Q3 2025 Amentum Holdings Inc Earnings Call
[music].
Okay.
[music].
Ladies and gentlemen, thank you for standing by good morning, and welcome to our maintenance third quarter fiscal year 'twenty 25 earnings Conference call. Today's call is being recorded at this time all participants are in listen only mode. After the speaker's presentation, there will be a quest.
And answer session and instructions will be provided at that time 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 I hope you've had an opportunity to read the press release, we issued yesterday afternoon.
On our Investor Relations website.
We've also provided presentation slides to facilitate today's call so let's move to slide two.
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.
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.
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 are safe Harbor statements 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're also joined by other members of management, including Steve Arnette, Chief operating officer.
With that moving to slide three its my pleasure to turn the call over to our CEO John Butler.
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.
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 tailwind from a global trends and an improving budget environment and were excited about the bright future ahead for <unk>.
I want to begin by acknowledging the extraordinary efforts of our team across the globe momentum 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 <unk> 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 in.
And free cash flow of $100 million.
During the quarter. We also successfully completed two divestitures, our rapid solutions business, which was originally announced in April and our non core New Zealand facilities maintenance business. These divestitures demonstrated 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 three five times 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 and 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 four.
The fiscal year 'twenty six budget reconciliation bill or the one big beautiful Bill along with recent executive orders represent a generational investments in national security and other critical areas that are well aligned with <unk> portfolio of advanced engineering and technology solutions.
Bill includes $150 billion in additional defense spending and $133 billion in supplemental funding per border security.
Both to be deployed over the next two years. It also contains sweeping investments in masses, 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 warfighters ability to counter emerging threats, including hypersonic systems through our Irish contract with the missile Defense agency with a $25 billion initial investment in the Golden Dome initiative. The U S is <unk>.
<unk> down on integrated layered defense and amend some 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 momentum is positioned to drive the next evolution of the economy and aerospace dominance in the.
Pacific Region momentum is supporting mission preparedness through programs, such as itunes well, we're driving agility and innovating command and control systems for the department of defense with billions of dollars aimed at bolstering Indo pay comps posture, we're ready to continue enabling deterrence.
And then some is at the heart of America space infrastructure powering the next era of human exploration at 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 of new funding for NASA space flight and modernization efforts, we're accelerating launch readiness and reinforcing U S space leadership.
Next from AI ml enabled decision environments to cyber Harden cloud migration and digital twin infrastructure momentum is working with our customers modernizing national security.
For real World applications, the decision to allocate billions for Nexgen federal infrastructure reinforces what we've known all along the mission demands leading edge solutions and our Mentum is delivering them.
Finally, we are excited about the administration's focus on the future of energy dominance.
As demand for reliable Baseload power its flows driven by AI electrification and geopolitical risks momentum is already at work across the nuclear lifecycle.
Some advanced reactor engineering to nuclear remediation, we operate the core of U S and Allied energy security strategies. The administrations made executive orders along with funding and the reconciliation bill aimed to remove regulatory barriers and inject capital into small modular.
Reactors fuel supply chains, and licensing areas, where mentum is already moving fast.
More to say about the role we're playing in the global nuclear Renaissance shortly but the key takeaway is this momentum 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 built our business around.
We're ready to meet the moment with speed precision and unmatched technical debt.
Let's move on to slide five highlights the continued strong demand for <unk> 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 one times.
As noted before awards two unconsolidated joint ventures are excluded from our reported book to bill, including momentum proportional share of joint venture revenues in bookings, our third quarter and year to date Imputed book to Bill was one eight times and one four times, 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 three two times 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 submit 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 S FRC, which deepens our partnership with the U S space Force and significantly expands our presence in space operations through this work momentum will modernize and maintained range infrastructure supporting launches on <unk>.
Both the eastern and Western ranges, the FRC 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, three critical nodes of U S based 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 Mentum 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 as a six year.
Base and an extension period of up to 20 years and is valued at approximately $1 2 billion Canadian dollars annually. It underscores <unk> nuclear solutions and strengthens our position across nuclear energy from environmental remediation and waste management to the advancement of <unk> technology.
It also reinforces our cross border solutions and supports our broader commercial nuclear growth strategy.
Also in the quarter momentum secured two new intelligence awards supporting classified customers totaling over $500 million.
We're proud to support these customers by leveraging our 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 momentum significant growth from modifications highlights our ability to win and expand scope across priority areas and valid.
<unk> the value of Mentum delivers to our customers every day.
I am proud of these recent awards I am also excited about what lies ahead.
Let's now turn to slide six and take a closer look at the global nuclear resurgence.
