Brian Gesuale

Brian Gesuale requested clarification on the magnitude and timing of the non-recurring FEMA-related revenue in the Federal Services segment for comparative purposes.

Answer

David Mutryn, CFO, quantified the non-recurring FEMA revenue at approximately $100 million last year (2% of total revenue), typically concentrated in the first two quarters due to hurricane season, though it was more spread out in the previous year.

Brian Gesuale asked about the sequential decline in PACT Act completed volumes, potential impacts from the government shutdown on VA case processing, the PACT Act volume assumptions for the full year guidance, drivers for lower volumes in the U.S. Services business, and the magnitude and timing of non-recurring FEMA revenue in Federal Services.

Answer

CFO David Mutryn attributed some PACT Act volume changes to seasonal impacts like holidays, noting that the overall view of volumes hasn't changed much, with strong underlying demand despite moderation from a prior surge period. He confirmed no meaningful impact from the government shutdown on VA case processing and stated that PACT volumes are expected to remain steady for the remainder of the fiscal year. For U.S. Services, David Mutryn explained that lower volumes stemmed from a number of programs, but the highly transaction-driven Medicaid portfolio is expected to be a net positive due to additional transactions from new requirements. President and CEO Bruce Caswell clarified the timing of Medicaid community engagement and redetermination activities, expecting a building year in 2027 and full run-rate benefits in 2028. David Mutryn also explained that U.S. Services margins are seasonally lower in Q1 due to specific contract pricing, and while the segment may not grow for the full year, it's expected to achieve positive organic growth by Q4. He reminded that FEMA's natural disaster support was around $100 million last year, typically pronounced during hurricane season (first two quarters).

Brian Gesuale from Raymond James Financial asked about the progress of technology and capacity investments in the VA business and the outlook for VA claim volumes. He also questioned the impact of a prior-quarter FEMA contract, the margin outlook, the potential for 'One Big Beautiful Bill Act' benefits to arrive in FY2026, and the extent of headwinds from the Department of Justice (Doge) and other agencies.

Answer

President and CEO Bruce Caswell described phased technology investments in the VA business, including AI/ML to streamline medical record review, which are expected to enhance throughput. He noted that while unprecedented VA volumes from Q3 might moderate, a sustained high level of demand is expected. Caswell also stated that headwinds from agency initiatives like Doge have had a minimal impact of less than 0.5% on revenue. CFO David Mutryn added that the company expects FY2026 EBITDA margins to remain near the high end of the target range and confirmed that the main revenue impact from the new legislation is prudently forecasted for FY2027.

Brian Gesuale from Raymond James asked for details on the interplay between Medicaid redeterminations and state-based exchange enrollment, the growth outlook for the veteran assessment business, the stability of the student loan servicing contracts, and the expected cadence of free cash flow for the remainder of the fiscal year.

Answer

CEO Bruce L. Caswell provided data showing a significant increase in health exchange enrollments, particularly from new consumers, linking it to the Medicaid unwinding process. Regarding the VA business, Caswell and CFO David Mutryn noted that while claim volumes have stabilized at high levels, they expect steady-to-modest growth rather than another large step-up. Caswell affirmed the student loan servicing work is a core function expected to continue regardless of administrative changes. Mutryn explained that the Q1 negative free cash flow was due to expected seasonal payment timings and that cash generation should be strong and more normalized over the next three quarters.

Brian Gesuale asked for details on Amentum's role across the entire nuclear life cycle, the current size of this business, and when the broader nuclear power ambitions are expected to impact the company's financials. He also sought clarification on the commercial versus defense split within the space business and how the Golden Dome initiative, including Wardett presence and launch activity, would drive the business, specifying its timing.

Answer

CEO John Heller explained Amentum's mission-critical role across the nuclear energy life cycle, from design to decommissioning, covering new development, SMRs, and plant life extension. He noted nuclear energy represents about 17% of the business and highlighted the long-term nature of nuclear projects, with significant engineering work expected through the decade for SMRs. COO Steve Arnette detailed Amentum's strong presence in government civilian space (NASA, Artemis II mission) and national security space (Missile Defense Agency, NORAD). He mentioned the ongoing SHIELD procurement, a multi-award IDIQ, as a key opportunity for Golden Dome, with task orders expected deeper into FY26, emphasizing the intersection of government and commercial space.

Brian Gesuale inquired about Amentum's role across the entire nuclear life cycle, the current size of that business, and when the broad ambitions for nuclear power might start to inflect for the company. He also asked about the commercial versus defense mix in the space business and how 'Golden Dome' from a Wardett presence and launch activity perspective would drive Amentum's business, including its timing relative to FY26 and FY27.

Answer

CEO John Heller explained Amentum's mission-critical role across the full nuclear energy life cycle, from design to decommissioning, covering new gigawatt reactors, SMRs, and plant life extension. He noted significant engineering work for SMRs is expected through this decade, with policy support driving a nuclear renaissance. COO Steve Arnette highlighted Amentum's strong presence in civilian space (NASA, Artemis II preparations for early 2026) and defense (Missile Defense Agency, NORAD). He mentioned the SHIELD procurement, a $150 billion IDIQ vehicle, with task orders expected deeper into FY26, emphasizing Amentum's position at the intersection of government and commercial space.

Brian Gesuale of Raymond James asked about the impact of the new administration's priorities on customer spending, the composition of the company's business pipeline, and the expected seasonality of free cash flow for the fiscal year.

Answer

CEO John Heller stated that Amentum's core business remains stable with some potential award delays, but highlighted growth opportunities in border security, space, and cyber. CFO Travis Johnson detailed the $30 billion in pending awards, noting it's roughly two-thirds new business and well-distributed between the Digital Solutions and Global Engineering segments. Johnson also explained cash flow seasonality, projecting Q2 to be the lowest point with the majority of cash generated in the second half of the year due to payment timing.

Brian Gesuale of Raymond James inquired about shifts in customer priorities under the new administration, the composition of the business pipeline between segments and business types, and the expected seasonality of free cash flow for the fiscal year.

Answer

CEO John Heller noted a stable environment for Amentum's core programs, with potential award delays but no material disruption, and highlighted growth opportunities in border security, space, and cyber. CFO Travis Johnson detailed the $30 billion pending pipeline, stating it's roughly two-thirds new business and well-distributed between the Digital Solutions and Global Engineering segments. Johnson also confirmed the full-year cash flow guidance, explaining that Q2 will likely be the lowest point due to interest payment timing, with the majority of cash flow expected in the second half of the year.

Brian Gesuale asked about the company's progress in shifting its business mix from development to production work and requested sensitivity analysis on how margins improve with this shift.

Answer

CFO Dave Farnsworth noted that the business mix is naturally shifting, with recent bookings being approximately 80% production-related. This is a consequence of completing a large number of development programs and securing follow-on production awards. While not providing a specific sensitivity formula, he affirmed that the company is still focused on pursuing the right kinds of new development and innovation.