AMTM - NYSE

Ladies and gentlemen, thank you for standing by. Good morning, and welcome to Amentum's Second Quarter Fiscal Year 2025 Earnings Conference Call. Today's call is being recorded. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. And at this time, I would now like to turn the call over to Nathan Rutledge, Senior Vice President of Investor Relations. Please go ahead, sir.

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 on our annual report on Form 10-K. These 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. Welcome to Amentum's second quarter earnings conference call. As we closed the first half of the fiscal year, it's rewarding to see the progress we've made notably staying on track with our integration plan and the solid execution of our strategy to enhance our position as a global leader in advanced engineering and technology solutions. Our operational results reflect the strength of our underlying business, the continued demand for our mission-focused capabilities and our ability to deliver differentiated solutions that help our customers achieve their objectives more efficiently and effectively. We also recently announced the divestiture of our Rapid Solutions product business, a positive step that is aligned with our core strategy and strengthens our balance sheet position, which I'll discuss in more detail shortly. I'm especially proud of our team, working closely with our customers around the globe as we stay focused on our shared vision of advancing critical missions. The disciplined execution of Amentum's strategy, agile business model and unwavering commitment to our customers' missions have enabled us to deliver solid financial results for the second quarter. As shown on slide 3, we delivered revenue of $3.5 billion, adjusted EBITDA of $268 million, reflecting 3% year-over-year growth and free cash flow of $53 million. We are encouraged by our results and understand that long-term success will be driven by disciplined execution and by managing variables within our control. By staying focused on these priorities, we are positioning ourselves to deliver sustained growth for our customers and stakeholders. Looking ahead to the second half of the year and beyond, we remain confident in our strategy and our ability to drive long-term growth and superior value for our shareholders. Now let's move to slide 4, which highlights the continued strong demand for Amentum's mission focused solutions across our diversified end-markets. We reported $2.8 billion in net bookings this quarter, resulting in a quarterly book-to-bill ratio of 0.9 times, bringing our year-to-date book-to-bill to one-times. As noted on our first quarter earnings call, awards to unconsolidated joint ventures are excluded from our reported book-to-bill ratio. Including Amentum's proportional share of joint venture revenues and bookings, our year-to-date imputed book-to-bill ratio is a robust 1.2 times. Finally, we ended the quarter with a total backlog of $45 billion representing 3.2 times our annual revenue. Enduring demand for our work is fueled by Amentum's diverse end market exposure and our proven ability to deliver impactful mission-focused solutions. This positions us to carry strong momentum in the months and years ahead. In the second quarter, we converted a strong pipeline into new awards that align with our key growth markets and priority customers. To illustrate this momentum, I'd like to highlight a few notable wins. First, Amentum was awarded multiple intelligence contracts totaling over $1 billion, which are aligned with national security priorities and will deliver a range of innovative mission-focused solutions, including critical infrastructure management, cyber security and intelligence analysis. At Capital Markets Day last August, we called out intelligence as a key market where our combined scale and capabilities will give Amentum a competitive strength. These awards demonstrate the demand for high-impact intelligence and cyber security solutions, which we expect will drive sustainable growth. This reflects the quality of our work and underscores our expertise in providing high-quality security engineering solutions, enabling our customers in their mission to defend and protect our national interest. Second, Amentum was selected as the program manager and lead design engineer for Sizewell C, a new nuclear power station that will strengthen the United Kingdom's energy solutions. We're supporting customers at the forefront of the nuclear renaissance and we are proud to be part of this mission. It draws directly on our advanced engineering and deep technical expertise to help deliver the next generation in reliable and secure nuclear power generation. This long-term contract will culminate with a station that has two 1.6 gigawatt reactors enough electricity to power 6 million homes each year. Lastly, I'd like to highlight over $500 million in IDIQ task orders awarded in the quarter, including a program with the Naval Surface Warfare Center. Through this award, we'll apply our proven expertise in electromagnetic environmental effects to strengthen the Navy's decision making in spectrum dominance. Our solutions will enhance battle force interoperability by addressing electromagnetic interference challenges, delivering a strategic edge in naval operations. With extensive capabilities spanning digital transformation, modernization and sustainment and space systems, and deep relationships across the customer landscape, Amentum is unlocking meaningful cross-selling opportunities. We have positions on more than $450 billion in contract vehicles, many of which span multiple mission areas. These broad scope awards allow us to deliver a wide range of integrated solutions to a single customer under a single task order. Our recent selection to OASIS+ is a prime example, covering eight domains from R&D to enterprise solutions. It enables us to align our capabilities with a diverse set of mission requirement. Opportunities like this strengthen customer