Ah Mentum brings advanced engineering and technology solutions to some of the world's most complex challenges one of the profound changes shaping our world today as 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 Bruce energy requirements accelerating the need for enhanced grid capacity and resilience in the U S. Local grid space 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 five trillion dollars through 2030, bringing new nuclear power plants online and extending existing <unk>.
The structure is critical to meet this demand.
Nuclear power is the only scalable and reliable base load energy source that can meet these demands with our long history, providing engineering solutions to the nuclear industry, including the deployment of new gigawatt power plants and research and design for small modular reactors momentum as well.
Equipped to lead as this market continues to grow.
<unk> is delivering solutions that fuel the nuclear resurgence across key sub markets. Please turn to slide seven which provides a visual overview of our comprehensive nuclear solutions built over more than 50 years, we cover the full lifecycle from planning design and licensing.
Our construction operations modernization and life extension and decommissioning, we have deep expertise and an integrated approach to these long term priorities.
And 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.
Much of our current work focuses on gigawatt reactors, we're increasingly applying that same expertise to next generation nuclear technologies, including <unk>.
<unk> provides scalable power with enhanced flexibility and safety features.
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 UK and Europe to accelerate deployment and enhance grid reliability we.
We support flagship programs like size, we'll see 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 stimulation of reactor physics. This tool is used by regulators and operators worldwide accelerating the adoption and construction of gigawatt reactors and SME.
We estimate that the current addressable market for <unk> nuclear solutions is approximately $20 billion in.
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 10 fold increase by 2050 its estimates for new builds are realized with.
With the backdrop of a growing global demand, our robust pipeline, including partnerships with key Oems and converging policy support we are executing our strategy to capture a significant share of this fast growing market for.
For gigawatt plants, Mentum delivers full lifecycle solutions, including design and regulatory support.
Program management and life extension.
For <unk> today are Mentum 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.
These same engineering and capabilities are directly applicable to reactor life extensions in the past five 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 nuke.
<unk> will be a critical engine of global growth at a mental the tailwind growing global demand driving policy and technology are aligned to uniquely position of Mentum 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 I am going from a strong third quarter performance.
Significant progress, we made to accelerate our deleveraging objectives and strengthen the balance sheet and.
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 our <unk> 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 nine.
Months as a public company.
With that let me walk you through our financial performance on slide eight.
I'd like to again highlight that while our GAAP results, providing accounting view of them and some of the 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 combined view of the new elements of 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 seven 7%.
Strong operational performance in both segments, along with benefits from our cost synergy initiatives for catalysts for profit performance in the quarter adjusted.
Adjusted diluted earnings per share were <unk> 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 nine.
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.
By strength in the commercial digital infrastructure market.
Adjusted EBITDA increased to $114 million, reflecting a 60 basis point increase in adjusted EBITDA margins.
8% the result of higher revenue volume favorable contract mix and improved operational performance.
Yeah.
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 102 hundred $55 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 a $360 million in gross proceeds from the sale of rapid solutions and the previously discussed $70 million final networking capital through a 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 three five times.
<unk>, 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 three times 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 revenue is expected to come from new business. We are increasing revenue expectation to the range of $13 975 to $14 $1 75 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 to 1.0 95 billion, reflecting a $5 million underlying organic increase at the midpoint as well as adjusted EBITDA margin at seven 7%.
With our year to date performance.
We are also raising our outlook for adjusted diluted earnings per share to a range of $2 five.
The $2 20.
Reflecting a 5% underlying organic increase at the midpoint.
And finally, we expect free cash flow between 475% from $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 todays presentation posted on our Investor Relations website.
Wrapping up on slide 12.
Simply put <unk> is performing well on all fronts and we are delivering on both our strategic and financial commitments.
All of which was 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 permit them in the long term value it can deliver for customers employees and shareholders.
Operator, please open the line for questions.
Okay.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your Touchtone phone and you will hear from that your hand testing range should you wish to declines from the calling process. Please press the star followed by the number too.
If you are using a speaker phone please lift the handset before pressing any key one moment. Please for your first.
Question.
Your first question comes from Colin Canfield.
Sir Please go ahead.
Hey, good morning, Thank you for the question.
Maybe starting out on the 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 long as it naphtha pipeline, so the space force contract well understood.
And a key win.
But as we think about kind of what's next it seems like the Sos.
Towards the company pretty quickly so maybe talk us through those.
Bookings dynamics.
Yeah.
Hey, good morning.
Sure. This is Travis I will start with your bookings question and then hand it over to cover your question on this space.
