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Item 7. Management’s Discussion and Analysis

2025-11-25 compared with 2024-12-17 · 120 added, 80 removed, 127 unchanged (61% of the section changed)

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We are a global advanced engineering and technology solutions provider to a broad base of U.S.

and allied government agencies, supporting programs of critical national importance across energy and environmental, intelligence, space, defense, civilian and commercial end-markets.

We offer a broad reach of capabilities including environment and climate sustainability, intelligence and counter threat solutions, data fusion and analytics, engineering and integration, advanced test, training and readiness, and citizen solutions.

and allied government agencies, and customers in international and commercial markets, supporting programs of critical national importance across energy and environmental, intelligence, space, defense, civilian and commercial end-markets.

We offer a broad reach of capabilities including energy, environmental remediation, intelligence and counter threat solutions, data fusion and analytics, engineering and integration, advanced test, training and readiness, and citizen solutions.

As a leading provider of differentiated technology solutions, we have built a repertoire of deep customer knowledge, enabling us to engage our customers across multiple capabilities and markets.

Underpinned by a strong culture of ethics, safety and inclusivity, Amentum is committed to operational excellence and successful execution.

We conduct our business activities and report financial results as one business segment.

The presentation of financial results as one reportable segment is consistent with the way the Company operates its business and the manner in which our chief

operating decision maker (“CODM”), currently our Chief Executive Officer, manages the operations of the Company for purposes of allocating resources and assessing performance.

Budgetary Environment

Underpinned by a strong culture of ethics and safety, Amentum is committed to operational excellence and successful execution.

We conduct our business activities and report financial results as two reportable segments:

Digital Solutions (“DS”) and Global Engineering Solutions (“GES”).

The DS segment provides advanced digital and data-driven solutions including intelligence analytics, space system development, cybersecurity, and next generation IT across the federal government and commercial clients.

The GES segment provides large-scale environmental remediation, nuclear power solutions, platform engineering, sustainment and supply chain management across all 7 continents for the U.S.

government and allied nations.

The presentation of financial results as two reportable segments is consistent with the way the Company operates its business and the manner in which our chief operating decision maker (“CODM”), currently our Chief Executive Officer, manages the operations of the Company for purposes of allocating resources and assessing performance.

Budgetary and Regulatory Environment

In fiscal year 2025, we generated approximately 81% of our revenues from contracts with the U.S.

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federal budget, legislative and contracting trends and activities and evolve our strategies accordingly.

federal government fiscal year (“GFY”) 2024 appropriations bill was passed by Congress and signed by President Biden in March 2024.

The final bill was consistent with the Fiscal Responsibility Act of June 2023.

Defense discretionary spending saw a 3.3% increase to $886 billion, while non-defense discretionary spending remained flat at $703 billion.

The GFY 2025 budget request was submitted to Congress in March 2024 and maintained the levels set in the Fiscal Responsibility Act.

The budget request would increase defense discretionary spending from $886 billion to $895 billion and non-defense discretionary spending from $704 billion to $711 billion.

The budget request also includes a $25 billion increase to Department of Defense (“DOD”) spending.

With the existing continuing resolution set to expire on December 20, 2024, Congress faces the decision of either passing another short-term continuing resolution or approving the 2025 funding bills before the year's end.

In May 2025, the President’s U.S.

federal government fiscal year (“GFY”) 2026 budget request was submitted to Congress.

As compared to the GFY 2025 budget, the GFY 2026 budget request maintained defense discretionary spending at $892 billion, reduced non-defense discretionary spending by approximately 21% to $557 billion, and increased GFY 2026 defense spending to $1.01 trillion, an increase of 13% from the GFY 2025 enacted level.

Final appropriations legislation for GFY 2026 was not passed as of October 1, 2025, the first day of GFY 2026, and the federal government shut down most agencies of the federal government until November 12, 2025, when a continuing resolution was passed to reopen the federal government and provide funding through January 30, 2026.

