Amentum Holdings, Inc.(AMTM) - 2025 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION Financial Statements (Unaudited) The unaudited condensed consolidated financial statements reflect the company's financial position, operations, and cash flows, with comparability significantly impacted by the CMS merger, a new two-segment reporting structure, and a subsequent divestiture agreement - On September 27, 2024, Amentum merged with Jacobs' Critical Mission Solutions (CMS) business, meaning financial results prior to this date are not comparable to current and future results[24][25] - In the first quarter of fiscal 2025, the company realigned its structure into two reportable segments: Digital Solutions (DS) and Global Engineering Solutions (GES), with prior year data recast to reflect this change[23] - On April 23, 2025, the company entered into a definitive agreement to sell its Rapid Solutions business to Lockheed Martin for $360 million in cash[82] Condensed Consolidated Balance Sheets Total assets slightly increased to $12.004 billion as of March 28, 2025, driven by higher cash and receivables, while total liabilities remained stable Condensed Consolidated Balance Sheet Highlights (in millions) | Account | March 28, 2025 | September 27, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $546 | $452 | | Goodwill | $5,658 | $5,556 | | Intangible assets, net | $2,353 | $2,623 | | Total Assets | $12,004 | $11,974 | | Liabilities & Equity | | | | Total current liabilities | $2,097 | $1,965 | | Long-term debt, net | $4,636 | $4,643 | | Total Liabilities | $7,425 | $7,422 | | Total Shareholders' Equity | $4,579 | $4,552 | Condensed Consolidated Statements of Operations Revenues surged to $6.907 billion for the six months ended March 28, 2025, leading to a net income of $16 million, a significant turnaround from the prior year's loss Consolidated Statement of Operations Highlights (in millions, except per share data) | Metric | Six Months Ended Mar 28, 2025 | Six Months Ended Mar 29, 2024 | | :--- | :--- | :--- | | Revenues | $6,907 | $4,034 | | Operating income | $242 | $175 | | Net income (loss) attributable to common shareholders | $16 | $(82) | | Diluted earnings (loss) per share | $0.07 | $(0.91) | Condensed Consolidated Statements of Cash Flows Net cash from operating activities was $167 million for the six months ended March 28, 2025, a significant improvement driven by higher net income and favorable working capital changes Consolidated Cash Flow Highlights (in millions) | Cash Flow Activity | Six Months Ended Mar 28, 2025 | Six Months Ended Mar 29, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $167 | $(78) | | Net cash used in investing activities | $(39) | $(6) | | Net cash used in financing activities | $(28) | $(28) | | Net change in cash and cash equivalents | $94 | $(108) | | Cash and cash equivalents, end of period | $546 | $197 | Note 3 — Acquisition The merger with Jacobs' CMS business was completed on September 27, 2024, for approximately $4.032 billion, resulting in significant goodwill and intangible assets - The merger with CMS was completed on September 27, 2024, with a total consideration of $4.032 billion[30][31] - The transaction resulted in the preliminary recognition of $2.767 billion in goodwill, attributed to expected synergies, future contracts, and the acquired workforce[32][35] - The purchase price allocation is preliminary and subject to adjustments as the company finalizes the fair values of acquired assets and liabilities[34] Note 4 — Revenues Total revenues reached $6.907 billion for the six-month period, with the Department of Defense and U.S. Intelligence Community as the largest customer group Revenues by Customer Type (Six Months Ended Mar 28, 2025, in millions) | Customer Type | DS | GES | Total | | :--- | :--- | :--- | :--- | | Department of Defense and U.S. Intelligence Community | $1,460 | $2,116 | $3,576 | | Other U.S. Government Agencies | $821 | $1,185 | $2,006 | | Commercial and International | $345 | $980 | $1,325 | - As of March 28, 2025, remaining performance obligations (backlog) totaled $10.7 billion, with approximately 72% expected to be recognized as revenue over the next 12 months[42] Note 9 — Debt Total debt stood at $4.762 billion as of March 28, 2025, with the company in compliance with all covenants and utilizing interest rate swaps to manage risk Debt Composition (in millions) | Component | March 28, 2025 | | :--- | :--- | | Term Loan | $3,750 | | Senior notes | $1,000 | | Other | $12 | | Total debt | $4,762 | | Total long-term debt, net of current portion | $4,636 | - The company has an $850 million revolving credit facility with $775 million available as of March 28, 2025[56][58] - The company utilizes interest rate swaps with an aggregate notional value of $1.9 billion to hedge against interest rate risk on its variable-rate debt[61] Note 12 — Segment Information The company operates under two new segments, with Global Engineering Solutions (GES) being the larger contributor to both revenue and Adjusted