Amentum Holdings - Earnings Call - Q2 2025

Executive Summary

• Amentum delivered a clean beat versus S&P Global consensus: revenue $3.49B vs $3.43B and Primary EPS $0.53 vs $0.47; Adjusted EBITDA printed $268M with 7.7% margin, up ~20 bps YoY, supported by disciplined execution and early synergy capture (consensus from S&P Global).
• FY25 guidance was narrowed but midpoints reaffirmed: revenue to $13.85–$14.15B (from $13.80–$14.20B) and Adjusted EBITDA to $1.065–$1.095B; Adjusted EPS $2.00–$2.20 and FCF $475–$525M unchanged; management reiterated typical 4Q seasonality and expects 2H revenue +3% vs 1H.
• Backlog remains robust at $44.8B; Q2 net bookings of $2.8B drove 0.9x book-to-bill (YTD 1.0x; imputed 1.2x incl. JVs), with notable wins in Intelligence (> $1B total) and U.K. nuclear (Sizewell C).
• Strategic portfolio action: sale of Rapid Solutions for $360M (≈$325M after-tax proceeds) expected to close in 2H25; accretive to adj. EPS/FCF and accelerates deleveraging (target ≈3x net leverage by end FY26).

What Went Well and What Went Wrong

What Went Well

• Contract momentum and pipeline: Q2 net bookings of $2.8B (0.9x quarterly; YTD 1.0x; imputed 1.2x incl. JVs) and $29B pending awards underscore durable demand; backlog at $44.8B (3.2x annual revenue) supports multi-year visibility.
• Segment execution: Digital Solutions revenue +3% YoY and adj. EBITDA +7% (margin +30 bps to 8.0%); GES adj. EBITDA +1% despite –1% revenue, reflecting operating performance improvement.
• Strategic focus and balance sheet: divestiture of Rapid Solutions enhances capital-light profile and provides ~$325M after-tax proceeds to accelerate deleveraging; “will be accretive to adjusted earnings per share and free cash flow”.
  • CEO: “Amentum delivered solid results… and the divestiture of Rapid Solutions… enhances our financial flexibility.”

What Went Wrong

• Book-to-bill below 1.0 in Q2 (0.9x), with management citing timing delays in awards amid federal workforce disruption and administrative changes; impact framed as timing rather than demand.
• JV transitions reduce reported revenue (from consolidated to unconsolidated), with ~zero 4Q revenue contribution expected, though bottom-line/FCF unaffected; total FY25 top-line impact “a little over $100M” YoY.
• GAAP profitability remains slim due to intangible amortization and interest expense; Q2 GAAP EPS $0.02 despite solid non-GAAP performance and 7.7% adj. EBITDA margin.

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by. Good morning and welcome to Amentum's Second Quarter Fiscal Year 2025 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 question-and-answer session. At that time, I would now like to turn the call over to Nathan Rutledge, Senior Vice President of Investor Relations. Please go ahead, sir.

Nathan Rutledge (SVP of Investor Relations)

Thank you and good morning, everyone. We hope you've had an opportunity to read the press release we issued yesterday afternoon, which is posted on our Investor Relations website. We have also provided presentation slides to facilitate today's call. 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. The 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, as 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. Our safe harbor statement 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 are also joined by other members of management, including Steve Arnette, Chief Operating Officer. With that, moving to slide three, it's my pleasure to turn the call over to our CEO, John Heller.

John Heller (CEO)

Thank you, Nathan, and good morning, everyone. We appreciate you joining us today. Welcome to Amentum's second quarter earnings conference call. As we close the first half of the fiscal year, it's rewarding to see the progress we've made, notably staying on track with our integration plan and the solid execution of our strategy to enhance our position as a global leader in advanced engineering and technology solutions. Our operational results reflect the strength of our underlying business, the continued demand for our mission-focused capabilities, and our ability to deliver differentiated solutions that help our customers achieve their objectives more efficiently and effectively. We also recently announced the divestiture of our Rapid Solutions product business, a positive step that is aligned with our core strategy and strengthens our balance sheet position, which I'll discuss in more detail shortly.

I'm especially proud of our team, working closely with our customers around the globe as we stay focused on our shared vision of advancing critical missions. The disciplined execution of Amentum's strategy, agile business model, and unwavering commitment to our customers' missions have enabled us to deliver solid financial results for the second quarter. As shown on slide three, we delivered revenue of $3.5 billion, adjusted EBITDA of $268 million, reflecting 3% year-over-year growth, and free cash flow of $53 million. We are encouraged by our results and understand that long-term success will be driven by disciplined execution and by managing variables within our control. By staying focused on these priorities, we are positioning ourselves to deliver sustained growth for our customers and stakeholders.