While we view the budget environment as constructive and believe core funding sources for our primary customer-based markets will continue to experience bipartisan tailwinds, there can be no certainty about the level of funding for any particular GFY or that appropriations bills will be passed in a timely manner.

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Depending on their scope, duration, and other factors, CRs can negatively impact our business due to delays in new program starts, delays in contract awards decisions, and other factors.

Under the Trump administration, the Department of Government Efficiency was created, the One Big, Beautiful Bill Act was passed which made certain tax cuts permanent, reduced healthcare spending and increased spending related to border security, defense, NASA and energy production, and the U.S.

Government is in the process of, or has announced its intent to, increase

current tariffs, impose additional tariffs, and expand tariffs on goods imported from various countries into the United States.

We continue to monitor the actions of the administration which could result in a change to budgetary priorities or impact federal government procurement timing.

Although a limited number of our contracts for the U.S.

Government have been affected by changes in budgetary priorities by the administration, the impact has not been material to date.

Decreases in, or delays in approving, the federal government’s budget, decreases in government spending on the types of programs that we support, delays in government contract awards, and pauses on government contracts on which we are currently performing could have an adverse impact on our business.

Market Environment

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• Increased investment in advanced technologies (e.g., hypersonics, microelectronics, unmanned, electromagnetic spectrum).

Results of Operations for the Years Ended September 27, 2024, September 29, 2023 and September 30, 2022

Results of Operations for the Years Ended October 3, 2025, September 27, 2024 and September 29, 2023

The following table presents our results of operations for the periods presented:

For the Year Ended September 27, 2024 Year to Year Change For the Year Ended September 29, 2023 Year to Year Change For the Year Ended September 30, 2022

For the Year Ended October 3, 2025 Year to Year Change For the Year Ended September 27, 2024 Year to Year Change For the Year Ended September 29, 2023

2024 to 2025 2023 to 2024

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Gain on acquisition of controlling interest — (69) (100.0) 69 69 — —

Loss before income taxes (123) 217 (63.8) (340) (276) 431.3 (64)

Benefit (provision) for income taxes 40 21 110.5 19 33 (235.7) (14)

Net loss (83) 238 (74.1) (321) (243) 311.5 (78)

net (loss) income attributable to non-controlling interests 1 (6) (85.7) 7 13 (216.7) (6)

Net loss attributable to Amentum $ (82) $ 232 (73.9) $ (314) $ (230) 273.8 $ (84)

Income (loss) before income taxes 115 238 (193.5) (123) 217 (63.8) (340)

(Provision) benefit for income taxes (56) (96) (240.0) 40 21 110.5 19

Net income (loss) including non-controlling interests 59 142 (171.1) (83) 238 (74.1) (321)

net income (loss) attributable to non-controlling interests 7 6 600.0 1 (6) (85.7) 7

Net income (loss) attributable to common shareholders $ 66 $ 148 (180.5) $ (82) $ 232 (73.9) $ (314)

Results of Operations October 3, 2025 vs September 27, 2024

Revenues — The increase in revenues was primarily attributable to revenues from the merger with CMS.

Cost of revenues — The increase in cost of revenues was primarily attributable to the increased revenues volume from the merger with CMS.

As a percentage of revenues, cost of revenues was 89.5% and 90.5% for the years ended October 3, 2025 and September 27, 2024, respectively.

Selling, general, and administrative expenses (“SG&A”) — The increase in SG&A was primarily attributable to the merger with CMS.

SG&A as a percentage of revenues increased to 4.3% for the year ended October 3, 2025 from 4.2% for the year ended September 27, 2024 primarily due to the merger with CMS and an increase in acquisition, transaction and integration costs.

Amortization of intangibles — Amortization of intangibles primarily relates to the amortization of our backlog and customer relationship intangible assets, which increased due to the merger with CMS.