Opportunities. So the first thing that I would highlight is that we're obviously pleased with our award in book to Bill performance in the third quarter, which was one times on a reported basis also one times on a year to date basis and to your question specifically about our imputed JV book to Bill a couple of different incentives that we did have the Canadian nuclear laboratories.
When that is non consolidated joint venture, which John highlighted in his prepared remarks, and including that award our imputed book to Bill for the quarter was $1 eight so really solid performance there that brings our imputed year to date book to Bill.
To one four 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 is currently under protest obviously look forward to that being resolved, but our reported book to Bill would have been approximately two in the quarter with that and obviously well over 200 feet of prospective so really please.
Seized with 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.
Yeah. Thanks, Thanks Colin.
Just following up with your second part of your question.
Obviously, we reported the space Force range contract award is 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 it's so integrated in that contract that will put us at the key launch areas, where we will have the opportunity. We're excited by side with all the major commercial space launch providers.
The second part is that the Golden zone as we know.
That's going to be a huge initiatives of this administration over the next few years and likely for the next decade to come.
U S.
Research and development investing behind this capability.
Our position etch space force as well as missile Defense agency, where we have been a key support for a long time puts us in a great position to respond to the upcoming.
Acquisition opportunities, so if you're talking about pipeline really around the Golden go it's shield and seen.
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 three year.
Years, and then the last thing I'd say is really NASA. We're excited about where naphtha is going a lot of very positive feedback from this administration and support on human space flight.
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 where we are.
We are in the thick of preparation for the Artemis <unk> mission, our team at NASA, Kennedy, making great progress integrating the vehicle.
<unk> cost will be the first crude Artemis flight So mission assurance in 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.
Importantly, 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 definitely talking about hey, we're going to need things like a nuclear reactor on the surface of the Moon Theres a theres a recognition that I would say two key things number one the moon.
Does in and of itself become a very strategic objective.
We are absolutely in our sector.
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's a key.
Waste off if you will to pave the way to go onward tomorrow and so we're excited about the bipartisan support for those missions and then continued priority focus for the nation and so a lot of great work happening there we continue to see good incremental opportunity as we go.
Got it that's great color and then maybe maybe kind of tying that into the revenue mix in the business.
And the EBIT growth building blocks for next year, if we could kind of talk through how we think about conceptually.
<unk> intelligence strategy.
60% of the business.
International NASA in court.
Nuclear right.
Non civil civil stuff, so call it maybe three quarters of the business that's accelerating in 2000.
Versus the calendar year.
Calendar week excuse me building blocks, we got last quarter.
Any sort of JV dynamics that impact next year, So maybe kind of walk me through how we think about all of that goodness in civil.
Translating to accelerated growth next year, but specifically on an EBIT basis, given those dynamics. Thank you.
Yes, Thanks Colin.
First I'll just talk.
<unk> macro level and try to 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 reflects the continued strength of the business, we're being very disciplined on execution.
We completed these divestitures that sharpening our focus on our core strategy, it's really like momentum was custom built for this era.
<unk> 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, we got that down to three and a half.
And we're on a clear path to meet our commitments and keep in mind, the nine month old public company.
And we set our first year as we focus on integration laid 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 are starting to show up in our pipeline again at $29 billion.
Bids awaiting award a pipeline that looks really strong across key areas that you were touching on as we think about 2006 nuclear is really starting to pick up and I'd love to talk more about that we're still number one.
Environmental remediation there are great opportunities in space, we just talked about.
Fence around systems design integration and modernization skilled leadership area of ours and then we talked about this 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 'twenty six you probably start to see intelligent show up more as well as some of those key priority areas physician administration start to show up in a bigger way in what's happening in our.
Business.
We've talked about space, we talked about the Golden Dome talked about Uavs counter UAV is talking about the border and our presence at the border.
We've been at the border of providing key support to customs and border protection. We are we are key.
Part of the.
A strategy there to this administration. So we're seeing all those things really working in the pipeline developing which should set us up in 2006 to see some of these things standout.
And then from a financial perspective, we obviously look forward to providing official FY 'twenty six 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 is some revenue dynamic that we've talked about related to the 50, <unk> week, JV transitions and 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 three five times, we expect that to continue in the fourth quarter.
All ahead of schedule.
As we start to look forward to the fourth quarter and into FY 'twenty six 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 'twenty six.
Got it that's fantastic color. Thank you.
Thank you.
Next question comes from Tobey Sommer with <unk>. Please go ahead.
It's Henry on for Tobey here, Thanks for taking my questions.
To start with given the upcoming end of the cycle 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 officers shortages seen with some of that money going out by the by the end of September.
Yes, I'd say, we've been very pleased with how the government is kind of.