intimacy and enhance our programmatic alignment leading to faster value delivery and simpler more effective solutions. These are just a few examples of our growth success but we continue to see strength across the broader pipeline. Demand for high-value mission-focused solutions remains a clear priority for our customers. With our proven differentiated capabilities, strong customer relationships and deep technical expertise, we are confident in our ability to deliver across the broad set of resilient end-markets. We currently have $29 billion in pending awards and we remain on track to submit over $35 billion for the full fiscal year. Now, I would like to take a moment to address the broader budget and policy environment impacting our market. While we are encouraged by healthy year-to-date demand from across our customer base, we recognize that we're living in a time of rapid transformation. The combination of evolving geopolitical dynamics and the direction of the new administration is reinforcing the need for mission-focused solutions, many of which are directly aligned with Amentum's strategy and capabilities. On the budget front, visibility is improving. For the fiscal year 2025, we feel confident in our ability to successfully navigate our way through the full year continuing resolution and meet our financial objectives. We've seen positive signals in the defense and border security allocations included in the reconciliation bills from both chambers. And while it's still early, last week's release of the fiscal year 2026, White House budget proposal clearly articulates the importance of national security as this administration's top priority. In February, Secretary of Defense, Hegseth, outlined 17 priority areas for the Department of Defense. These areas are critically important to national security, which is why Amentum is already supporting several of them including: first, missile defense. We're supporting the Missile Defense Agency's evolving mission through integrated test, training and operational support under our Integrated Research and Development for Enterprise Solutions contract. As a result we're also well positioned to play a significant role in the development and deployment of the Golden Dome missile defense initiative. Second, combating transnational criminal organizations we're deploying AI/ML-powered analytics under our Counternarcotics and Global Threats contract to disrupt the financial networks of cartels and terrorist groups and at the border where Amentum is enhancing U.S. border surveillance and patrol capabilities through aviation support. Third, nuclear modernization, advancing strategic radiation-hardened microelectronics to improve the resilience of the Navy's nuclear deterrence systems. Finally, through our ITEAMS contract, Amentum is advancing USINDOPACOM mission objectives by enhancing operational readiness and command support in the Indo-Pacific theater. These are just a few examples of how Amentum is contributing to critical national security priorities today and where we are well-positioned to support future opportunities. Beyond the defense and intelligence markets, we are strategically expanding into enduring missions experiencing rapid growth. We're especially pleased with the strong and consistent growth in our commercial and international markets, which represent 20% of revenue. As I noted earlier, our targeted growth in high potential sectors like nuclear engineering and commercial 5G places us at the cutting edge of evolving markets. At our core, Amentum is in the business of delivering solutions that enable our government and commercial customers to achieve their objectives faster and more effectively. These are capabilities that align with the priorities of any administration or corporation validating our strategic direction. In short, while the environment remains dynamic, Amentum's strategy, capabilities, and mission focus position us well for the future. Let's now turn to Slide 5. Building on the strength of our end-market diversification, a little more than two weeks ago, we announced the planned divestiture of our Rapid Solutions product business, a transaction that illustrates the capital-light nature of our go-to-market strategy and commitment to disciplined balance sheet management. Technology agnostic capabilities and solutions are a key ingredients in our strategy to deliver high-impact high-value solutions that meet customer needs and maintain Amentum's position as the premier pure-play government and commercial services provider. This transaction is an extension and reaffirmation of our existing operating model. This business is better suited to a product-centric model that depends on steady capital investment an approach that differs from our asset-light integrated solution-driven model. With a more streamlined portfolio we are better positioned to pursue opportunities, aligned with our core strengths and deliver differentiated value and complex mission-critical environments. While Travis will speak in detail about the financial benefits of the transaction, I'll note that the divestiture is aligned with our deleveraging objectives, accelerating our ability to flexibly redeploy capital toward value-accretive opportunities. To conclude I would like to underscore three takeaways from Amentum's second quarter. First demand for our mission-critical solutions is strong and growing as demonstrated by recent wins, including in the intelligence and environment markets. Second, we're executing with discipline, streamlining our portfolio, advancing our debt reduction goals, and staying focused on markets where we can lead. Third, our integration plan remains firmly on track positioning us to fully realize the benefits of scale, talent, and capability that our platform brings together. With strong momentum and a clear strategy, I remain confident in our future and excited about the value we are creating for all stakeholders. With that, I'll turn it over to Travis to walk you through the financials in more detail.

