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The call conveyed strong operational and financial momentum: modest organic revenue growth, margin expansion (notably a 100-basis-point improvement in Global Engineering Solutions), a meaningful bookings cadence (book-to-bill ~1.2x) and a rebound in quarterly free cash flow. Management reinforced FY26 guidance, completed capital structure improvements that lowered borrowing costs (~50 bps) and reiterated strategic positioning in accelerating markets (CDI, nuclear, space). Near-term headwinds are limited and identifiable — Digital Solutions margin pressure during program ramps, impacts from JV transitions/divestitures, seasonality of cash flow, and a modest potential FY27 revenue effect from a NASA directive — but these do not materially outweigh the positive execution and growth catalysts discussed.
Amentum reaffirmed its fiscal 2026 guidance, calling for revenue of $13.95–$14.30 billion, adjusted EBITDA of $1.10–$1.14 billion, adjusted diluted EPS of $2.25–$2.45 and free cash flow of $525–$575 million; management said ~97% of revenues are expected from existing/recompete business, roughly 48% of remaining revenue and profit is expected in Q3 with a sequential increase in Q4 (the bulk of cash generation), and they remain on track to meet full‑year FCF guidance after H1 FCF of $78 million and Q2 FCF of $220 million. Post‑quarter capital actions (a $1.4 billion Term Loan A, $1.0 billion revolver and a ~50 bps reduction in weighted‑average cost of debt) support a net‑leverage target below 3x (projected in the high‑2s) and a goal of 10%+ FCF growth to FY‑28; the outlook is underpinned by backlog of nearly $48 billion, funded backlog of $6.9 billion (up 20% YoY) and LTM book‑to‑bill of ~1.2x.
Second quarter revenue of $3.5 billion, reflecting normalized year-over-year growth of ~3%. Adjusted EBITDA of $275 million with margins of 7.9% (up ~20 basis points year-over-year). Adjusted diluted EPS of $0.60, up 13% year-over-year.
Net bookings of $4.0 billion in the quarter, trailing-12-month book-to-bill of 1.2x (1.3x on an imputed basis including JVs). Ending backlog near $48 billion, up ~7% year-over-year; funded backlog of $6.9 billion, up ~20% year-over-year. Over $20 billion in first-half submits and $26 billion in proposals awaiting award (~65% new business).
Quarterly free cash flow of $220 million driven by recovered collections; first-half free cash flow of $78 million and full-year free cash flow guidance reaffirmed at $525–$575 million, consistent with seasonality and expectation of strong fourth-quarter collections.
Post-quarter refinancing included a new $1.4 billion Term Loan A to pay down and reprice Term Loan B, and an increase in revolving credit capacity to $1.0 billion. Actions plus a Moody's upgrade reduced weighted average cost of debt by ~50 basis points and support target net leverage below 3x by fiscal-year end.
Digital Solutions segment revenue of $1.5 billion, up ~10% driven by ramps in critical digital infrastructure and space systems. Continued strong demand in CDI and space-related markets noted.
Global Engineering Solutions revenue of $2.0 billion. Adjusted EBITDA of $170 million and adjusted EBITDA margin expanded ~100 basis points year-over-year to 8.5%, driven by higher-margin mix (fixed price), JV equity income and cost synergy benefits.
Notable awards include a 14-year, $406 million GB Nuclear SMR contract (Amentum-led JV); a 2-year, $112 million European Commission decommissioning/waste contract (JV); a 5-year, $425 million CALFIRE aviation contract; $300M+ in intelligence awards; and $600M+ in critical digital infrastructure awards supporting telecom, hyperscalers and retrofits for AI workloads.
Company highlights large addressable markets: data center demand cited as growing ~29% annually, edge expected to grow ~36% annually through 2030, and overall CDI end market expected to grow 10%+ annually. Amentum positions ~ $4 billion of annual revenue in accelerating growth markets with accretive margins.
Reaffirmed fiscal-year 2026 guidance: revenue $13.95–$14.3 billion; adjusted EBITDA $1.10–$1.14 billion; adjusted diluted EPS $2.25–$2.45; free cash flow $525–$575 million.
Ladies and gentlemen, thank you for standing by. Good morning, and welcome to Amentum's Second Quarter Fiscal Year 2026 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] I would like to turn the call over to Joe DeNardi, Senior Vice President of Investor Relations. Please go ahead, sir.
Thank you, and good morning, everyone. We hope you've had an opportunity to read our earnings release, which we issued yesterday afternoon and is posted on our Investor Relations website. We have also provided presentation slides to facilitate today's call. So let's move to Slide 2. 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, except as required by applicable law.
In addition, we will discuss non-GAAP financial measures, which we believe provide useful information for investors. Both our earnings release and supplemental presentation slides include reconciliations to the most comparable GAAP measures. We do not provide reconciliations of forward-looking non-GAAP financial measures due to the inherent difficulty in forecasting and quantifying certain si...