That you had that transition any administration youre going to feel an impact of that is the administration brings in key people.
Ladies outdoor priorities the big beautiful Bill.
Came out provided clarity provided excitement provided direction leadership at these organizations are in place. They are supported by this administration. So frankly, we're seeing a government debt today is working relatively efficiently and if not.
Not even more efficiently because there is 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.
The impacts that we might have seen in previous quarters to come out in the fourth quarter. I think this is going to be business as usual. The our customers are focused they know what they have to do their focus on executing that rfps are coming out as planned awards coming out generally on time of course.
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, it would be pretty solid.
Great. Thanks, Alright, thanks for that color and just a quick on the film dome opportunity, where where do you see kind of the overall.
Budget are finding opportunities for youre kind of pushing a shield area within the whole goal known project in one of the.
The differences or similarities in the timeline of that versus the overall overall project.
Yeah. 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 in continuing to develop and maintain the 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 Golden do because I think that.
The headline to think about is the emphasis of 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 had been developing a lot of the key TEG.
<unk> in recent years.
Boy, there's a lot in the public domain about the hypersonic tracking ballistic space century that we've had great <unk> in.
Test deployment of that integrating that capability, we've worked with NBA to develop the integrated digital data environment. That's allowed us to do simulation think digital twins and integrate developing new capabilities that will be required.
Golden Dome, when we've even pioneered kind of the new ground space architecture. If you will that allows us to have rapid decision capability, even things like algorithms that they ought to do pattern recognition and 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 <unk>.
Present in that market at the center of developing that system. Today, we think we're going to be a great partner working with space for some 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 of <unk>.
As you will be aware and reconciliation devoted 25 billion to kind of a rapid start some of that technology developments, we think those things begin to happen pretty quickly.
Okay.
Okay.
Hello Tobey.
Tobey are you still there.
Okay.
Thank you.
The next question comes from Mariana Perez Mora with Bank of America. Please go ahead.
Thank you so much good morning, everyone.
Good morning, Michael.
My question is going to be about nuclear.
And he's going to be a three part question.
One could you please remind us like how are you actually seeing you Eric but.
Sure Paul.
From a sales perspective, but mostly from an EBITDA perspective, because you do have some of those contracts that can.
<unk> consolidate unconsolidated John <unk>.
You highlight that.
That 8% CAGR expected to happen in the four years between 2006 and Tony Patty.
How much faster could go.
Especially if you are exposed to <unk>, our self or our upgrades of our staff that could.
Go faster than just neglected.
<unk>.
And that one when we think about these new care opportunity.
And especially on the contribution not just to the topline, but mostly through the bottom line. How should we think about the margin contribution on the path towards your 2028 calls.
Yes.
Marianna.
We love the subject obviously, we highlighted it on the earnings call for a reason, we just think that.
<unk> is very differentiated in this space.
Our expertise across Europe, where the European continent has really leaned forward on nuclear where in the U S.
Taken a back seat over the past three decades, but there's a lot of excitement here in the U S.
Here's a couple of things I would say.
To that.
Our business is on the nuclear front in terms of.
Chemical engineering nuclear engineering mechanical seal hole data, all types of engineering capability and technical skills, well over $2 billion in our business.
And a nuclear power standpoint, we are currently delivering on approximately 29 projects cross momentum.
Across fusion fuel fabrication enrichment.
Gigawatt, Newbuild gigawatt life extension and SME.
We are in capture.
For over 50 projects nuclear projects over the next three years the market is picking up and I talked about this in my prepared remarks.
<unk> environment.
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.
That market has been moving forward. So most much of our work is in Europe. Some of it's in the U S, but what we.
We're excited about is the investment environment in the U S as well as the President's executive orders.
We're 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.
Getting regulatory streamlining.
That's supported by bipartisan support.
It's driven by our business community AI hyperscale or electricity needs.
The credit environment and private funding is very positive, it's bringing the cost down and of course the <unk>.
Need for electricity is indisputable to support our economy as well as defense sees this as an energy Brazilians plus a lot of interest on defense as well.
This is very strong demand. This is not a one two or three 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 Mentum.
Market is.
Obviously, it's happening real time in the U S, which means with regulatory approval. So for US it's more focused on a lot of engineering support regulatory support that will build over time into the actual design construct.
<unk> and implementation. So this next decade is going to be a lot of activity.
So.
Energy for Us probably.
<unk>, probably has the exact numbers, but still.
Over $500 million.
And we just see that has the potential to grow substantially over the next five to frankly 25 years Travis Yeah, I'll add some color on the financial elements of that so margins. Yes. We previously discussed at around 17% of our range of annual revenues to $40 5 billion come from our energy and environment market over.