Thank you, John and good morning everyone. I'm pleased to discuss with you today Amentum's solid second quarter performance, expected financial benefits from the recently announced Rapid Solutions divestiture, and our continued confidence in achieving full year results, in line with the commitments we originally set back in August at Capital Markets Day. As John noted, our results for the quarter evidenced the underlying strength of Amentum's diversified business and go-to-market strategy and were enabled by the dedication and commitment from our employees across the globe. The relentless focus on excellence yielded strong business development results and importantly, outstanding operational performance for our customers. With that, let's talk about our financial performance on Slide 6. 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 pro forma results from the second quarter of fiscal 2024. These figures offer a combined view of the new Amentum business and provide performance insights on a more comparable basis. Second quarter results were in line with our expectations. Revenues of $3.5 billion reflect 1% growth and were driven by continued strong demand and year-over-year increases in Digital Solutions. Adjusted EBITDA was $268 million, reflecting year-over-year growth of 3%, supported by a 20 basis point increase in adjusted EBITDA margins to 7.7%. In addition to the strong program performance in both segments, we're beginning to see benefits from our cost synergy initiatives, which remain on track with our previously communicated objectives. Adjusted diluted earnings per share were $0.53, up 4% from a year ago, with revenue growth and strong operating performance more than offsetting higher interest and tax expense. Moving to our reportable segment results on Slide 7, Digital Solutions generated revenues of $1.3 billion, representing 3% growth. The year-over-year increase was driven by higher volume on new contract awards, particularly in the commercial infrastructure market, which more than offset the expected ramp down of other historical programs. Excluding the previously discussed impact of Cytec, Digital Solutions revenues grew 8% on an underlying basis. Adjusted EBITDA increased to $107 million, reflecting a 30 basis point increase in adjusted EBITDA margins to 8% as a result of the higher revenue volume and improved operating performance. Global Engineering Solutions generated revenues of $2.2 billion, a year-over-year decrease of 1%. The decrease was driven by 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 increased to $161 million despite the revenue volume impact, as a result of a 10 basis point increase in adjusted EBITDA margins from strong operating performance. Turning to Slide 8, to cover our cash flow performance and capital structure highlights. Second quarter free cash flow of $53 million was impacted by the anticipated timing of interest and tax payments and came in slightly higher than expected as a result of solid operating performance and disciplined working capital management. Our liquidity position remains strong, with ending cash on hand of $546 million and no outstanding balances on our $850 million revolving credit facility. Further, net leverage is trending as expected at four times, a reduction from 4.1 times at the end of fiscal year 2024. With expiration of the six-month soft call on our Term Loan B, we are now positioned to repay debt without incremental cost in the second half of fiscal year and beyond. In terms of strengthening our balance sheet position, as John noted earlier, we recently announced the divestiture of our Rapid Solutions product business. The sale, which is strategically aligned to our capital-light business model and will be accretive to adjusted earnings per share and free cash flow, is expected to close in the second half of 2025 and to generate approximately $325 million in after-tax proceeds. In addition, as is customary in M&A transactions and was expected, we have finalized a net working capital true-up in connection with the Jacobs' transaction, which resulted in a $70 million payment to Jacobs' in the third quarter. Together, these investing activities are expected to result in approximately $255 million of incremental cash, which will accelerate our deleveraging objectives and path to a flexible and opportunistic capital deployment posture. We continue to believe our balance sheet strength, strong liquidity position, and robust free cash flow profile, which will be enhanced by the Rapid Solutions divestiture, will act as fundamental drivers in the creation of long-term shareholder value. On Slide 9, let's now turn to our fiscal year 2025 full-year outlook. As a result of our solid first-half performance and with 98% of revenues expected to come from existing or re-compete business, we remain confident in our outlook and are therefore narrowing guidance ranges for both revenues and adjusted EBITDA. We now expect revenues in the range of $13.85 billion to $14.15 billion and adjusted EBITDA between $1.065 billion to $1.095 billion. Adjusted earnings per share remained unchanged at $2 to $2.20. And we still expect free cash flow between $475 million and $525 million. Based on the expected close timing, our guidance currently assumes no significant impact from the Rapid Solutions divestiture. However, following the close of the transaction, we will reassess our forecast and update the outlook if necessary. In addition, guidance continues to reflect the revenues impact of approximately 1%, as a result of the new administration initiatives. From a time-phasing perspective, consistent with the prior year, we expect third-quarter revenues and profitability to be in line with our second quarter results and to accelerate in the fourth quarter. Second half revenues are expected to grow 3% relative to first half performance, driven by organic growth including a 53rd week in the fourth quarter partially offset by joint venture transitions and administration change impacts. We expect cash flow will follow normal seasonality with the fourth quarter being the strongest quarter as a result of robust collections given our alignment with the government fiscal year-end. Other key assumptions in connection with fiscal year 2025 guidance are included on Slide 9 and today's presentation posted on our Investor Relations website. Wrapping up on Slide 10. We are pleased with our first half performance which reflects the strength of our combined company. We are well positioned to meet our fiscal year 2025 financial objectives and remain confident in our ability to deliver significant free cash flow growth and long-term value for stakeholders. With that, operator, please open the line for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Tobey Sommer with Truist. Please go ahead, sir.

