on existing programs. Adjusted EBITDA, which was impacted by the revenue volume, was $160 million and benefited from a 10-basis-point increase in adjusted EBITDA margins from strong operational performance. Turning to Slide 10 to cover our cash flow performance and capital structure highlights. Third quarter and year-to-date free cash flow of $100 million and $255 million, respectively, were in line with our expectations and reflects strong cash earnings and our disciplined approach to working capital management. Investing activities generated another $275 million in the quarter as a result of $360 million in gross proceeds from the sale of Rapid Solutions and the previously discussed $70 million final net working capital true-up payment to Jacobs in connection with the merger. Together, the robust free cash flow performance and investing activity proceeds significantly enhanced our balance sheet position, with ending cash on hand of $738 million and no outstanding balances on our $850 million revolving credit facility. The results also drove meaningful progress in reducing our net leverage to 3.5x, accelerating our path to a more flexible and opportunistic capital deployment posture. In addition, following the expiration of the soft call on our Term Loan B, we repaid $200 million in debt during the quarter without incurring incremental fees. And subsequent to the quarter end, we repaid an additional $250 million. As a result of these actions, we will see meaningful reductions in future interest costs and now expect to achieve net leverage of less than 3x by the end of fiscal year 2026. On Slide 11, let's now turn to our fiscal year 2025 full year outlook. Based on the strength of our year-to-date performance and expectations for the fourth quarter, which more than offset impacts from the divestitures John noted earlier, we are raising our full year organic guidance. With less than 1% of revenues expected to come from new business, we are increasing revenue expectations to the range of $13.975 billion to $14.175 billion, which at the midpoint reflects a $125 million underlying organic increase. After adjusting for the impact of customer priority shifts, which we continue to estimate at approximately 1% of revenues for fiscal year 2025 and the divestitures, it also represents a 2% increase from strength in the underlying business relative to our original guidance expectations. We continue to expect adjusted EBITDA in the range of $1.065 billion to $1.095 billion, reflecting a $5 million underlying organic increase at the midpoint as well as adjusted EBITDA margins at 7.7%, consistent with our year-to-date performance. We are also raising our outlook for adjusted diluted earnings per share to a range of $2.05 and to $2.20, reflecting a $0.05 underlying organic increase at the midpoint. And finally, we expect free cash flow between $475 million and $525 million, which represents an underlying organic increase of $20 million, predominantly as a result of divestiture-related tax payments expected in the fourth quarter. Additional key assumptions for our updated guidance are included on Slide 11 in today's presentation posted on our Investor Relations website. Wrapping up on Slide 12. Simply put, Amentum is performing well on all fronts, and we are delivering on both our strategic and financial commitments, all of which is made possible by the dedication and commitment from our talented employees across the globe. As we enter the last quarter in our first year as a combined public company, we remain confident in meeting our fiscal year 2025 financial objectives and are more excited than ever about the future for Amentum and the long-term value it can deliver for customers, employees and shareholders. With that, operator, please open the line for questions. Thank you.

[Operator Instructions] Your first question comes from Colin Canfield with Cantor.

Maybe starting out on bookings. Can you just clarify what the JV adjusted quarterly book-to-bill was in the quarter? And then maybe talk us through how we should think about your Space Force pipeline as well as your NASA pipeline. So the Space Force contract is well understood and a key win. But as we think about kind of what's next, it seems like the SLS awards should be coming pretty quickly. So maybe talk us through those bookings dynamics first.

Sure. This is Travis. I will start with your bookings question and then hand it over to cover your question on the space opportunities. So the first thing that I'd highlight is that we're obviously pleased with our awarded book-to-bill performance in the third quarter, which was 1x on a reported basis, also 1x on a year-to-date basis. And to your question specifically about our imputed JV book-to- bill, a couple of different things. We did have the Canadian Nuclear Laboratories win. That's an unconsolidated joint venture, which John highlighted in his prepared remarks. And including that award, our imputed book-to-bill for the quarter was 1.8. So really solid performance there. That brings our imputed year-to-date book-to-bill to 1.4. And probably the last thing to highlight just from a metrics perspective on book-to-bill, we also highlighted our Space Force win, which is excluded from our book-to-bill metrics given that it's currently under protest. Obviously, we look forward to that being resolved. But our reported book-to-bill would have been approximately 2 in the quarter with that and obviously well over 2 in imputed perspective. So really pleased with the business development performance that we've experienced in the third quarter and through the year so far. And with that, maybe I'll hand it over to John.