Looking ahead to the second half of the year and beyond, we remain confident in our strategy and our ability to drive long-term growth and superior value for our shareholders. Now, let's move to slide four, which highlights the continued strong demand for Amentum's mission-focused solutions across our diversified end markets. We reported $2.8 billion in net bookings this quarter, resulting in a quarterly book-to-bill ratio of 0.9 times, bringing our year-to-date book-to-bill to one times. As noted on our first quarter earnings call, awards to unconsolidated joint ventures are excluded from our reported book-to-bill ratio. Including Amentum's proportional share of joint venture revenues and bookings, our year-to-date imputed book-to-bill ratio is a robust 1.2 times. Finally, we ended the quarter with a total backlog of $45 billion, representing 3.2 times our annual revenue.

Enduring demand for our work is fueled by Amentum's diverse end market exposure and our proven ability to deliver impactful, mission-focused solutions. This positions us to carry strong momentum in the months and years ahead. In the second quarter, we converted a strong pipeline into new awards that align with our key growth markets and priority customers. To illustrate this momentum, I'd like to highlight a few notable wins. First, Amentum was awarded multiple intelligence contracts totaling over $1 billion, which are aligned with national security priorities and will deliver a range of innovative mission-focused solutions, including critical infrastructure management, cybersecurity, and intelligence analysis. At Capital Markets Day last August, we called out intelligence as a key market where our combined scale and capabilities will give Amentum a competitive strength. These awards demonstrate the demand for high-impact intelligence and cybersecurity solutions, which we expect will drive sustainable growth.

This reflects the quality of our work and underscores our expertise in providing high-quality security engineering solutions, enabling our customers in their mission to defend and protect our national interest. Second, Amentum was selected as the program manager and lead design engineer for Sizewell C, a new nuclear power station that will strengthen the United Kingdom's energy solutions. We're supporting customers at the forefront of the nuclear renaissance, and we are proud to be part of this mission. It draws directly on our advanced engineering and deep technical expertise to help deliver the next generation in reliable and secure nuclear power generation. This long-term contract will culminate with a station that has two 1.6 GW reactors, enough electricity to power 6 million homes each year. Lastly, I'd like to highlight over $500 million in IDIQ task orders awarded in the quarter, including a program with the Naval Surface Warfare Center.

Through this award, we'll apply our proven expertise in electromagnetic environmental effects to strengthen the Navy's decision-making in spectrum dominance. Our solutions will enhance battle force interoperability by addressing electromagnetic interference challenges, delivering a strategic edge in naval operations. With extensive capabilities spanning digital transformation, modernization, and sustainment in space systems, and deep relationships across the customer landscape, Amentum is unlocking meaningful cross-selling opportunities. We have positions on more than $450 billion in contract vehicles, many of which span multiple mission areas. These broad-scope awards allow us to deliver a wide range of integrated solutions to a single customer under a single task order. Our recent selection to OASIS+ is a prime example. Covering eight domains from R&D to enterprise solutions, it enables us to align our capabilities with a diverse set of mission requirements.

Opportunities like this strengthen customer intimacy and enhance our programmatic alignment, leading to faster value delivery and simpler, more effective solutions. These are just a few examples of our growth success, but we continue to see strength across the broader pipeline. Demand for high-value, mission-focused solutions remains a clear priority for our customers. With our proven differentiated capabilities, strong customer relationships, and deep technical expertise, we are confident in our ability to deliver across the broad set of resilient end markets. We currently have $29 billion in pending awards, and we remain on track to submit over $35 billion for the full fiscal year. Now, I would like to take a moment to address the broader budget and policy environment impacting our market. While we are encouraged by healthy year-to-date demand from across our customer base, we recognize that we're living in a time of rapid transformation.

The combination of evolving geopolitical dynamics and the direction of the new administration is reinforcing the need for mission-focused solutions, many of which are directly aligned with Amentum's strategy and capabilities. On the budget front, visibility is improving. For the fiscal year 2025, we feel confident in our ability to successfully navigate our way through the full-year continuing resolution and meet our financial objectives. We've seen positive signals in the defense and border security allocations included in reconciliation bills from both chambers. While it's still early, last week's release of the fiscal year 2026 White House budget proposal clearly articulates the importance of national security as this administration's top priority. In February, Secretary of Defense Pete Hegseth outlined 17 priority areas for the Department of Defense. These areas are critically important to national security, which is why Amentum is already supporting several of them, including: First, missile defense.

We're supporting the Missile Defense Agency's evolving mission through integrated test, training, and operational support under our Integrated Research and Development for Enterprise Solutions contract. As a result, we're also well-positioned to play a significant role in the development and deployment of the Golden Dome Missile Defense Initiative. Second, combating transnational criminal organizations. We're deploying AIML-powered analytics under our Counternarcotics and Global Threats contract to disrupt the financial networks of cartels and terrorist groups. At the border, where Amentum is enhancing U.S. border surveillance and patrol capabilities through aviation support. Third, nuclear modernization. Advancing strategic radiation-hardened microelectronics to improve the resilience of the Navy's nuclear deterrence systems. Finally, through our ITEAMS contract, Amentum is advancing U.S. INDOPACOM mission objectives by enhancing operational readiness and command support in the Indo-Pacific theater.