Thank you. I was wondering if we could start out by digging into the nuclear opportunity not just the one you cited in terms of new business wins, but thematically how you see demand percolating across different geographies? Thanks.

Good morning Tobey. How are you been?

Very well. Thank you. Hope you are as well.

Thank you. So now this is an area that we're really excited about when we brought the two companies together. Obviously, Amentum is extremely well known here in the U.S. with nuclear remediation but we also do work in a lot of the labs helping with the development of next-generation nuclear energy capability and bringing the Jacobs team into the mix just created a global really engineering capability that we think is one of the strongest on the globe. Over in the U.K. we're a key leader a dominant player in terms of the energy market both with the large gigawatt plants like the Sizewell C that we mentioned but also with SMRs and the emergence of SMR OEMs that are doing a lot of research and our participation with them both in the U.S. and in Europe. And I mentioned the U.K. but across Europe we have partnerships in many countries working on energy projects. So we're really excited about that kind of leg of our strategy and especially given the tailwinds because of demand that is accelerating tremendously driven by the hyperscale companies that to fund and fuel their growth and frankly the U.S. economy we are going to need a much larger amount of energy availability to enable our great technology companies to grow and bring that new technology online using AI large computing centers advancing computing power but you need energy. And nuclear can be a great kind of source of that because we could -- we have the technology the capacity of nuclear is substantial and we could bring that on quickly. So lots going on in our business. And Steve I don't know if you want to touch on Sizewell in particular maybe some of the other things that are happening.