Yes. Thanks, John. Thanks, Colin. So just following up with your second part of your question. Obviously, we reported the Space Force Range Contract award. That's probably the biggest highlight of the quarter. But also when you talk about our pipeline, we see it as the opportunity to not only be a larger supporter for Space Force, but be in a position to also be much closer to commercial space because that's so integrated in that contract that will put us at the key launch areas where we'll have the opportunity to work side-by- side with all the major commercial space launch providers. The second part is that the Golden Dome. As we know, that's going to be a huge initiative of this administration over the next few years and likely for the next decade to come as the U.S. puts research and development, investing behind this capability our position at Space Force as well as Missile Defense Agency where we have been a key supporter for a long time, puts us in a great position to respond to the upcoming acquisition opportunities. So if you talk about pipeline really around the Golden Dome, it's shield. And seeing, first, just winning a position on shield, our expertise at Space Force and Missile Defense Agency and our decades of experience supporting NASA on rocket design and technology development should put us in a great position to get a key spot on shield. And then to support the development initiatives that are going to come out on shield. So all in all, excited about the pipeline opportunities, the growth opportunities near term over the next 3 years. And then the last thing I'd say is really NASA. We're excited about where NASA is going, a lot of very positive feedback from this administration and support on human spaceflight and our role in NASA is critical to supporting that. And maybe, Steve, you could hit on just our excitement about what's happening on human spaceflight.

Yes. John, I think, headlined it well. There's a lot of exciting direction coming out of the new administration. Really, I think most people know we are in the thick of preparation for the Artemis II mission. Our team at NASA Kennedy making great progress integrating the vehicle, testing out. This, of course, will be the first crew Artemis flight. So mission assurance and flight safety at the forefront of all that we're doing, but we're integrating systems, checking out software, hardware, flight hardware. That work is proceeding exceptionally well, and we're really proud of our team there and how they're working with the agency to prepare for that mission. I think importantly, just if you kind of take account of some of the recent messages coming out, even in recent days, coming out of the agency as well as the Interim Secretary Duffy talking about, hey, we're going to need things like a nuclear reactor on the surface of the moon. There's a recognition that I would say, 2 key things. Number one, the moon does in and of itself become a very strategic objective. We are absolutely in a second space race, if you will. And so we're very focused on ensuring U.S. with our international partners to make sure that we secure that position on the moon. And secondly, that it's a key waste of, if you will, to pave the way to go onward to Mars. And so we're excited about the bipartisan support for those missions and the continued priority focus for the nation. And so a lot of great work happening there, and we continue to see good incremental opportunity as we go.

Got it. That's great color. And then maybe kind of tying that into the revenue mix in the business and the EBITDA growth building blocks for next year. If we could kind of talk through how we think about this actually defense and intelligence, right, which is about 50% to 60% of the business. International, NASA and call it nuclear, right, the kind of non-civil, civil stuff, so call it maybe 3/4 of the business that's accelerating in '26 versus the calendar year or calendar week, excuse me, building blocks we got last quarter? And any sort of JV dynamics that impact next year. So maybe kind of walk through how we think about all that goodness in civil translating to accelerating growth next year, but specifically on an EBITDA basis given those dynamics?

Yes. Thanks, Colin. First, I'll just talk kind of strategy, macro level and Travis can dive in on that question from a pure financial standpoint. But first of all, I just want to go back. We're really pleased with how the third quarter came together. As I said in my prepared remarks, our performance really reflects the continued strength of the business we're being very disciplined on execution, where we completed these divestitures that's sharpening our focus on our core strategy. It's really like Amentum was custom-built for this era. Amentum is aligned with these enduring global trends and well-funded priority areas, and it's starting to show up in our results. We're accelerating our deleveraging and we got that down to 3.5, and we're on a clear path to meet our commitments. And keep in mind, Amentum is 9-month old public company. And we said our first year will be focused on integration, laying the groundwork for long-term growth, and I think that's exactly what we've done. And we've got strength in our underlying business that we're starting to show up in our pipeline. Again, $29 billion of bids awaiting award, a pipeline that looks really strong across key areas that you were touching on as we think about '26, nuclear is really starting to pick up, and I'd love to talk more about that. We're still #1 in environmental remediation. There are great opportunities in space. We just talked about defense, around systems design, integration and modernization, still leadership area of ours. And then we talked about this the last few quarters the intelligence community, our belief that, that can be a strong driver but not probably in '25, but it's doing well, but we really see that as a '26, '27. So when we think about '26, you probably start to see intelligence show up more as well as some of those key priority areas of this administration start to show up in a bigger way in what's happening in our business. We talked about space, we talked about the Golden Dome, talked about UAVs, counter UAVs, talking about the border and our presence at the border. We've been at the border providing key support to Customs and Border Protection. I mean we are a key part of the strategy there to this administration. So we're seeing all those things really working and the pipeline development, which should set us up in '26 to see some of these things stand out.