These are just a few examples of how Amentum is contributing to critical national security priorities today and where we are well-positioned to support future opportunities. Beyond the defense and intelligence markets, we are strategically expanding into enduring missions experiencing rapid growth. We're especially pleased with the strong and consistent growth in our commercial and international markets, which represent 20% of revenue. As I noted earlier, our targeted growth in high-potential sectors like nuclear engineering and commercial 5G places us at the cutting edge of evolving markets. At our core, Amentum is in the business of delivering solutions that enable our government and commercial customers to achieve their objectives faster and more effectively. These are capabilities that align with the priorities of any administration or corporation, validating our strategic direction. In short, while the environment remains dynamic, Amentum's strategy, capabilities, and mission focus position us well for the future.

Let's now turn to slide five. Building on the strength of our end market diversification, a little more than two weeks ago, we announced the planned divestiture of our Rapid Solutions product business, a transaction that illustrates the capital-light nature of our go-to-market strategy and commitment to disciplined balance sheet management. Technology-agnostic capabilities and solutions are a key ingredient in our strategy to deliver high-impact, high-value solutions that meet customer needs and maintain Amentum's position as the premier pure-play government and commercial services provider. This transaction is an extension and reaffirmation of our existing operating model. This business is better suited to a product-centric model that depends on steady capital investment, an approach that differs from our asset-light, integrated solution-driven model. With a more streamlined portfolio, we are better positioned to pursue opportunities aligned with our core strengths and deliver differentiated value in complex mission-critical environments.

While Travis will speak in detail about the financial benefits of the transaction, I'll note that the divestiture is aligned with our deleveraging objectives, accelerating our ability to flexibly redeploy capital toward value-accretive opportunities. To conclude, I would like to underscore three takeaways for Amentum's second quarter. First, demand for our mission-critical solutions is strong and growing, as demonstrated by recent wins, including in the intelligence and environment markets. Second, we're executing with discipline, streamlining our portfolio, advancing our debt reduction goals, and staying focused on markets where we can lead. Third, our integration plan remains firmly on track, positioning us to fully realize the benefits of scale, talent, and capability that our platform brings together. With strong momentum and a clear strategy, I remain confident in our future and excited about the value we are creating for all stakeholders.

With that, I'll turn it over to Travis to walk you through the financials in more detail.

Travis Johnson (CFO)

Thank you, John, and good morning, everyone. I'm pleased to discuss with you today Amentum's solid second-quarter performance, expected financial benefits from the recently announced Rapid Solutions divestiture, and our continued confidence in achieving full-year results in line with the commitments we originally set back in August at Capital Markets Day. As John noted, our results for the quarter evidence the underlying strength of Amentum's diversified business and go-to-market strategy, and were enabled by the dedication and commitment from our employees across the globe. The relentless focus on excellence yielded strong business development results and, importantly, outstanding operational performance for our customers. With that, let's talk about our financial performance on slide six.

I'd like to again highlight that while our GAAP results provide an accounting view of Amentum's legacy business excluding CMS, today's discussion will focus on our non-GAAP results compared to pro forma results from the second quarter of fiscal 2024. These figures offer a combined view of the new Amentum business and provide performance insights on a more comparable basis. Second-quarter results were in line with our expectations. Revenues of $3.5 billion reflect 1% growth and were driven by continued strong demand and year-over-year increases in digital solutions. Adjusted EBITDA was $268 million, reflecting year-over-year growth of 3%, supported by a 20 basis point increase in adjusted EBITDA margins to 7.7%. In addition to the strong program performance in both segments, we're beginning to see benefits from our cost synergy initiatives, which remain on track with our previously communicated objectives.

Adjusted diluted earnings per share were $0.53, up 4% from a year ago, with revenue growth and strong operating performance more than offsetting higher interest and tax expense. Moving to our reportable segment results on slide seven. Digital solutions generated revenues of $1.3 billion, representing 3% growth. The year-over-year increase was driven by higher volume on new contract awards, particularly in the commercial infrastructure market, which more than offset the expected ramp-down of other historical programs. Excluding the previously discussed impact of SITEC, digital solutions revenues grew 8% on an underlying basis. Adjusted EBITDA increased to $107 million, reflecting a 30 basis point increase in adjusted EBITDA margins to 8%, as a result of the higher revenue volume and improved operating performance. Global engineering solutions generated revenues of $2.2 billion, a year-over-year decrease of 1%.

The decrease was driven by 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 increased to $161 million, despite the revenue volume impact, as a result of a 10 basis point increase in adjusted EBITDA margins from strong operating performance. Turning to slide eight to cover our cash flow performance and capital structure highlights. Second-quarter free cash flow of $53 million was impacted by the anticipated timing of interest and tax payments and came in slightly higher than expected as a result of solid operating performance and disciplined working capital management. Our liquidity position remained strong, with ending cash on hand of $546 million and no outstanding balances on our $850 million revolving credit facility.

