Release Date: August 11, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Adjusted EBITDA margins reached a record 8.3% in Q3, up 60 basis points year-over-year, driven by favorable mix and strong operational performance.
- Adjusted diluted EPS increased 20% year-over-year to $0.67, supported by lower interest expense from debt repayments and refinancing.
- Net leverage reduced to 3.0x at quarter-end, one quarter ahead of the Capital Markets Day target, positioning for more flexible capital deployment.
- Book-to-bill of 1.1x in Q3 and 1.3x trailing twelve months, with funded backlog up 10% year-over-year to $6.2 billion, indicating strong future revenue visibility.
- Strategic wins in nuclear energy, including a $400 million+ commercial nuclear bookings and the Savannah River AI data center project, underscore leadership in a high-growth market.
- Raised FY2026 adjusted EBITDA guidance to $1.115-$1.14 billion and EPS to $2.40-$2.50, reflecting strong year-to-date performance.
- Preliminary FY2027 outlook expects 20 basis points margin expansion, with NASA insourcing impact accretive to margins and low-margin program exits improving mix.
Negative Points
- Q3 revenue of $3.5 billion came in slightly below expectations due to protest delays and lower material volume, with normalized growth of only 1%.
- NASA workforce directive insourcing is now expected to impact FY2027 revenue by 3%, higher than the prior 1% estimate, creating a near-term top-line headwind.
- FY2026 revenue guidance was revised down to $13.8-$13.95 billion, removing contributions from new business awards under protest and reflecting lower materials volume.
- The company is intentionally exiting low-margin programs, representing approximately 1% of revenue, which will reduce top-line growth in FY2027.
- Near-term growth is impacted by extended protest periods and procurement delays, including effects from the firm-fixed-price executive order, slowing award conversions.
- Free cash flow guidance for FY2026 remains at $525-$575 million, with no increase despite higher EBITDA, indicating working capital pressures.
- The company expects only mid-single-digit growth in the remaining portfolio for FY2027, which may not fully offset the NASA and program exit impacts.
Q & A Highlights
Q: As your commitment to deleveraging concludes, how are you planning to deploy capital in the following fiscal year?
A: Travis Johnson (CFO) stated that reaching a net leverage of 3.0x a quarter earlier than expected positions the company to be more flexible and opportunistic with capital deployment. The approach will be disciplined, focusing on the highest long-term returns, and will consider options including M&A, share repurchases, and continued debt reduction. John Heller (CEO) added that the company's organic business development momentum, particularly in nuclear energy, means transformational M&A is not required to achieve its growth strategy.
Q: Can you provide more detail on the preliminary fiscal year 2027 outlook, specifically regarding the NASA workforce directive impact and the decision to exit certain low-margin programs?
A: Steve Arnette (COO) explained that NASA has solidified its plan to insource certain workforce elements, and the impact is now expected to be at the upper bound of prior scenarios, resulting in a 3% revenue impact for FY2027. He noted the impacted contracts are margin-dilutive, so the EBITDA impact will be less than the revenue impact. Travis Johnson (CFO) added that the company has made an intentional decision to exit a few no- to low-margin programs, representing approximately 1% of revenue, to allocate resources to higher-return opportunities. This is not related to the global threat environment but is purely a margin-profile decision.
Q: How should we think about the split between Digital Solutions (DS) and Global Engineering Solutions (GES) for the preliminary 2027 outlook?
A: Travis Johnson (CFO) declined to provide segment-specific guidance this early but stated that at a macro level, the NASA impact, which is in the Digital Solutions segment, will put some pressure on that segment's growth. However, setting that aside, the company sees organic growth and margin expansion opportunities across both segments for the next fiscal year.
Q: How much of the fiscal year 2027 revenue outlook is covered by existing backlog and expected pending awards?
A: Travis Johnson (CFO) stated that as of today, the company expects approximately 92% of FY2027 revenue to come from existing or follow-on work, providing a high level of visibility this early. He noted that the adjudication of the $32 billion in pending awards in the coming months will have an impact on FY2027, but the company feels good about the current visibility.
Q: Can you unpack the specific items driving the revenue guide for fiscal year 2026, such as protests and procurement delays?
A: Travis Johnson (CFO) attributed the revenue revision to roughly $175 million in new business delays, notably from awards under protest spread across the portfolio, and lower-than-expected materials and non-labor volume. He stated that Q4 growth is expected to be consistent with year-to-date performance at approximately 2% at the midpoint, and that the FY2027 preliminary outlook has factored in the current award environment and protest timelines.
Q: What needs to happen to get the company towards its mid-single-digit growth potential?
A: John Heller (CEO) highlighted the continued success in nuclear energy and the maturation of the pipeline into funded construction phases as key drivers. He cited the Savannah River AI data center and nuclear power project as a significant, decades-long opportunity that will provide milestone achievements. He also pointed to continued progress in the US nuclear industry and global opportunities through the Rolls-Royce and Westinghouse partnerships as key indicators for accelerated growth.
Q: Can you provide more color on the opportunities in the critical digital infrastructure market and how Amentum plans to scale?
A: Steve Arnette (COO) expressed excitement about the accelerating progress in critical digital infrastructure, noting the company is moving to scale with a first hyperscaler client and has found entry with a second. He attributed success to the company's ability to bring engineering and systems integration solutions that optimize schedule and minimize delivery risk in a market with high project volume. The company is incrementally biasing resources and making strategic hires to bolster business development and project leadership in this area.
Q: How should we think about Amentum's involvement in US allied nuclear power programs, such as the reported agreement with Saudi Arabia?
A: John Heller (CEO) stated that Amentum has a strong pipeline of global opportunities and sees opportunities in countries like Saudi Arabia as open to the company given its global brand. He highlighted the company's established presence in Europe, including involvement in 17 nuclear power plant construction projects in the UK and the Rolls-Royce partnership, and noted the company is actively tracking opportunities globally for near-term growth.
Q: Given that national security is roughly 50% of revenue, should this business naturally mix down, or is there an unlock on revenues or margins within this segment?
A: Steve Arnette (COO) pushed back on characterizing national security as an anchor, highlighting diversification across the US, UK, and Australia. He noted an organic transformation within the portfolio, driven by the executive order favoring firm-fixed-price work, which shifts the business from cost-plus to solution-based offerings. Travis Johnson (CFO) added that while the base case assumes no significant impact to defense budgets, the company sees higher growth opportunities in its accelerating growth markets, which will naturally become a larger percentage of the portfolio over time.
Q: What specific budget scenarios are contemplated in the 2027 preliminary outlook?
A: Travis Johnson (CFO) stated that the base case assumes a stable budget environment, contemplating the likelihood of a continuing resolution at least through the better part of the first quarter. He noted that a relatively consistent budget environment has been factored into the range of anticipated outcomes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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