Amentum Holdings Inc.

02/10/2026 | Press release | Distributed by Public on 02/10/2026 08:21

Quarterly Report for Quarter Ending January 2, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our unaudited condensed consolidated financial condition and results of operations should be read in conjunction with the Amentum Holdings, Inc. unaudited condensed consolidated financial statements, and the notes thereto, and other data contained elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis should also be read in conjunction with our audited consolidated financial statements, and notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended October 3, 2025. In addition, please see "Information Relating to Forward-Looking Statements" and "Item 1A. Risk Factors" within our Annual Report on Form 10-K for a discussion of the risks, uncertainties and assumptions associated with these statements.
References to "Amentum", the "Company", "we", "our" or "us" refer to Amentum Holdings, Inc. and its subsidiaries unless otherwise stated or indicated by context.
Overview
We are a global advanced engineering and technology solutions provider to a broad base of U.S. and allied government agencies, and customers in international and commercial markets, supporting programs of critical national importance across energy and environmental, intelligence, space, defense, civilian and commercial end-markets. We offer a broad reach of capabilities including energy, environmental remediation, intelligence and counter threat solutions, data fusion and analytics, engineering and integration, advanced test, training and readiness, and citizen solutions. As a leading provider of differentiated technology solutions, we have built a repertoire of deep customer knowledge, enabling us to engage our customers across multiple capabilities and markets. Underpinned by a strong culture of ethics and safety, Amentum is committed to operational excellence and successful execution.
We conduct our business activities and report financial results as two reportable segments: Digital Solutions ("DS") and Global Engineering Solutions ("GES"). The DS segment provides advanced digital and data-driven solutions including intelligence analytics, space system development, cybersecurity, and next generation IT across the federal government and commercial clients. The GES segment provides large-scale environmental remediation, nuclear power solutions, platform engineering, sustainment and supply chain management across all seven continents for the U.S. government and allied nations. The
presentation of financial results as two reportable segments is consistent with the way the Company operates its business and the manner in which our chief operating decision maker ("CODM"), currently our Chief Executive Officer, manages the operations of the Company for purposes of allocating resources and assessing performance.
Budgetary and Regulatory Environment
In fiscal year 2025, we generated approximately 81% of our revenues from contracts with the U.S. federal government, either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. federal government. We carefully follow the U.S. federal budget, legislative and contracting trends and activities and evolve our strategies accordingly.
In May 2025, the President's U.S. federal government fiscal year ("GFY") 2026 budget request was submitted to Congress, which, as compared to GFY 2025 enacted level, maintained defense discretionary spending at $892 billion, reduced non-defense discretionary spending by approximately 21% to $557 billion, and increased defense spending by approximately 13% to $1.01 trillion. Following a government shutdown from October 2, 2025 to November 12, 2025 and a partial government shutdown from January 31, 2026 to February 3, 2026, final appropriations legislation for GFY 2026 was passed on February 3, 2026, excluding the Department of Homeland Security which was funded via a continuing resolution ("CR") through February 13, 2026. While we view the budget environment as constructive and believe core funding sources for our primary customer-based markets will continue to experience bipartisan tailwinds, there can be no certainty about the level of funding for any particular GFY or that appropriations bills will be passed in a timely manner. During those periods of time when appropriations bills have not been passed and signed into law, government agencies operate under a CR, a temporary measure allowing the government to continue operations at prior year funding levels. Depending on their scope, duration, and other factors, CRs can negatively impact our business due to delays in new program starts, delays in contract awards decisions, and other factors.
Under the Trump administration, the Department of Government Efficiency was created, the One Big, Beautiful Bill Act was passed which made certain tax cuts permanent, reduced healthcare spending and increased spending related to border security, defense, NASA and energy production, and the U.S. Government is in the process of, or has announced its intent to, increase current tariffs, impose additional tariffs, and expand tariffs on goods imported from various countries into the United States. We continue to monitor the actions of the administration which could result in a change to budgetary priorities or impact federal government procurement timing. Although a limited number of our contracts for the U.S. Government have been affected by changes in budgetary priorities by the administration, the impact has not been material to date. Decreases in, or delays in approving, the federal government's budget, decreases in government spending on the types of programs that we support, delays in government contract awards, and pauses on government contracts on which we are currently performing could have an adverse impact on our business.