Yes. And then from a financial perspective, Colin, we obviously look forward to providing official FY '26 guidance in our Q4 earnings call. But what I will say is that as you hear John talk about, we're really excited about the trajectory of the business. Obviously, there's some revenue dynamics that we've talked about related to the 53rd week JV transitions and then the new impact from the divestitures, which closed in the last week of our third quarter. But they really don't impact the momentum of the underlying organic business at all. In fact, we're really excited about kind of our year-to-date performance, both from a margin expansion perspective, 20 basis points year-over-year. We've reduced net leverage to 3.5x. We expect that to continue in the fourth quarter, all ahead of schedule. So as we start to look forward to the fourth quarter and into FY '26, we really made meaningful progress towards our margin expansion and free cash flow growth objectives. So we're confident this will continue as we head into FY '26.

The next question comes from Tobey Sommer with Truist.

It's Henry on for Tobey here. Just to start with, given the upcoming end of the federal fiscal year here this quarter, are you expecting a seasonally high number of kind of budget flush opportunities with the slow procurement environment up to date so far this year? And are you seeing any potential headwinds there around kind of federal contracting officer shortages, some of that money going out by the end of September?

Yes, I'd say we've been very pleased with how the government is kind of -- you had that transition, any administration, you're going to feel an impact of that as the administration brings in key people, lays out their priorities, the Big Beautiful Bill came out, provided clarity, provided excitement, provide direction, the leadership at these organizations are in place, they're supported by this administration. So frankly, we're seeing a government that today is working relatively efficiently and if not even more efficiently because there's a sense of urgency. There is a desire to move things forward in a pace that is probably a little different than what we're used to. So we're -- we don't expect that the impacts that we might have seen in previous quarters to come out in the fourth quarter. I think it's going to be business as usual. Our customers are focused, they know what they have to do. They're focused on executing that. RFPs are coming out as planned, awards are coming out generally on time. Of course, there's there are still protests, which is just part of the industry, and we're all used to that. So it's nothing new. And yes, we would expect fourth quarter to be pretty solid.

Great. And maybe just a quick on the Golden Dome opportunity. Where do you see kind of the overall budget or funding opportunities for your kind of folks in the shield area within the whole Golden Dome project, and kind of the differences or similarities in the ramp time line of that versus the overall project?

Yes. Thanks for the question. I think the Golden Dome narrative for us starts with the fact that we are very highly engaged in that mission today and continuing to develop and maintain our missile defenses of the U.S. as well for key allies. And our work with the Missile Defense Agency really, in many ways, paves the way for the objectives associated with the Golden Done, because I think that the headline to think about is the emphasis in Golden Dome is about rapid deployment, rapid deployment of defensive capabilities as part of the Golden Dome initiative. And the good news is that Missile Defense Agency to their credit, and we as their trusted partner, have been developing a lot of the key technologies in recent years. [indiscernible] there's a lot in the public domain about the Hypersonic Tracking Ballistic Space Sensor that we've had great RDT&E and test deployment of that, integrating that capability. We've worked with MDA to develop the integrated digital data environment that's allowed us to do simulation, I think digital twins and integrate developing new capabilities that will be required for Golden Dome and we've even pioneered kind of the new ground to space architecture, if you will, that allows us to have rapid decision capability, even things like algorithms with AI to do pattern recognition, all that. So a lot of these underlying enabling technologies we've developed with MDA, and those will become key for Golden Dome. So because of our presence in that market at the center of developing that system today, we think we are going to be a great partner working with Space Force and Missile Defense, as John mentioned in his prepared remarks, to help pioneer Golden Dome and be able to develop and deploy those capabilities. So it's absolutely a big opportunity for us. And the government, to their credit, have already, as you will be aware in the reconciliation, devoted $25 billion to kind of rapid start some of that technology development. So we think those things begin to happen pretty quickly.

The next question comes from Mariana Perez Mora with Bank of America.

So my question is going to be about nuclear, and it's going to be a 3-part question. Number one, could you please remind us like how large is the nuclear exposure for you from a sales perspective, but mostly from an EBITDA perspective because you do have some of those contracts that come through unconsolidated joint ventures. Number two, you highlight the 8% CAGR expected to happen in the 4 years between '26 and 2030. How much faster Amentum could grow, especially if you are exposed to SMRs or software or upgrades or staff that could actually grow faster than just like nuclear gigawatts? And the third one, when we think about this nuclear opportunity and especially on the contribution, not just to top line, but mostly through the bottom line. How should we think about the margin contribution and the path towards your 2028 goals.