They're all provide some further color on that roughly two thirds of that relates to nuclear remediation and decommissioning and the remaining third relates to basically all of its 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, that's the margin.
While this business is accretive from an overall perspective, and thats, an even bigger contributor from an EBITDA perspective.
John pointed out we're really excited about the growth that this can provide momentum headed into the future.
Great and is it fair to think that you.
Should at least growing in line with the market for about two thirds of the.
That 17%.
Yeah, I would say based on our position and everything that we've done historically in the nuclear market.
The leading project engineering firms across the globe, we don't see any reason why that shouldn't be the case.
Thank you so much.
Thank you.
The next question comes from Noah <unk> with Goldman Sachs. Please go ahead.
Hey, good morning, guys.
Sure.
How do I.
Think about our square up the.
Total backlog picture the total pipeline picture.
The robust opportunity.
So I think youre, describing with the move lower through the year in the funded backlog.
Hey, guys. Good morning, So as we've mentioned and John has talked about and it's been brought up on previous calls as the New administration came in and that would obviously impact to the contracting officer workforce and I think what youre 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 are confident that will be funded sufficiently to perform mission critical work going forward.
Yes, I think the other part.
We mentioned and we've mentioned previously is that momentum 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 jv's debt.
That are not contributing to backlog.
We're real excited about what they mean to our business.
So we talked about.
Backlog are at book to Bill this quarter of one point, though but a few are included our jv's are.
Imputed book to Bill would have been one eight.
And Thats, you know thats happened in previous quarters already and we see a pipeline of these types of opportunities that.
We will drive meaningful EBITDA and cash flow, but just Don.
So in our backlog. So we're we're winning we're winning these large jv's.
They're meaningful and it's just part of the dynamics of the markets. We play in a unique aspect of momentum and we will continue to talk and provide more detail on that but let me say we are winning we are winning big long term contracts to Canadian nuclear contract. We won this quarter a 20 year contract.
<unk>.
And over a 1 billion Canadian annually. So this type of volume that we're talking about it doesn't necessarily show up in our backlog.
Okay.
Super helpful and helps clarify I'd 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 there's going to be moving pieces with outside of the core.
Got it.
Is that is that the right starting point before we then adjust those moving pieces.
I think a couple of things obviously, a lot of things have changed since August the capital markets day, but there's a lot of things that haven't changed in 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 Collyns question, but.
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 'twenty five has proven to be resilient, even in times of uncertainty and the significant progress we made in 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 'twenty six.
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.
You'll have a starting point as we assess.
The growth there.
Yes, so I'll just reiterate the response to <unk> question, which is roughly one third 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.
Excellent. Thank you so much.
<unk> of approximately two point.
Got it thanks.
Okay.
Thank you.
The next question comes from Ken Herbert with RBC capital markets. Please go ahead.
Yes.
Yes, hi, good morning, I wondered if you could start off with can appreciate again youre not seeing a lot about 'twenty six but are there any significant re competes we should keep in mind the fourth quarter here or 26, as we just again start to think about.
The revenue build into next year.
Hey, good morning, so as we've talked about a couple of different things only one of our top 10 rigs with our top 10 programs, we expect to be up for Recompete in FY 'twenty six and there is likelihood that that will even be extended but overall.
<unk> momentum holds true from this perspective in that we benefit from longer than average contract duration 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 'twenty, six and look forward to providing more detail at our Q4 earnings call.
Nothing pending in 'twenty five.
Yes.
Okay perfect. Thanks.
And.
In the third quarter. The digital solutions segment had really nice margin expansion on the adjusted EBITDA is that 8%.
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.
<unk> out of our digital solutions segment. This quarter, obviously, there is different timing things related to easy adjustments operational performance, but they did have solid performance during the quarter other <unk>.
Longer term definitely see them head at above 8% margins.
Right.
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 at in that part of the portfolio and just the mattikalli to add try to tie together at 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.
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, where engineering developing deploying technology and so that true advanced engineering technology solution is becoming more omnipresent in that business and I.
That really is at the core kind of driving the incremental margin opportunity.
We are coming now thanks, John Gallery.
Thank you.
We are coming up on the yellow so I would like to hand, the call over to back to Mr. John Hulbert. Thank you.
Thank you operator, two clubs, we're energized by our performance 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 are positioned to mentum to capture accelerating demand and deliver long term value for our shareholders. Thank.
Thank you again for your continued interest and momentum we look forward to updating you on our progress in the quarters ahead.
Have a happy and safe summer.
Okay.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect.
[noise].