For a discussion of risks, see Part II. Item 1A. Risk Factors in this Report and Part I. Item 1A. Risk Factors in our Fiscal Year 2025 Form 10-K.
Market Environment
We believe our scale, breadth of capabilities, and depth of experience give us a robust understanding of our customers' evolving needs. Given our portfolio diversity, we believe our total addressable market, and associated growth rate, is sufficient to support our strategic growth plans.
We believe Amentum's capabilities are strategically aligned to well-funded, long-term priorities for the federal government, allied nations, and commercial customers. Specifically, we believe we are well positioned to continue to win new business driven by the following trends in our addressable market:
•Increasing demand for outsourced services and solutions with federal government customers;
•Increased global demand for reliable power sources and nuclear energy;
•Increased spending on government-wide modernization priorities;
•Increasing government focus on near-peer competitors and other nation state threats;
•Increasing discretionary spending for homeland security and regional activities in the Western hemisphere;
•Increasing discretionary spending for Indo-Pacific regional activities and initiatives;
•Increasing discretionary spending to improve the readiness of the defense industrial base; and
•Increased investment in advanced technologies (e.g., hypersonics, microelectronics, unmanned, electromagnetic spectrum).
Results of Operations for the Three Months Ended January 2, 2026 and December 27, 2024
The following table presents our results of operations for the periods presented:
Three Months Ended
January 2, 2026 December 27, 2024 Change
(Dollars in millions) Dollars Dollars Dollars Percent
Revenues $ 3,237 $ 3,416 $ (179) (5.2) %
Cost of revenues (2,911) (3,055) 144 (4.7)
Selling, general, and administrative expenses (115) (130) 15 (11.5)
Amortization of intangibles (94) (120) 26 (21.7)
Equity earnings of non-consolidated subsidiaries 21 21 - -
Operating income 138 132 6 4.5
Interest expense and other, net (74) (87) 13 (14.9)
Income before income taxes 64 45 19 42.2
Provision for income taxes (20) (24) 4 (16.7)
Net income including non-controlling interests 44 21 23 109.5
Less: net income attributable to non-controlling interests - (9) 9 (100.0)
Net income attributable to common shareholders $ 44 $ 12 $ 32 266.7
Revenues- The decrease in revenues was primarily attributable to the impacts from the government shutdowns ($150 million), as well as the transition of certain contracts from consolidated to unconsolidated joint ventures and fiscal year 2025 divestitures ($110 million). The reduction in revenue was partially offset by growth on existing programs and the ramp up of new contract awards.
Cost of revenues- The decrease in cost of revenues was primarily attributable to the decrease in revenues discussed above. As a percentage of revenues, cost of revenues was 89.9% for the three months ended January 2, 2026 compared to 89.4% for the three months ended December 27, 2024.
Selling, general, and administrative expenses ("SG&A")- The decrease in SG&A was primarily attributable to synergies arising from the spin-off of the Jacobs Solutions Inc. ("Jacobs") Critical Mission Solutions business and portions of the Jacobs Divergent Solutions business (and, together with the Critical Mission Solutions business, referred to as "CMS"). SG&A as a percentage of revenues decreased to 3.6% for the three months ended January 2, 2026 from 3.8% for the three months ended December 27, 2024 primarily due to the reduction in SG&A discussed above.
Amortization of intangibles - Amortization of intangibles primarily relates to the amortization of our backlog and customer relationship intangible assets, which decreased due to the full amortization of backlog associated with the CMS merger in the prior year.
Equity earnings of non-consolidated subsidiaries- Equity earnings of non-consolidated subsidiaries include our proportionate share of the income from equity method investments partially offset by the utilization of fair market value adjustments assigned to certain equity method investments based on the remaining period of performance for the related contract and was consistent with the three months ended December 27, 2024.
Interest expense and other, net- The decrease in interest expense and other, net was primarily due to the reduction to our term loan principal balance as compared to the three months ended December 27, 2024.
Provision for income taxes- The effective tax rate for the three months ended January 2, 2026 was 31.3%, as compared to 53.3% for the three months ended December 27, 2024. The change in the effective tax rate was primarily due to the recognition of a valuation allowance against a disallowed interest expense deferred tax asset relative to income before income taxes in the respective period.