Yes. Thanks John. Just to fill in maybe a couple of gaps. I think John covered it well. But also maybe a flavor Tobey on geographic opportunity as you mentioned in your question. In U.K. and just as John said a great win with Sizewell C that will be a great project that they'll need program manager and designer that will go for several years. It actually comes on the heels of having won a similar role in the Hinkley Point C reactor that's just now evolving into construction. Thing that's great about those gigawatt power stations while we help design and realize the facility ours tends to be a cradle-to-grave involvement there where we continue to do the sustaining engineering and monitoring from a technical standpoint the health of the plant and even getting into end of life to be able to diagnose. Those tend to be long-term engagements which we're really excited about. Also U.K. supporting several of the SMR developers and there's a major program happening in the U.K. to down select some serious investment there which we're excited to be part of several of those teams. And so there's a lot happening in the U.K. which John cited. One thing I would also mention with the revolution in the U.S. and a lot of kind of early-stage initiatives around nuclear power much of it geared toward enabling AI like John said. We're actually now on the front end engaged in several projects mainly in an engineering state where we're looking at advanced fuel processing, fuel fabrication facilities that we're now in a design stage on those. So that really makes sense that, that would be kind of the leading edge of the curve, if you will, to enable the ramp-up in the US. We're excited about our engagement there. The last thing I'll mention is in Australia. And you think about AUKUS and now moving out to help equip that key ally with nuclear submarines. And so a whole -- a need for a whole new nuclear regime, how do you deal with nuclear fuel and safely do that and everything that goes around that. Our team there helping that government to work through that. So it really has become for Momentum kind of a global market in terms of this nuclear revitalization.

Perfect. Thank you. If I could just ask one housekeeping question, and then I'll get back in the queue. The guidance, does it include the revenue and profit from the announced upcoming divestiture?

Hey, Tobey. Good morning.

Good morning.

So based on the expected close timing, which we publicly stated we're expecting to occur in the second half of calendar year 2025. Our guidance currently assumes that there's no significant impact this year as a result of the divestiture based on that expected close timing. And as a reminder, the business in aggregate only makes up around 1% of our revenues and adjusted EBITDA. So to the extent that it does happen this fiscal year, I wouldn't expect it to have a significant impact. And certainly, any impact to be well within our guidance range.

Great. Thank you very much. I'll get back in the queue.

Thank you. The next question comes from Andre Madrid with BTIG. Please go ahead.

Good morning, gentlemen. Thanks for taking my question. We've heard some competitors call out a slowing award environment, and I'm curious to hear your thoughts on how you're finding the pace of things as of now?

Thanks, Andre. Good morning. I think I'll start and then John can certainly add on. As a result of what we're seeing in terms of federal workforce disruption and obviously, changes in priorities and adjusting to the various executive orders that are out there and the new administration priorities, we certainly have seen some impacts to timing of awards and also extensions on some of our existing work. But what I will say is we're really pleased with our year-to-date business development performance, both from a book-to-bill perspective, which is 1.0 on a year-to-date. And I think it really demonstrates the diversification and strength of our mission-focused portfolio and what we're doing to support our customers, not only with the US government, but as John noted in his prepared remarks, 20% of our business is international and commercial. And we've certainly seen good tailwinds and bookings from that perspective as well. And we're also excited about the $29 billion of pending awards and what that can mean for the second half. So to kind of summarize, yes, we've seen some impacts to the timing of awards, but we expect it to be just that timing. Eventually, the $29 billion of pending awards will be adjudicated. So we're just staying laser-focused on developing the best solutions and putting the best proposal forward to support our customers.

And I would keep in mind as awards are delayed, existing programs are ongoing. And there -- if they cannot get awards out, they are adding work to those existing contracts, and we're seeing robust adds to existing contracts that are also contributing to our year-to-date performance. And that's always an important element of our performance every year is helping customers identify opportunities for improving operations and seeing those types of modifications added to existing contracts.