Further, net leverage is trending as expected at four times, a reduction from 4.1 times at the end of fiscal year 2024. With expiration of the six-month soft call on our term loan B, we are now positioned to repay debt without incremental cost in the second half of fiscal year and beyond. In terms of strengthening our balance sheet position, as John noted earlier, we recently announced the divestiture of our Rapid Solutions product business. The sale, which is strategically aligned to our capital-light business model and will be accretive to both adjusted earnings per share and free cash flow, is expected to close in the second half of 2025 and to generate approximately $325 million in after-tax proceeds.

In addition, as is customary in M&A transactions and was expected, we have finalized the networking capital through in connection with the Jacobs transaction, which resulted in a $70 million payment to Jacobs in the third quarter. Together, these investing activities are expected to result in approximately $255 million of incremental cash, which will accelerate our deleveraging objectives and path to a flexible and opportunistic capital deployment posture. We continue to believe our balance sheet strength, strong liquidity position, and robust free cash flow profile, which will be enhanced by the Rapid Solutions divestiture, will act as fundamental drivers in the creation of long-term shareholder value. On slide nine, let's now turn to our fiscal year 2025 full-year outlook.

As a result of our solid first-half performance and with 98% of revenues expected to come from existing or recompete business, we remain confident in our outlook and are therefore narrowing guidance ranges for both revenues and adjusted EBITDA. We now expect revenues in the range of $13.85 billion-$14.15 billion and adjusted EBITDA between $1.065 billion-$1.095 billion. Adjusted earnings per share remain unchanged at $2-$2.20, and we still expect free cash flow between $475 million-$525 million. Based on the expected close timing, our guidance currently assumes no significant impact from the Rapid Solutions divestiture. However, following the close of the transaction, we will reassess our forecast and update the outlook if necessary. In addition, guidance continues to reflect the revenues' impact of approximately 1% as a result of the new administration initiatives.

From a time phasing perspective, consistent with prior year, we expect third-quarter revenues and profitability to be in line with our second-quarter results and to accelerate in the fourth quarter. Second-half revenues are expected to grow 3% relative to first-half performance, driven by organic growth, including a 53rd week in the fourth quarter, partially offset by joint venture transitions and administration change impacts. We expect cash flow will fall in normal seasonality, with the fourth quarter being the strongest quarter as a result of robust collections, given our alignment with the government fiscal year-end. Other key assumptions in connection with fiscal year 2025 guidance are included on slide nine in today's presentation posted on our Investor Relations website. Wrapping up on slide 10, we are pleased with our first-half performance, which reflects the strength of our combined company.

We are well positioned to meet our fiscal year 2025 financial objectives and remain confident in our ability to deliver significant free cash flow growth and long-term value for stakeholders. With that, Operator, please open the line for questions.

Operator (participant)

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 touch-tone phone, and you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you use a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Tobey Sommer with Truist. Please go ahead, sir. Thank you.

Tobey Sommer (Managing Director)

I was wondering if we could start out by digging into the nuclear opportunity, not just the one you cited in terms of new business wins, but thematically how you see demand percolating across different geographies. Thanks.

John Heller (CEO)

Morning, Tobey. How you been?

Tobey Sommer (Managing Director)

Real well. Thank you. Hope you are as well.

John Heller (CEO)

Thank you. No, this is an area that we're real excited about when we brought the two companies together. Obviously, Amentum is extremely well known here in the U.S. with nuclear remediation, but we also do work in a lot of labs helping with the development of next-generation nuclear energy capability and bringing the Jacobs team into the mix just created a global engineering capability that we think is one of the strongest on the globe.

Over in the U.K., we're a key leader, a dominant player in terms of the energy market, both with the large gigawatt plants like the Sizewell C that we mentioned, but also with SMRs and the emergence of SMR OEMs that are doing a lot of research and our participation with them both in the U.S. and in Europe. I mentioned the U.K., but across Europe, we have partnerships in many countries working on energy projects.

We're really excited about that kind of leg of our strategy, especially given the tailwinds because of demand that is accelerating tremendously driven by the hyperscale companies that to fund and fuel their growth and, frankly, the U.S. economy, we are going to need a much larger amount of energy availability to enable our great technology companies to grow and bring that new technology online using AI, large computing centers, advancing computing power, but you need energy. Nuclear can be a great kind of source of that because we have the technology. The capacity of nuclear is substantial, and we can bring that on quickly. Lots going on in our business. Steve, I do not know if you want to touch on Sizewell in particular, maybe some of the other things that are happening.

Steve Arnette (COO)

Yeah. Thanks, John. Just to fill in maybe a couple of gaps.