Net income attributable to non-controlling interests- Net income attributable to non-controlling interests includes the utilization of fair market value adjustments assigned to certain non-controlling interests based on the remaining period of performance for the related contract partially offset by the minority interests in our consolidated joint ventures that are not wholly-owned and decreased due to the completion of certain contracts with follow-on contracts which transitioned to equity method investments.
Segment Results for the Three Months Ended January 2, 2026 and December 27, 2024
The primary financial performance measures we use to manage our reportable segments and monitor results of operations are Revenues and Adjusted EBITDA. The following tables present our performance measures by reportable segment:
Digital Solutions
Three Months Ended
January 2, 2026 December 27, 2024 Change
(Dollars in millions) Dollars Dollars Dollars Percent
Revenues $ 1,337 $ 1,286 $ 51 4 %
Adjusted EBITDA 103 100 3 3 %
The increase in revenues for the three months ended January 2, 2026, as compared to the three months ended December 27, 2024, was primarily attributable to the ramp up of new contract awards partially offset by the fiscal year 2025 divestiture of Rapid Solutions.
The increase in Adjusted EBITDA for the three months ended January 2, 2026, as compared to the three months ended December 27, 2024, was primarily attributable to the revenue growth factors described above.
Global Engineering Solutions
Three Months Ended
January 2, 2026 December 27, 2024 Change
(Dollars in millions) Dollars Dollars Dollars Percent
Revenues $ 1,900 $ 2,130 $ (230) (11) %
Adjusted EBITDA 160 162 (2) (1) %
The decrease in revenues for the three months ended January 2, 2026, as compared to the three months ended December 27, 2024, was primarily attributable to the transition of certain contracts from consolidated to unconsolidated joint ventures, a fiscal year 2025 divestiture, and impacts from the government shutdown in the first quarter of fiscal year 2026. The reduction in revenue was partially offset by growth on existing programs and the ramp up of new contract awards.
The decrease in Adjusted EBITDA for the three months ended January 2, 2026, as compared to the three months ended December 27, 2024, was primarily attributable to the change in revenue described above partially offset by strong operational performance.
Revenues by Contract Type
Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract. For a discussion of the types of contracts under which we generate revenues, see "Critical Accounting Policies" below. The following table summarizes revenues by contract type as a percentage of each reportable segment and total Amentum revenues, for the periods presented:
Three Months Ended
January 2, 2026 December 27, 2024
DS GES Total DS GES Total
Cost-plus-fee 59 % 56 % 57 % 61 % 65 % 64 %
Fixed-price 28 % 29 % 29 % 28 % 22 % 24 %
Time-and-materials 13 % 15 % 14 % 11 % 13 % 12 %
Total 100 % 100 % 100 % 100 % 100 % 100 %
Backlog
The Company's backlog represents the estimated amount of future revenues to be recognized under negotiated contracts. The Company's backlog includes unexercised option years and excludes the value of task orders that may be awarded under multiple award indefinite delivery / indefinite quantity ("IDIQ") vehicles until such task orders are issued.
The Company's backlog is either funded or unfunded:
•Funded backlog represents contract value for which funding is appropriated less revenues previously recognized on the contract.
•Unfunded backlog represents estimated values that have the potential to be recognized as revenues from negotiated contracts for which funding has not been appropriated and from unexercised contract options.
As of January 2, 2026, the Company had total backlog of $47.2 billion, compared with $45.2 billion as of December 27, 2024, an increase of $2.0 billion primarily due to new contract wins partially offset by revenue recognized on current contracts. Funded backlog as of January 2, 2026 was $6.9 billion.
The Company's backlog, by reportable segment and in total, consisted of the following (in millions):
January 2, 2026 December 27, 2024
DS GES Total DS GES Total
Funded backlog $ 2,645 $ 4,232 $ 6,877 $ 2,722 $ 3,883 $ 6,605
Unfunded backlog 18,329 22,023 40,352 16,171 22,396 38,567
Total backlog $ 20,974 $ 26,255 $ 47,229 $ 18,893 $ 26,279 $ 45,172
There is no assurance that all backlog will result in future revenues being recognized, and the backlog balance is subject to increases or decreases based on the execution of new contracts, contract modifications or extensions, deobligations, early terminations, and other factors.