Got it. Got it. Very helpful. Thank you. And then if I could squeeze one more in. I mean, Rapid Solutions, excellent job with that. I mean, are there -- are you continuing to assess the broader portfolio and seeing if there's any similar assets that might be worth divesting to shore up capital?

Yeah. When you think about a company, $14 billion in revenue, very broad and very diversified. As we came out in the beginning back in end of September, we were really excited about that diversity. But we are just getting together. We have just had the opportunity as a leadership team to kind of look inside the portfolio in a very detailed way. I would say, as any company, you go through a strategic planning process usually annually, you look at what your priorities are in that strategy. And then you look at your portfolio and make sure that all the elements of that portfolio align with those priorities. And I think as we looked at Rapid Solutions, we found that was a piece of the business that we felt did not -- I mean it's a great piece of business, obviously, real excited for those employees, in particular, having the opportunity to continue the work that they're doing with a partner that's really going to support them, but it just didn't align with our strategy priorities. And I think as we think of the future, we're going to continue to look at our priorities and look at our portfolio every year and look at what is or is not aligned and make those decisions as we continue to go forward.

Thanks. That's super helpful. I'll jump back in the queue. Thank you.

Thank you. The next question comes from Colin Canfield with Cantor Fitzgerald. Please go ahead.

Thanks. Maybe asking the divestiture question in a different way. Travis, you mentioned about future debt paydown. Is there a right way to think about the level of proceeds in terms of a range that you might expect? And then also is there a right way to think about the potential valuation that's being considered on those proceeds? Thanks.

Good morning. So speaking of Rapid Solutions specifically, as we had in our press release the sale price is expected to be $360 million. And then on an after-tax basis, we expect the net around $325 million. We were able to take advantage of some tax attributes that were obviously positive to the taxes we'll have to pay on that which is a positive. And we're really excited about the proceeds. Obviously, we need to get to close, but it will certainly strengthen our balance sheet position and accelerate both our deleveraging objectives. And as John said on the call, a path to more flexible and opportunistic capital deployment posture. So we're excited about that. And really from an overall perspective we remain focused on delivering our prior commitment of three times net operating leverage by the end of FY 2026.

Got it. Got it. And then in terms of the bookings maybe walk us through what was quarterly book-to-bill with the included bookings from the JVs? And then what was that – like how should we think about the bookings number quarter-to-date thus far?

Yes Colin, thanks. Book-to-bill both on a reported basis and on an imputed basis was 0.9 for the quarter. As John noted in his prepared remarks, it was on a reported basis 1.0 year-to-date and 1.2 on an imputed basis, so we really saw the strength of those joint venture awards in the first quarter across not only in the environment business with Hanford and West Valley but also with our COSMIC win that we announced. So that was really concentrated in the first quarter. But really pleased with the performance of the business since we came together back in September.

And any sense of bookings thus far this quarter?

So we haven't commented on anything in regards to post quarter. We've – I will say that we've continued to see both submits and awards take place as we've gone through the first month of the third quarter.

Okay. Thank you. I’ll hop back in the queue.

Thank you. The next question comes from Ken Herbert with RBC Capital Markets. Please go ahead.

Good morning. Maybe just to start just wanted to follow-up on the sort of the revenue guidance for the year, I think it implies about a 3% sequential step up from first half to second half. Obviously, the growth in the second half is limited. You talked about the joint venture transitions and some of the other changes as potential headwinds. Can you just go into any more detail on sort of the specific headwinds and maybe quantifications there? But I guess more importantly, as you look at the sequential step-up first to second half maybe some seasonality or other aspects to it but underpinning that confidence in the full year guide? Thank you.