I think John covered it well, but also maybe a flavor, Tobey, on the geographic opportunity as you mentioned in your question. And U.K., just as John said, great win with Sizewell C. That'll be a great project that they'll need program manager and designer that'll go for several years. It actually comes on the heels of our having won a similar role in the Hinkley Point C reactor that's just now evolving into construction. I think it's great about those gigawatt power stations. While we help design and realize the facility, ours tends to be a cradle-to-grave involvement there where we continue to do the sustaining engineering and monitoring from a technical standpoint, the health of the plant, and even getting it to end of life and be able to diagnose. Those tend to be long-term engagements, which we're really excited about.

Also in the U.K., supporting several of the SMR developers, and there's a major program happening in the U.K. to downselect to some serious investment there, which we're excited to be part of several of those teams. There is a lot happening in the U.K., which John cited. One thing I would also mention with the revolution in the U.S. and a lot of kind of early-stage initiatives around nuclear power, much of it geared toward enabling AI, like John said. We're actually now on the front end engaged in several projects, mainly in an engineering state where we're looking at advanced fuel processing, fuel fabrication facilities that we're now in a design stage on those. That really makes sense that that would be kind of the leading edge of the curve, if you will, to enable the ramp-up in the U.S. We're excited about our engagement there.

John Heller (CEO)

The last thing I'll mention is in Australia. If you think about AUKUS and now moving out to help equip that key ally with nuclear submarines. And so a need for a whole new nuclear regime. How do you deal with nuclear fuel and safely do that and everything that goes around that? Our team there are helping that government to work through that. So it really has become for Amentum kind of a global market in terms of this nuclear revitalization.

Tobey Sommer (Managing Director)

Perfect. Thank you. If I could just ask one housekeeping question, then I'll get back in the queue. The guidance, does it include the revenue and profit from the announced upcoming divestiture?

Hey, Tobey. Good morning.

John Heller (CEO)

Based on the expected close timing, which we publicly stated we're expecting to occur in the second half of calendar year 2025, our guidance currently assumes that there's no significant impact this year as a result of the divestiture based on that expected close timing. As a reminder, the business in aggregate only makes up around 1% of our revenues and adjusted EBITDA. To the extent that it does happen this fiscal year, I wouldn't expect it to have a significant impact and certainly any impact would be well within our guidance range.

Tobey Sommer (Managing Director)

Thank you very much. I'll get back in the queue.

Operator (participant)

Thank you. The next question comes from Andre Madrid with BTIG. Please go ahead.

Andre Madrid (Vice President and Equity Research Analyst)

Good morning, gentlemen. Thanks for taking my question. Morning.

John Heller (CEO)

We've heard some competitors call out a slowing award environment, and I'm curious to hear your thoughts on how you're finding the pace of things as of now?

Travis Johnson (CFO)

Thanks, Andrew. Good morning. I think I'll start, and then John can certainly add on. As a result of what we're seeing in terms of federal workforce disruption and obviously changes in priorities and adjusting to the various executive orders that are out there and the new administration priorities, we certainly have seen some impacts to timing of awards and also extensions on some of our existing work. What I will say is we're really pleased with our year-to-date business development performance, both from a book-to-bill perspective, which is 1.0 on a year-to-date.

I think it really demonstrates the diversification and strength of our mission-focused portfolio and what we're doing to support our customers, not only with the U.S. government, but as John noted in his prepared remarks, 20% of our business is international and commercial. We've certainly seen good tailwinds and bookings from that perspective as well. We're also excited about the $29 billion of pending awards and what that can mean for the second half. To kind of summarize, yes, we've seen some impacts to the timing of awards, but we expect it to be just that, timing. Eventually, the $29 billion of pending awards will be adjudicated. We're just staying laser-focused on developing the best solutions and putting the best proposal forward to support our customers. I would keep in mind as awards are delayed, existing programs are ongoing.

If they cannot get awards out, they're adding work to those existing contracts. We're seeing robust adds to existing contracts that are also contributing to our year-to-date performance. That's always an important element of our performance every year, helping customers identify opportunities for improving operations and seeing those types of modifications added to existing contracts.

Got it. Got it. Very helpful. Thank you. If I could squeeze one more in. I mean, Rapid Solutions, excellent job with that. Are you continuing to assess the broader portfolio and seeing if there's any similar assets that might be worth divesting to shore up capital?

Yeah. I mean, when you think about a company, the $14 billion in revenue, very broad and very diversified, as we came out in the beginning back in end of September, we were really excited about that diversity.

We were just getting together. We had just had the opportunity as a leadership team to kind of look inside the portfolio in a very detailed way. I would say as any company, you go through a strategic planning process, usually annually, you look at what your priorities are in that strategy, and then you look at your portfolio and make sure that all the elements of that portfolio align with those priorities. I think as we looked at Rapid Solutions, we found that was a piece of the business that we felt did not, it was a great piece of business, obviously. Real excited for those employees, in particular, having the opportunity to continue the work that they're doing with a partner that's really going to support them, but it just did not align with our strategy priorities.

