Financial Performance - Revenues for the three months ended January 2, 2026, were $3,237 million, a decrease of 5.2% compared to $3,416 million for the same period in 2024, primarily due to government shutdown impacts and contract transitions [81]. - The Digital Solutions segment reported revenues of $1,337 million, an increase of 4% from $1,286 million in the prior year, driven by new contract awards [90]. - The Global Engineering Solutions segment experienced a revenue decline of 11% to $1,900 million from $2,130 million, attributed to contract transitions and government shutdown impacts [92]. - Net income attributable to common shareholders increased significantly to $44 million, up 266.7% from $12 million in the previous year [81]. - Cost of revenues as a percentage of revenues was 89.9% for the three months ended January 2, 2026, compared to 89.4% for the same period in 2024 [82]. - Selling, general, and administrative expenses decreased to 3.6% of revenues, down from 3.8% in the prior year, reflecting operational efficiencies [83]. Tax and Backlog - The effective tax rate for the three months ended January 2, 2026, was 31.3%, a decrease from 53.3% in the prior year, primarily due to a valuation allowance against a disallowed interest expense deferred tax asset [87]. - The company's backlog includes both funded and unfunded contracts, representing future revenue potential, with funded backlog being the contract value for which funding is appropriated [95]. - As of January 2, 2026, the total backlog was $47.2 billion, an increase of $2.0 billion from $45.2 billion on December 27, 2024, with a funded backlog of $6.9 billion [96]. Revenue Sources and Contracts - Approximately 81% of revenues were generated from contracts with the U.S. federal government, indicating a strong reliance on government contracts [75]. - The company is strategically aligned with long-term federal government priorities, including increased spending on modernization and defense initiatives [80]. - For the three months ended January 2, 2026, 57% of revenues were generated under cost-plus-fee contracts, which have limited inflation risk [97]. Cash Flow and Liquidity - Net cash used in operating activities decreased by $246 million to $(136) million for the three months ended January 2, 2026, compared to $110 million for the same period in 2024 [106]. - The Company reported a net cash used in investing activities of $(33) million for the three months ended January 2, 2026, an increase of $25 million compared to $(8) million in the prior year [107]. - The Company believes that its combination of internally generated funds and available bank borrowings will provide necessary liquidity for at least the next twelve months [102]. - The Company had a net change in cash and cash equivalents of $(190) million for the three months ended January 2, 2026, compared to an increase of $70 million in the same period in 2024 [106]. Debt and Interest Rates - The Term Loan requires quarterly principal amortization payments of $9 million, which commenced on March 31, 2025 [99]. - The Company has entered into floating-to-fixed interest rate swap agreements for an aggregate notional amount of $1.6 billion related to a portion of its variable rate debt [111]. - The remaining balance under the Term Loan is subject to interest rate fluctuations, with a $1 million fluctuation in interest rates affecting interest expense by approximately $8 million [111]. - The Company was in compliance with all covenants as of January 2, 2026 [101].
Amentum Holdings, Inc.(AMTM) - 2026 Q1 - Quarterly Report