Hey, Ken. Good morning. Thank you for the question. So I'll start by just saying first of all we're really pleased with the financial performance in the first half of the year, which as I noted really just demonstrates the diversity and the strength of our mission-focused portfolio. And as we look ahead to the second half of the year, I think you hit a couple of the dynamics spot on, right? And we're expecting revenue to increase 3% relative to the first half. And I'll kind of piece it out for you a little bit. First, we're expecting around 6% organic growth including the impact of the 53rd week and that is partially offset by the joint venture award that we announced earlier this year as well as the kind of folding in of the administrative change impacts that we previously discussed. And maybe to provide a little bit more context on the joint venture dynamics. So both – actually all three of the joint venture awards I noted earlier West Valley, Hanford, COSMIC, really great wins for the company and a continuation of the work that we've previously been doing. However, they are now transitioning from what was historically consolidated joint ventures, which we reported revenue on to unconsolidated joint ventures. So it will impact the revenue top line but have no impact on the bottom line in free cash flow obviously. And in fact we expect probably stronger performance on those, especially as they ramp up over the transition period and head into FY 2026 with EBITDA and free cash flow increasing on these opportunities in aggregate. So really excited about those. But obviously, as we noted we'll have an impact on the revenue profile. And then the last thing I'll note, it's important to note that we provide guidance ranges that obviously, contemplate a variety of different scenarios. And at the top end of our guidance range, 2H revenues would actually grow around 5%. So we feel really good again about the first half performance and obviously, reaffirming the midpoint of our guidance for the full fiscal year demonstrates the confidence we have in delivering the numbers we set back in August.

And Ken I would add, you have to contemplate here that we brought these two companies together just six months ago and we talked a lot about white space synergies, the value of having the expanded engineering and technology capability of these both businesses in a single enterprise. So we're applying that to every opportunity that were coming on and bidding and as well as existing projects and taking that enterprise capability that we now have and applying it to opportunities that exist and come up on existing programs. So this gives us optimism on the strength of the business our ability to bid opportunities that we could not bid before as we go forward and we're building our pipeline on those opportunities and then things even that were in our pipeline both companies we are applying the combined strength of our new enterprise against those. So, is that going to have a huge impact on FY '25? Probably not because those contracts are just -- those bids are just going in, but we're really excited about as these things matriculate in '26 and '27, this should really provide an opportunity for us to grow as we think about the future.

No, that's great. I really appreciate the color. And just as a final question. Have you seen any impact yet from some of the GSAs push on the consulting front? Is it possible to maybe bracket or frame how much of your revenues would be perhaps pure consulting? And has this been anything that's come up yet for you guys?

Yes. No, this has not been an issue for Amentum. Our focus is -- has been and is today purely on mission operations, mission delivery and key technology capabilities that do not relate to any type of consulting work. It's just not part of our business model and not something we were looking at as a part of our strategy in the future.

Perfect. I appreciate the color and nice results. Thank you.

Thank you. The next question comes from Noah Poponak with Goldman Sachs. Please go ahead.

Hi, good morning everyone. Travis, apologies for not getting this, but what's the 5% that you were just referencing that you walked back to adjusting for things to sort of get to a core growth rate?

The comment around 5% Noah is just at the top end of our guidance range for revenues at $14.15 billion. The growth from the first half of the year to the second half of the year will be 5%.

That's first half to second half?

Correct.

Okay. What is the growth rate impact to the full year growth rate from this change in the JV accounting?

So the joint ventures in aggregate, we were running at around $80 million a quarter for the first half of the year. And we expect those to fully transition out by the end of the third quarter and have zero revenue contribution in the fourth quarter. So that's kind of the -- if you want to think about the quarterly and full year impact of the joint venture transitions that's the right way to think about it.

So that takes out maybe $100 million of like-for-like year-over-year '25 versus '24?

Yes, that's correct, a little over $100 million.

