Amentum Holdings, Inc. 10-Q Summary
Business Context and Reporting Period
This filing covers the quarterly period ended January 2, 2026 (Fiscal Q1 2026). Amentum Holdings, Inc. is a global advanced engineering and technology solutions provider serving U.S. and allied government agencies, as well as commercial markets. The company operates through two reportable segments: Digital Solutions (DS) and Global Engineering Solutions (GES). The quarter was impacted by U.S. government shutdowns occurring in October-November 2025 and late January 2026.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 (Prior Year) |
|---|---|---|
| Revenues | $3,237 million | $3,416 million |
| Operating Income | $138 million | $132 million |
| Net Income (Common Shareholders) | $44 million | $12 million |
| Diluted EPS | $0.18 | $0.05 |
| Adjusted EBITDA | $263 million | $262 million |
| Cash and Equivalents | $247 million | $437 million (Prior Quarter) |
| Total Debt | $3,998 million | $4,008 million (Prior Quarter) |
| Operating Cash Flow | ($136 million) used | $110 million provided |
Material Changes vs. Prior Period
- Revenue Decline: Total revenues decreased 5.2% to $3.237 billion. The decline was primarily driven by government shutdown impacts ($150 million) and the transition of certain contracts to unconsolidated joint ventures or divestitures ($110 million).
- Profitability Improvement: Despite lower revenue, Net Income attributable to common shareholders increased 266.7% to $44 million. This was driven by a lower effective tax rate (31.3% vs. 53.3% prior year) due to valuation allowance adjustments, reduced interest expense, and lower amortization of intangibles.
- Segment Performance:
- Digital Solutions: Revenue increased 4% to $1.337 billion; Adjusted EBITDA increased 3% to $103 million.
- Global Engineering Solutions: Revenue decreased 11% to $1.900 billion; Adjusted EBITDA decreased 1% to $160 million.
- Cash Flow: Operating cash flow turned negative ($136 million used) compared to positive ($110 million provided) in the prior year. This was primarily due to an additional pay cycle in Q1 2026 and working capital impacts from the government shutdown.
Outlook, Risks, and Contingencies
- Backlog: Total backlog increased to $47.2 billion as of January 2, 2026, up $2.0 billion from the prior year, driven by new contract wins. Funded backlog stands at $6.9 billion.
- Government Budget Environment: The company notes a constructive budget environment with bipartisan tailwinds for core markets, though appropriations delays and Continuing Resolutions (CRs) can negatively impact program starts and contract awards.
- Regulatory and Tax: The "One Big, Beautiful Bill Act" (OBBBA) enacted in July 2025 introduced tax changes, including the restoration of EBITDA for interest expense limitations. The company is monitoring potential impacts of increased tariffs and Department of Government Efficiency initiatives.
- Liquidity: The company maintains $768 million in available borrowing capacity under its revolving credit facility and $247 million in cash. It remains in compliance with all debt covenants.
Investor Verification Checklist
- Shutdown Impact Duration: Verify the extent to which government shutdowns in late 2025 and early 2026 will continue to delay revenue recognition in subsequent quarters.
- Operating Cash Flow Recovery: Monitor the reversal of working capital outflows (specifically accrued compensation) in Q2 2026 to confirm cash flow normalization.
- Contract Transitions: Assess the long-term impact of transitioning contracts from consolidated to unconsolidated joint ventures on reported revenue and margin profiles.
- Tax Rate Stability: Confirm whether the 31.3% effective tax rate is sustainable or if it was influenced by discrete valuation allowance adjustments.
- Backlog Conversion: Evaluate the conversion rate of the $40.4 billion unfunded backlog into funded contracts given the current appropriations environment.