I think as we think of the future, we're going to continue to look at our priorities and look at our portfolio every year and look at what is or is not aligned and make those decisions as we continue to go forward.

Andre Madrid (Vice President and Equity Research Analyst)

Excellent. That's super helpful. I'll jump back in the queue. Thank you.

Operator (participant)

Thank you. The next question comes from Colin Canfield with Cantor Fitzgerald. Please go ahead.

Colin Canfield (Equity Analyst)

Thanks. Maybe asking the divestiture question in a different way. Travis, you mentioned about future debt paid on. Is there a right way to think about the level of proceeds in terms of a range that you might expect? And then also, is there a right way to think about the potential valuation that's being considered on those proceeds? Thanks.

Travis Johnson (CFO)

Thanks, Colin. Good morning.

Speaking of Rapid Solutions specifically, as we had in our press release, the sale price is expected to be $360 million. On an after-tax basis, we expect to net around $325 million. We were able to take advantage of some tax attributes that were obviously positive to the taxes we will have to pay on that, which is a positive. We are really excited about the proceeds. Obviously, we need to get to close, but it will certainly strengthen our balance sheet position and accelerate both our deleveraging objectives and, as John said on the call, a path to more flexible and opportunistic capital deployment posture. We are excited about that. From an overall perspective, we remain focused on delivering our prior commitment of three times net operating leverage by the end of FY2026.

Colin Canfield (Equity Analyst)

Got it. Got it.

Then in terms of the bookings, maybe walk us through what was quarterly book-to-bill with the included bookings from the JVs? What was that? How should we think about the bookings number quarter to date thus far?

Travis Johnson (CFO)

Yeah, Colin, thanks. Book-to-bill, both on a reported basis and on an imputed basis, was 0.9 for the quarter. As John noted in his prepared remarks, it was on a reported basis, 1.0 year-to-date and 1.2 on an imputed basis. We really saw the strength of those joint venture awards in the first quarter across not only in the environment business with Hanford and West Valley, but also with our cosmic win that we announced. That was really concentrated in the first quarter, but really pleased with the performance of the business since we came together back in September.

Colin Canfield (Equity Analyst)

Any sense of bookings thus far this quarter?

Travis Johnson (CFO)

We have not commented on anything in regards to post-quarter. I will say, though, we have continued to see both submits and awards take place as we have gone through the first month of the third quarter.

Colin Canfield (Equity Analyst)

Okay. Thank you. I will hold back in the queue.

Operator (participant)

Thank you. The next question comes from Ken Herbert with RBC Capital Markets. Please go ahead.

Ken Herbert (Aerospace and Defense Analyst)

Morning. Maybe just to start, just wanted to follow up on the sort of the revenue guidance for the year. I think it implies about a 3% sequential step-up from first half to second half. Obviously, the growth in the second half is limited. You talked about the joint venture transitions and some of the other changes as potential headwinds. Can you just go into any more detail on sort of the specific headwinds and maybe quantifications there?

I guess more importantly, as you look at the sequential step-up, first to second half, maybe some seasonality or other aspects to it, but underpinning that confidence in the full-year guide. Thank you.

Travis Johnson (CFO)

Hey, Ken. Good morning. Thank you for the question. I'll start by just saying, first of all, we're really pleased with the financial performance in the first half of the year, which, as I noted, really just demonstrates the diversity and the strength of our mission-focused portfolio. As we look ahead to the second half of the year, I think you hit a couple of the dynamics spot on, right? We're expecting revenue to increase 3% relative to the first half. I'll kind of piece it out for you a little bit. First, we're expecting around 6% organic growth, including the impact of the 53rd week.

That is partially offset by the joint venture awards that we announced earlier this year, as well as the kind of folding in of the administrative change impacts that we previously discussed. Maybe to provide a little bit more context on the joint venture dynamic. Actually, all three of the joint venture awards I noted earlier, West Valley, Hanford, Cosmic, really great wins for the company and a continuation of the work that we've previously been doing. However, they are now transitioning from what was historically consolidated joint ventures, which we reported revenue on, to unconsolidated joint ventures. It will impact the revenue top line, but have no impact on the bottom line in free cash flow, obviously.

In fact, we expect probably stronger performance on those, especially as they ramp up over the transition period and head into fiscal year 2026 with EBITDA and free cash flow increasing on those opportunities in aggregate. Really excited about those, but obviously, as we've noted, will have an impact on the revenue profile. The last thing I'll note, it's important to note that we provide guidance ranges that obviously contemplate a variety of different scenarios. At the top end of our guidance range, two-week revenues would actually grow around 5%. We feel really good, again, about the first-half performance. Obviously, reaffirming the midpoint of our guidance for the full fiscal year demonstrates the confidence we have in delivering the numbers we set back in August.