EBITDA Segment Performance (Six Months Ended March 28, 2025, in millions) | Segment | Revenues | Adjusted EBITDA | | :--- | :--- | :--- | | Digital Solutions (DS) | $2,626 | $207 | | Global Engineering Solutions (GES) | $4,281 | $323 | | Total | $6,907 | $530 | - The Chief Executive Officer, as the chief operating decision maker (CODM), evaluates segment performance based on revenues and Adjusted EBITDA[70] Note 15 — Subsequent Event Subsequent to the reporting period, the company entered a definitive agreement to sell its Rapid Solutions business to Lockheed Martin for $360 million - A definitive agreement was signed on April 23, 2025, to sell the Rapid Solutions business to Lockheed Martin for $360 million in cash[82] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes significant growth in revenue and profitability to the CMS merger, with a strong backlog and liquidity position supporting future performance - The company's total backlog was $44.8 billion as of March 28, 2025, a significant increase from $27.2 billion a year prior, primarily due to the CMS merger[119] - Management identifies key market trends supporting growth, including increased demand for outsourced federal services, clean energy, government modernization, and advanced technologies[98] - Liquidity is primarily sourced from cash, operations, a receivables sales program, and an $850 million revolving credit facility, with proceeds from the planned $360 million sale of Rapid Solutions to be used for debt reduction[122][129] Results of Operations For the six months ended March 28, 2025, revenues grew 71.2% to $6.907 billion and operating income grew 38.3% to $242 million, driven by the CMS merger Results of Operations Comparison (Six Months Ended, in millions) | Metric | March 28, 2025 | March 29, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $6,907 | $4,034 | $2,873 | 71.2% | | Operating income | $242 | $175 | $67 | 38.3% | | Net income (loss) attributable to common shareholders | $16 | $(82) | $98 | (119.5)% | - The primary driver for the increases in revenues, cost of revenues, SG&A, and amortization of intangibles for both the three and six-month periods was the merger with CMS[97][106][107][108] Segment Results Both the Digital Solutions and Global Engineering Solutions segments reported substantial revenue and Adjusted EBITDA growth for the six-month period, primarily due to the CMS merger Digital Solutions Performance (Six Months Ended, in millions) | Metric | March 28, 2025 | March 29, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $2,626 | $930 | 182% | | Adjusted EBITDA | $207 | $78 | 165% | Global Engineering Solutions Performance (Six Months Ended, in millions) | Metric | March 28, 2025 | March 29, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $4,281 | $3,104 | 38% | | Adjusted EBITDA | $323 | $232 | 39% | Liquidity and Capital Resources The company maintains sufficient liquidity through cash, operations, and credit facilities, with the planned $360 million sale of Rapid Solutions set to accelerate debt reduction - The company has a $3.75 billion Term Loan and $1.0 billion in Senior Notes, with the Term Loan requiring quarterly principal payments of $9 million starting March 31, 2025[123] - The company entered into a definitive agreement to sell its Rapid Solutions business for $360 million, with proceeds intended to accelerate debt reduction[129] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate risk on its variable-rate debt, which it mitigates through $1.9 billion in floating-to-fixed interest rate swaps - The company has $1.9 billion in floating-to-fixed interest rate swaps to manage risk on its variable-rate debt[138] - A 1% change in interest rates would have resulted in a $19 million change in interest expense for the six months ended March 28, 2025[138] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 28, 2025, with no material changes to internal controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the reporting period[139] - No material changes to internal control over financial reporting occurred during the fiscal quarter ended March 28, 2025[140] PART II: OTHER INFORMATION Legal Proceedings The company is involved in various routine claims and disputes which are not expected to have a material adverse effect on its financial condition or operations - Information regarding legal proceedings is detailed in Note 14 of the financial statements[142] Risk Factors A new risk factor has emerged concerning significant uncertainty around U.S. Government tariffs and trade policies, which could increase costs and disrupt supply chains - A new risk factor has been identified concerning significant uncertainty around U.S. Government tariffs and trade policies following announcements by President Trump on April 2, 2025[144] - Potential impacts include increased costs of materials, supply chain disruptions, and greater difficulty in business planning for both U.S. and international operations[144] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None[145]