Equity earnings of non-consolidated subsidiaries — Equity earnings of non-consolidated subsidiaries include our proportionate share of the income from equity method investments and decreased due to utilization of fair market value adjustments assigned to certain equity method investments obtained in the merger with CMS partially offset by the performance of our non-consolidated subsidiaries.

Interest expense and other, net — The decrease in interest expense and other, net was primarily due to the reduction to our Term Loan principal balance as compared to the year ended September 27, 2024 combined with a decrease in interest rates, partially offset by the interest incurred on our Senior Notes during the fiscal year ended October 3, 2025.

Loss on extinguishment of debt — The loss on extinguishment of debt for the year ended October 3, 2025 was due to $722 million of voluntary principal payments on the Term Loan.

The loss on extinguishment of debt for the year ended September 27, 2024 was due to a loss on the debt modification of $14 million and debt issuance costs of $31 million.

Gain on acquisition of controlling interest — The gain on acquisition of controlling interest was primarily due to the acquisition of a joint venture which was accounted for as a business combination achieved in stages, in which the Company’s previously held equity interest in the joint venture was remeasured to fair value, resulting in a gain of $69 million during the fiscal year ended September 27, 2024.

(Provision) benefit for income taxes — The effective tax rate for the year ended October 3, 2025 was 48.7%, as compared to 32.5% for the year ended September 27, 2024.

The change in the effective tax rate was primarily due to the recognition of a valuation allowance against a deferred tax asset related to disallowed interest expense, release of a valuation allowance related to domestic capital losses, and the tax effect of the Rapid Solutions divestiture during the year ended October 3, 2025.

Net income attributable to non-controlling interests — Net income attributable to non-controlling interests includes the utilization of fair market value adjustments assigned to certain non-controlling interests obtained in the merger with CMS partially offset by the minority interests in our consolidated joint ventures that are not wholly-owned.

Results of Operations September 27, 2024 vs September 29, 2023

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As a percentage of revenues, cost of revenues was 90.5% and 90.1% for the years ended September 27, 2024 and September 29, 2023, respectively.

Selling, general, and administrative expenses (“SG&A”) — SG&A as a percentage of revenues increased from 3.8% for the year ended September 29, 2023 to 4.2% for the year ended September 27, 2024 primarily due to an increase in acquisition, transaction and integration costs.

Selling, general, and administrative expenses — SG&A as a percentage of revenues increased from 3.8% for the year ended September 29, 2023 to 4.2% for the year ended September 27, 2024 primarily due to an increase in acquisition, transaction and integration costs.

Amortization of intangibles — Amortization of intangibles primarily relates to the amortization of our backlog and customer relationship intangible assets, which decreased as a result of the accelerated method of amortization utilized to amortize our intangibles which best approximates the proportion of the future cash flows estimated to be generated in each period over the estimated useful life of the applicable asset.

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Interest expense and other, net — The increase in interest expense and other, net was primarily due to an increase in interest rates on our variable rate debt and a reduced benefit from our interest rate swaps.

Loss on extinguishment of debt — The loss on extinguishment of debt was primarily due to a loss on the debt modification of $14 million and debt issuance costs of $31 million during the fiscal year ended September 27, 2024.

Loss on extinguishment of debt — The loss on extinguishment of debt was due to a loss on the debt modification of $14 million and debt issuance costs of $31 million during the fiscal year ended September 27, 2024.

Benefit for income taxes — The effective tax rate for the year ended September 27, 2024 was 32.5%, as compared to 5.6% for the year ended September 29, 2023.

The change in the effective tax rate was primarily due to the partial release of a valuation allowance against a deferred tax asset related to disallowed interest expense during the year ended September 27, 2024 impact of goodwill impairment charges recognized during the year ended September 29, 2023 that are nondeductible for income tax purposes.

In December 2021, the Organization for Economic Cooperation and Development (“OECD”) enacted model rules for a new 15% global minimum tax framework (“Pillar Two”).