Effects of Inflation
Given the nature of our operations and contract type mix, we expect the impact of inflation on our business may be limited for some of our contracts. During the three months ended January 2, 2026, 57% of our revenues was generated under cost-plus-fee type contracts that have limited inflation risk as they include provisions that adjust revenues to cover costs affected by inflation. The remainder of our revenues was generated under time-and-materials or fixed-price type contracts which we have historically been able to price in a manner that accommodates inflation and cost increases over the period of performance but changes in our expectations with respect to inflation rates or in the overall mix of our contract types could cause future results to differ substantially.
Liquidity and Capital Resources
Existing cash and cash equivalents and cash generated by operations are our primary sources of liquidity, as well as sales of receivables under our Master Accounts Receivable Purchase Agreement ("MARPA") and available borrowing capacity under the revolving credit facility provided for in the senior secured credit facility (the "Credit Facility").
The Credit Facility consists of our term facility ("Term Loan") maturing on September 27, 2031 and a $850 million revolving facility ("Revolver") maturing on September 27, 2029, which includes a $200 million letter of credit subfacility and a $100 million swingline subfacility. The Term Loan requires quarterly principal amortization payments of $9 million, which commenced on March 31, 2025, with the remainder of the principal thereunder being due at maturity. In August 2024, the Company also completed an offering of $1,000 million in aggregate principal amount of 7.250% senior notes due August 1, 2032 (the "Senior Notes").
The Credit Facility and the Senior Notes are guaranteed by substantially all of our wholly owned material domestic restricted subsidiaries, subject to customary exceptions set forth in the credit agreement and indenture, respectively.
The interest rates applicable to the Term Loan are floating interest rates equal to an Alternate Base Rate or Adjusted Term Secured Overnight Financing Rate ("SOFR") plus an applicable margin based upon our net leverage ratio.
Each of the credit agreement and indenture requires us to comply with certain representations and warranties, customary affirmative and negative covenants and, in the case of the Revolver, under certain circumstances, a financial covenant. We were in compliance with all covenants as of January 2, 2026.
We believe that the combination of internally generated funds, available bank borrowings, and cash and cash equivalents on hand will provide the required liquidity and capital resources necessary to fund on-going operations, capital expenditures, scheduled principal and interest payments on our debt obligations, scheduled lease payments, and other working capital requirements over at least the next twelve months.
Over the longer term, our ability to generate sufficient cash flows from operations necessary to fulfill the obligations under the Credit Facility, Senior Notes and any other indebtedness we may incur will depend on our future financial performance which could be affected by factors outside of our control, including, but not limited to, worldwide economic and financial market conditions.
See "Note 5 - Sales of Receivables" and "Note 8 - Debt" of the notes to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.
Cash Flow Information
Three Months Ended
(Amounts in millions) January 2, 2026 December 27, 2024
Net cash (used in) provided by operating activities $ (136) $ 110
Net cash used in investing activities (33) (8)
Net cash used in financing activities (20) (16)
Effect of exchange rate changes on cash and cash equivalents (1) (16)
Net change in cash and cash equivalents $ (190) $ 70
Net cash used in operating activities decreased by $246 million for the three months ended January 2, 2026 when compared to the three months ended December 27, 2024 as a result of $263 million in changes in operating assets and liabilities and a $17 million increase in cash earnings. The changes in operating assets and liabilities was primarily due to an additional pay cycle in the first quarter of fiscal year 2026 as compared to the first quarter of fiscal year 2025 and the impact of the government shutdown.
Net cash used in investing activities increased by $25 million for the three months ended January 2, 2026 when compared to the three months ended December 27, 2024 primarily due to contributions to equity method investments.
Net cash used in financing activities increased by $4 million for the three months ended January 2, 2026 when compared to the three months ended December 27, 2024 primarily due to the principal payment on our Term Loan, which was not required in first quarter of fiscal year 2025, partially offset by distributions to non-controlling interests.
Critical Accounting Policies and Estimates
There have been no significant changes to the Company's critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended October 3, 2025.
Recent Accounting Pronouncements
See "Note 2 - Recent Accounting Pronouncements" of the notes to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.
Amentum Holdings Inc. published this content on February 10, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 10, 2026 at 14:21 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]