Okay. Okay. I guess I just wanted to ask too on growth just zooming out higher level. You've laid out a very strong case in the prepared remarks for your position in the market, your capability, your customer relationships enduring mission exposure, but the growth rates are low. Now, in the first half, there's Cytec and then in the second half, there's this -- there's just moving pieces. I guess though at a high level if I just listen to your prepared remarks, it sounds like a high growth rate and the growth rates are low. I guess, how do I square that? Or maybe just speak to the multiyear CAGR you have, is that still firmly in place? Can you be in that range next year in 2026? Or does 2026 also have transition elements to it? How do I square all that?

Given obviously the government's kind of transformational activities that are ongoing it looks -- for everyone it's added some uncertainty. But I think when -- just as my remarks to Ken a second ago, just when you step back and look at what we've brought together in Amentum today is a company that is highly diversified with like a leadership position across many market areas that have opportunity to take advantage of the shifting priorities in government both the US government and our key allies. And we think that our strategy around key areas like space and defense and intelligence and energy and environment, all have the opportunity to kind of find those niches of growth. And when you look at the US government's priorities of missile defense, data analytics around UABs, the border all firmly aligned in strengths of Amentum past capabilities of Amentum. And then we talked about energy as a key demand area for the commercial economy and not just here in the US, but around the world going forward. And then our commercial business in general, there are several areas that we feel that market areas in critical infrastructure management, the shift to 5G and other things that we're working on, that can all provide key elements of strategic growth for the business as we look forward. So, we're very happy with where we're sitting today with nearly $30 billion of bids awaiting award and a pipeline of strength and opportunities across all those areas I discussed so, especially being aligned to key US government priority areas that have been articulated.

Okay. Okay John, I appreciate all that detail. I guess the 1% you've referenced as an impact to the year from changes happening at your customer. You spoke to that previously and then today you're speaking to the same number, so it's not changing. So that implies that has stabilized. What's your sense of or your view on if that is now kind of as bad as that gets? Or how much risk do you see through the rest of this year going into your fiscal 2026 that that 1% becomes something larger?

So you're absolutely right, Noah. Obviously, we'll acknowledge that we're still operating in a dynamic environment. But based on the information we have today, we still feel comfortable that 1% is the right estimate for the expected impact on our FY 2025 revenues, which obviously we've fully contemplated in the guidance that we reaffirmed today. The other thing I'd say is that, while we've contemplated that in our guidance, we're tracking several potential opportunities where Amentum is well aligned to the new administration priorities, many of which John noted in his prepared remarks and in the Q&A responses, which we haven't factored into our expectations or guidance yet. So as we look forward and move into FY 2026, as you noted, those will provide potential tailwinds as they become more real and get adjudicated through the system.

Okay. Last one Travis. It actually changes -- 1% is 1% but depending on the possible rounding of how much Rapid Solutions was as a percentage of your EBITDA, whether it was 0.6% or 1.4% it makes a huge difference. But did you sell Rapid Solutions for something close to 30 times EBITDA?

So we'll stick to what we have in the press release Noah, which is exactly what we've said, which is a sale price of $360 million and adjusted EBITDA around 1% of revenue. Yes, 1% of overall EBITDA.

Okay. Thanks a lot.

Thank you. The next question comes from Kristine Liwag with Morgan Stanley. Please go ahead.

Hey. Good morning, guys. I just want to close the loop here on DOGE and the risk that you're seeing. From your commentary, it seems like there's a lot of confidence in the 2025 guide. But when I look at the DOGE wall of receipts, there are a few AECOM and Jacobs contracts terminated just in the past few days, including two Department of Homeland Security contracts adding up to the $46 million. So I want to understand is the confidence in the guide, because these aren't part of Amentum today? Or are they part of the guidance range? Any more commentary would be helpful.

Thank you. There are no further questions, at this time. I would now like to turn the call over to John Heller, Chief Executive Officer for closing remarks.

Thank you, operator and thank you all for your interest in Amentum. We are very encouraged by our progress thus far. Amentum is delivering great value to our customers and we look forward to keeping you updated in the quarters to come.