Many governments around the world have enacted or are in the process of enacting Pillar Two legislation.

We are evaluating the potential impact of the rules but currently do not expect them to have a material impact.

Net income attributable to non-controlling interests — Net income attributable to non-controlling interests include the minority interests in our consolidated joint ventures that are not wholly-owned, which decreased due to performance on certain consolidated joint ventures and the completion of certain contracts.

Results of Operations September 29, 2023 vs September 30, 2022

Revenues — The increase in revenues was primarily attributable to a full year of performance on legacy PAE contracts contributing $0.9 billion as well as new contract awards and growth on existing programs of $0.5 billion, partially offset by the completion of certain contracts which totaled $1.2 billion, including a follow-on contract which transitioned from a consolidated joint venture to an equity method investment.

Cost of revenues — The increase in cost of revenues was primarily driven by increased revenue volume.

As a percentage of revenues, cost of revenues was 90.1% and 90.0% for the years ended September 29, 2023 and September 30, 2022, respectively.

Selling, general, and administrative expenses — The decrease in SG&A was primarily attributable to the absence of the acquisition, transaction and integration costs associated with the acquisition of PAE during fiscal year 2022.

As a percentage of revenues, SG&A was 3.8% and 4.0% for the years ended September 29, 2023 and September 30, 2022, respectively.

Equity earnings of non-consolidated subsidiaries — Equity earnings of non-consolidated subsidiaries include our proportionate share of the income from equity method investments, which increased due to a full year of performance on new equity method investments that started during the fiscal year ended September 30, 2022 partially offset by the completion of certain contracts.

Goodwill impairment charges — During the fiscal years ended September 29, 2023 and September 30, 2022, we performed goodwill impairment tests which concluded that the carrying value of a reporting unit exceeded fair value.

As a result, non-cash impairment charges of $186 million and $108 million were recognized during the years ended September 29, 2023 and September 30, 2022, respectively.

Interest expense and other, net — The increase in interest expense and other, net was primarily due to additional interest on the new first and second lien borrowings obtained to acquire PAE, an increase in interest rates on our variable rate debt, and a reduced benefit from our interest rate swaps.

Loss on extinguishment of debt — The loss on extinguishment of debt was primarily due to debt issuance costs of $32 million during the fiscal year ended September 30, 2022.

Benefit (provision) for income taxes — The effective tax rate for the year ended September 29, 2023 was 5.6%, as compared to (21.9)% for the year ended September 30, 2022.

The change in the effective tax rate was primarily due to the recognition of a partial valuation allowance against a deferred tax asset related to disallowed interest expense during the year ended September 29, 2023 and the impact of goodwill impairment charges that are nondeductible for income tax purposes recognized in both fiscal years relative to the total loss before income taxes.

Net (loss) income attributable to non-controlling interests — Net (loss) income attributable to non-controlling interests include the minority interests in our consolidated joint ventures that are not wholly-owned, which decreased due to the completion of a contract which transitioned to an equity method investment.

The change in the effective tax rate was primarily due to the partial release of a valuation allowance against a deferred tax asset related to disallowed interest expense during the year ended September 27, 2024 and the impact of goodwill impairment charges recognized during the year ended September 29, 2023 that are nondeductible for income tax purposes.

Net (loss) income attributable to non-controlling interests — Net income attributable to non-controlling interests include the minority interests in our consolidated joint ventures that are not wholly-owned, which decreased due to performance on certain consolidated joint ventures and the completion of certain contracts.

Segment Results for the Years Ended October 3, 2025, September 27, 2024 and September 29, 2023

The primary financial performance measures we use to manage our reportable segments and monitor results of operations are Revenues and Adjusted EBITDA.