John Heller (CEO)

Ken, I would add, you know, you have to contemplate here that we brought these two companies together just six months ago. We talked a lot about white space synergies, the value of having the expanded engineering and technology capability of these both businesses in a single enterprise. We are applying that to every opportunity that we are coming on and bidding, as well as existing projects and taking that enterprise capability that we now have and applying it to opportunities that exist and come up on existing programs. This gives us optimism on the strength of the business, our ability to bid opportunities that we could not bid before as we go forward, and we are building our pipeline on those opportunities. Then things even that were in our pipeline, both companies, we are applying the combined strength of our new enterprise against those.

Is that going to have a huge impact on FY2025? Probably not because those contracts are just, or those bids are just going in. We are real excited about as these things matriculate in 2026 and 2027, this should really provide an opportunity for us to grow as we think about the future.

Ken Herbert (Aerospace and Defense Analyst)

No, that's great. I really appreciate the color. Just as a final question, have you seen any impact yet from some of the GSA's push on the consulting front? Is it possible to maybe bracket or frame how much of your revenues would be perhaps pure consulting? Has this been anything that's come up yet for you guys?

John Heller (CEO)

Yeah. No, this has not been an issue for Amentum.

Our focus has been and is today purely on mission operations, mission delivery, and key technology capabilities that do not relate to any type of consulting work. It's just not part of our business model and not something we were looking at as a part of our strategy in the future.

Ken Herbert (Aerospace and Defense Analyst)

Perfect. I appreciate the color and nice results. Thank you.

John Heller (CEO)

Thanks, Ken.

Operator (participant)

Thank you. The next question comes from Noah Poponak with Goldman Sachs. Please go ahead.

Noah Poponak (Equity Research Analyst)

Hey, good morning, everyone. Morning, Noah. Travis, apologies for not getting this, but what's the 5% that you were just referencing that you walked back to adjusting for things to sort of get to a core growth rate?

Travis Johnson (CFO)

The comment around 5%, though, is just at the top end of our guidance range for revenues at $14.15 billion.

The growth from the first half of the year to the second half of the year will be 5%.

Noah Poponak (Equity Research Analyst)

Oh, that's first half to second half.

Travis Johnson (CFO)

Correct.

Noah Poponak (Equity Research Analyst)

Okay.

What is the growth rate impact to the full-year growth rate from this change in the JV accounting?

Travis Johnson (CFO)

So the joint ventures in aggregate were running at around $80 million a quarter for the first half of the year. And we expect those to fully transition out by the end of the third quarter and have zero revenue contribution in the fourth quarter. That is kind of the, if you want to think about the quarterly and full-year impact of the joint venture transitions, that is the right way to think about it.

Noah Poponak (Equity Research Analyst)

That takes out maybe $100 million of like-for-like year-over-year, 2025 versus 2024?

Travis Johnson (CFO)

Yeah, that is correct. A little over $100 million.

Noah Poponak (Equity Research Analyst)

Okay. Okay.

I guess I just wanted to ask too on growth, just zooming out higher level. You've laid out a very strong case in the prepared remarks for your position in the market, your capability, your customer relationships, enduring mission exposure. But the growth rates are low. Now, in the first half, there's SciTech, and then in the second half, there's this. There's just moving pieces. I guess, though, at a high level, if I just listen to your prepared remarks, it sounds like a high growth rate, and the growth rates are low. I guess, how do I square that? Or maybe just speak to the multi-year CAGR you have. Is that still firmly in place? Can you be in that range next year in 2026 or just 2026? Also have transition elements to it. How do I square all that? Yeah.

John Heller (CEO)

No, given obviously the government's kind of transformational activities that are ongoing, it looks for everyone, it's added some uncertainty. Just as my remarks to Ken a second ago, just when you step back and look at what we've brought together in Amentum today is a company that is highly diversified with a leadership position across many market areas that have opportunity to take advantage of the shifting priorities in government, both the U.S. government and our key allies. We think that our strategy around key areas like space and defense and intelligence and energy and environment all have the opportunity to kind of find those niches of growth. When you look at the U.S. government's priorities of missile defense, data analytics around UAVs, the border, all firmly aligned in strengths of Amentum, past capabilities of Amentum.

We talked about energy as a key demand area for the commercial economy, and not just here in the U.S., but around the world going forward. Our commercial business in general, there are several areas that we feel that a market area is in critical infrastructure management, the shift to 5G, and other things that we're working on that can all provide key elements of strategic growth for the business as we look forward. We're very happy with where we're sitting today with nearly $30 billion of bids awaiting award and a pipeline of strength and opportunities across all those areas I discussed, and especially being aligned to key U.S. government priority areas that have been articulated.

Noah Poponak (Equity Research Analyst)

Okay. Okay, John. I appreciate all that detail.