Yes. Mariana, we love this subject. Obviously, we highlighted it on the earnings call for a reason. We just think that Amentum is very differentiated in this space. And because of our expertise across Europe, where the European continent has really leaned forward on nuclear, where the U.S. has kind of taken a backseat over the past 3 decades. But there's a lot of excitement here in the U.S. Here's a couple of things, I would say. First, today, our business is on the nuclear front in terms of chemical engineering, nuclear engineering, mechanical, civil, data, all types of engineering capability and technical skills, well over $2 billion in our business. From a nuclear power standpoint, we are currently delivering on approximately 29 projects across Amentum, across fusion, fuel fabrication enrichment, gigawatt new build, gigawatt life extension and SMR. We are in capture for over 50 projects, nuclear projects over the next 3 years. The market is picking up, and I talked about this in my prepared remarks. The investment environment is as best as it's been in the U.S. And the real opportunity, what we're talking about the real excitement because we're already well embedded in Europe. And that market has been moving forward. So much of our work is in Europe, some of it's in the U.S. But what we're excited about is the investment environment in the U.S. as well as the President's executive orders, which were about 30 pages long. By the way, this was a very detailed guidance that you don't typically see. And it's just make -- all of what's happening is making the economics better for investors. You're getting regulatory streamlining that's supported by bipartisan support. It's driven by our business community, AI, hyperscalers, electricity needs. The credit environment and private funding is very positive. It's bringing the cost down. And of course, the need for electricity is indisputable to support our economy as well as defense sees this as an energy resilience play, but a lot of interest on defense as well. This is very strong demand. This is not a 1-, 2- or 3-year cycle. This is a multi-decade long cycle. And of course, a nuclear power plant, once installed, can operate upwards of 70 years. So see this as each of these projects can be a 70-year project for Amentum [indiscernible] market is. Obviously, it's happening real time in the U.S., which means regulatory approval. So for us, it's more focused on a lot of engineering support, regulatory support that, that will build over time into the actual design, construction and implementation. So this next decade is going to be a lot of activity. And so energy for us probably -- I don't know, Travis probably has the exact number, but still over $500 million, and we just see that as the potential to grow substantially over the next 5 to, frankly, 25 years. Travis, any?

Yes. I'll add some color on the financial elements of that. Yes. We previously discussed that around 17% of our annual revenue, $2.4 billion, $2.5 billion come from our energy and environment market overall, provide some further color on that. Roughly 2/3 of that relates to nuclear remediation and decommissioning and the remaining 1/3 relates to basically all this front-end engineering, design, construction, commissioning, operations and maintenance, both for government and commercial customers here in the U.S. and abroad. And as you point out, obviously, the margin profile of this business is accretive from an overall perspective, and it's an even bigger contributor from an EBITDA perspective. So as John pointed out, we're really excited about the growth that this can provide for Amentum headed into the future.

Great. And is it fair to think that you should at least grow in line with the market for those 2/3 of the 17%?

Yes, I would say based on our position and everything that we've done historically in the nuclear market as one of the leading project engineering firms across the globe, we don't see any reason why that shouldn't be the case.

The next question comes from Noah Poponak with Goldman Sachs.

How do I think about or square up the total backlog picture, the total pipeline picture, the robust opportunity set that you're describing with the move lower through the year in the funded backlog.

Noah, so as we mentioned and John has talked about, and it's been brought up on previous calls, as the new administration came in, there was obviously the impact to the contracting officer workforce. And I think what you're seeing in the funding dynamic is just kind of the trailing effects of that. We don't have any concern related to the funded backlog at all whatsoever. I'd say it's just timing related, and we're confident that we'll be funded sufficiently to perform our mission-critical work going forward.

Yes. And I think the other part that we mentioned and we've mentioned previously is that Amentum does a lot of JV work in some of our key high-growth market areas. And we've been very successful winning some of these JVs that are not contributing to backlog. And we're real excited about what they mean to our business. So we talked about a backlog or book-to-bill this quarter of 1.0. But if you included our JVs, our imputed book-to-bill would have been 1.8. And that's happened in previous quarters already and we see a pipeline of these types of opportunities that will drive meaningful EBITDA and cash flow, but just don't show up in our backlog. So we're winning. We're winning these large JVs. They're meaningful, and it's just part of the dynamics of the markets we play in, and a unique aspect of Amentum and we'll continue to talk and provide more detail on that. But let me say, we are winning. We are winning big long-term contracts, the Canadian nuclear contract we won this quarter, a 20-year contract and over CAD 1 billion annually. So it's this type of volume that we're talking about that doesn't necessarily show up in our backlog.

Okay. That is super helpful and helps clarify. I appreciate that. If I go back to the Capital Markets Day about a year ago, you outlined a multiyear organic revenue growth framework, 4% to 6%. As we start to look to 2026, is that a reasonable starting point for the kind of true core? I know there's going to be moving pieces with -- outside of the core. But in the -- is that the right starting point before we then adjust those moving pieces?

Noah, I think a couple of things. Obviously, a lot of things have changed since August at Capital Markets Day, but there's a lot of things that haven't changed. And the underlying strength of the business is one of them. Obviously, we have some of the revenue dynamics that we talked about earlier in response to Colin's question. But the mission-critical advanced engineering and technology solutions that we provide to our customers every day, the diversified and differentiated position of our portfolio, which has been demonstrated through our results in FY '25 has proven to be resilient even in times of uncertainty and the significant progress we've made taking advantage of the merger thesis, both from a strategic and financial perspective, all still hold true today. And as John said in his prepared remarks, we're more aligned than ever with global enduring trends and our customers' top priorities. And so all that to say, we remain excited about the trajectory of the business as we head into FY '26.

Okay. Great. Last one, back to the nuclear topic. Have you quantified or can you quantify the revenue base today from that market so that we can then have a starting point as we assess the growth there?

Yes. So I'll just reiterate the response to Mariana's question, which is roughly 1/3 of our overall energy and environment market revenues are associated with the rest of, I'll call it, the nuclear market, that's the front-end nuclear engineering, design, construction and commissioning and O&M work. So around $700 million.

Yes, of approximately [ 2.7 ]. I think...

The next question comes from Ken Herbert with RBC Capital Markets.

I wondered if you could start off and I appreciate, again, you're not saying a lot about '26, but are there any significant recompetes we should keep in mind in the fourth quarter here or '26 as we just again start to think about the revenue build into next year?

So as we talked about a couple of different things only one of our top 10 recompetes -- our top 10 programs, we expect to be up for recompete in FY '26, and there's likelihood that, that will even be extended. But overall, the thesis of Amentum holds true from this perspective and that we benefit from longer-than-average contract durations. And over the next few years, only 10% to 15% of our revenues, we expect to be up for recompete on an annual basis. So we feel really good about the sources of revenue as we head into FY '26 and look forward to providing more detail at our Q4 earnings call.

And nothing pending in '25.

Yes. Okay. Perfect. And on -- in the third quarter, the Digital Solutions segment had really nice margin expansion on the adjusted EBITDA. Is that 8% a good number moving forward and we could see some increases off of that? Or were there any sort of moving pieces in the quarter that you'd call out? I'm just trying to get a sense moving forward for that segment in particular, how we should think about sort of margin run rate?

Yes. We were very pleased with the performance out of our Digital Solutions segment this quarter. Obviously, there's different timing things related to the EAC adjustments and operational performance, but they did have strong performance during the quarter. The longer term, definitely see them headed above 8% margins, right, and kind of in line with our long-term expectations of the business, but saw really strong growth out of our commercial digital infrastructure portfolio there, which is accretive to the overall margins. So just overall, really excited about where we're headed in that part of the portfolio.

And just thematically to add to try to tie it together, there is a bit of a trend throughout the business for that part of the company where as we continue to develop and deploy, I'm going to call it these digital -- organic Digital Solutions, we are finding that in some sense, it becomes almost a bit of a horizontal thread. It becomes part of every offering, whether it's a commercial or government customers as we're engineering, developing, deploying technology. And so that true advanced engineering technology solution is becoming more omnipresent in that business. And I think that really is at the core kind of driving the incremental margin opportunity.

We are coming up on the hour. So I would like to hand the call over back to Mr. John Heller. Thank you.

Thank you, operator. To close, we're energized by our performance and by the opportunities that lie ahead of us. We've been deliberate in aligning our strategy to long-cycle global enduring trends, and we're continuing to strengthen our capabilities and evolve ahead of the curve. We have the expertise to meet the mission needs of our customers, and we have positioned Amentum to capture accelerating demand and deliver long-term value for our shareholders. Thank you again for your continued interest in Amentum. We look forward to updating you on our progress in the quarters ahead. Have a happy and safe summer.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.