I guess the 1% you've referenced as an impact of the year from changes happening at your customer, you spoke to that previously, and then today you're speaking to the same number, so it's not changing. That implies that has stabilized. What's your sense of or your view on if that is now kind of as bad as that gets? Or how much risk do you see through the rest of this year going into your fiscal 2026 that that 1% becomes something larger?

Travis Johnson (CFO)

You're absolutely right, Noah. Obviously, we'll acknowledge that we're still operating in a dynamic environment, but based on the information we have today, we still feel comfortable that 1% is the right estimate for the expected impact on our FY2025 revenues, which obviously we've fully contemplated in the guidance that we reaffirmed today.

The other thing I'd say is that, we've contemplated that in our guidance. We're tracking several potential opportunities where Amentum is well aligned to the new administration priorities, many of which John noted in his prepared remarks and in the Q&A responses, which we haven't factored into our expectations or guidance yet. As we look forward and move into FY2026, as you noted, those will provide potential tailwinds as they become more real and get adjudicated through the system.

Noah Poponak (Equity Research Analyst)

Okay. Last one, Travis. It actually changes. 1% is 1%, but depending on the possible rounding of how much Rapid Solutions was as a percentage of your EBITDA, whether it was 0.6 or 1.4, it makes a huge difference. Did you sell Rapid Solutions for something close to 30 times EBITDA?

Travis Johnson (CFO)

We'll stick to what we have in the press release now, which is exactly what we've said, which is a sale price of $360 million and adjusted EBITDA around 1% of revenue. Or yeah, 1% of overall EBITDA.

Noah Poponak (Equity Research Analyst)

Okay. Thanks a lot.

Operator (participant)

Thank you. The next question comes from Kristene Liwag with Morgan Stanley. Please go ahead.

Kristene Liwag (Executive Director)

Hey, good morning, guys. I just want to close the loop here on DOGE and the risk that you're seeing. From your commentary, it seems like there's a lot of confidence in the 2025 guide. When I look at the DOGE wall of receipts, there are a few AECOM and Jacobs contracts terminated just in the past few days, including two Department of Homeland Security contracts adding up to $46 million.

I want to understand, is the confidence in the guide because these are not part of Amentum today, or are they part of the guidance range? Any more commentary would be helpful.

Travis Johnson (CFO)

Thanks, Kristene. Good morning. A couple of different comments there. Just to Noah's question, we feel really good about the 1% we previously stated and do feel confident in the guidance range we reaffirmed. Over 98% of our revenues are expected to come from firm or recompete work. The 2% that is new business is more in the commercial area, which is typical at this point in the year to have that. I will reiterate, we feel good about the 1% in our guidance for fiscal year 2025.

Kristene Liwag (Executive Director)

Great. Thanks.

If I could do a follow-up, I mean, 10% of total revenue today is space-related, and NASA faces a 24% budget cut from the proposed budget. Can you provide color on how that's factored into that 1%, or is it something different?

John Heller (CEO)

Yeah. Thanks for the question. Maybe just a little bit of context to set the starting point. We're really excited right now about our teams that are supporting NASA. We're doing great work to prepare for the Artemis II mission that's scheduled for early 2026, which will take a crew of astronauts to the moon and back safely. We're making great progress in assembling the flight vehicle at NASA and Kennedy, as well as testing the avionics, the launch flight software elements. All that is progressing really well.

I think the other thing that has emerged in recent days and weeks is that the new administration is also prioritizing the Artemis III mission to follow, which will return our astronauts to the surface of the moon. So really, if you think about it, we're preparing for Artemis II. Artemis III proceeds as planned. That will dominate our work in supporting NASA at the Kennedy Space Center for the next several years. We have also seen, as you have, I'm sure, in the president's new skinny budget, which is a key first step in the budgeting process, that they proposed more of a parallel moon and Mars emphasis when you get out beyond Artemis III. And that absolutely could result in some changes post-Artemis III to the ongoing cadence of Artemis missions. So we'll be watching that with interest.

I think kind of the positive key takeaway for us is that the new administration has signaled such a strong priority assigned to space superiority both from a national security and an exploration standpoint. That excites us because we believe whether it's the work we're doing for NASA or Missile Defense Agency or other clients, we just feel like Amentum is really well positioned, and we're excited about Amentum's future in space.

Kristene Liwag (Executive Director)

Great. Just to confirm, from the NASA cuts, are there risks to your guide from the proposed cuts, or are you immune from the opportunity for moon and Mars?

John Heller (CEO)

We do not expect any material impact in FY2025.

Kristene Liwag (Executive Director)

Thank you.

Operator (participant)

Thank you. There are no further questions at this time. I would now like to turn the call over to John Heller, Chief Executive Officer, for closing remarks.

John Heller (CEO)

Thank you, Operator.

Thank you all for your interest in Amentum. We are very encouraged by our progress thus far. Amentum is delivering great value to our customers, and we look forward to keeping you updated in the quarters to come.

Operator (participant)

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.