The following tables present our performance measures by reportable segment:

Digital Solutions

For the Year Ended October 3, 2025 Year to Year Change For the Year Ended September 27, 2024 Year to Year Change For the Year Ended September 29, 2023

2024 to 2025 2023 to 2024

(Dollars in millions) Dollars Percent Dollars Percent

Revenues $ 5,543 $ 3,562 180 % $ 1,981 $ 82 4 % $ 1,899

Adjusted EBITDA (1)

437 278 175 % 159 — — % 159

(1) Represents a Non-GAAP financial measure - see the related explanations included below and Note 18 — Segment Information in Part II of this Annual Report on Form 10-K.

The increase in revenues for the year ended October 3, 2025, as compared to the year ended September 27, 2024, was primarily attributable to revenues from the merger with CMS, higher volume from new contract awards and the benefit of additional working days, partially offset by the expected ramp-down of historical programs and the divestiture of Rapid Solutions.

The increase in Adjusted EBITDA for the year ended October 3, 2025, as compared to the year ended September 27, 2024, was primarily attributable to the revenue growth factors described above.

The increase in revenues for the year ended September 27, 2024, as compared to the year ended September 29, 2023, was primarily attributable to new contract awards and growth on existing programs.

Adjusted EBITDA remained consistent year-over-year.

Global Engineering Solutions

For the Year Ended October 3, 2025 Year to Year Change For the Year Ended September 27, 2024 Year to Year Change For the Year Ended September 29, 2023

2024 to 2025 2023 to 2024

(Dollars in millions) Dollars Percent Dollars Percent

Revenues $ 8,850 $ 2,443 38 % $ 6,407 $ 441 7 % $ 5,966

Adjusted EBITDA (1)

667 208 45 % 459 22 5 % 437

(1) Represents a Non-GAAP financial measure - see the related explanations included below and Note 18 — Segment Information in Part II of this Annual Report on Form 10-K.

The increase in revenues for the year ended October 3, 2025, as compared to the year ended September 27, 2024, was primarily attributable to revenues from the merger with CMS, the ramp up of new contract awards, growth on existing programs and the benefit of additional working days, partially offset by the transition of contracts from consolidated to unconsolidated joint ventures and the expected ramp-down of historical programs.

The increase in Adjusted EBITDA for the year ended October 3, 2025, as compared to the year ended September 27, 2024, was primarily attributable to the revenue growth factors described above.

The increase in revenues and adjusted EBITDA for the year ended September 27, 2024, as compared to the year ended September 29, 2023, was primarily attributable to new contract awards and growth on existing programs.

Non-GAAP Financial Measures

We include the presentation and discussion of Adjusted EBITDA, which is not a measure of financial performance under Generally Accepted Accounting Principles in the United States (“GAAP”).

Adjusted EBITDA should be considered only as supplement to and should not be considered in isolation or used as a substitute for financial information prepared in accordance with GAAP.

Management of the Company believes Adjusted EBITDA, when read in conjunction with the Company’s financial statements prepared in accordance with GAAP and the reconciliation herein to the most directly comparable GAAP measure, provides useful information to management, investors and other users of the Company’s financial information in evaluating operating results and understanding operating trends by adjusting for the effects of items we do not consider to be indicative of the Company’s ongoing performance, the inclusion of which can obscure underlying trends.

Additionally, management of the Company uses Adjusted EBITDA in its evaluation of business performance, particularly when comparing performance to past periods, and believes Adjusted EBITDA is useful for investors because it facilitates a comparison of financial results from period to period.

The computation of a non-GAAP measure may not be comparable to similarly titled measures reported by other companies, thus limiting their use for comparability.

Adjusted EBITDA

The Company defines Adjusted EBITDA as net income (loss) attributable to common shareholders adjusted for interest expense and other, net, provision for income taxes, depreciation and amortization, and certain discrete items that are not considered in the evaluation of ongoing operating performance.

These discrete items include acquisition, transaction, and integration costs, non-cash gains and losses, loss on extinguishment of debt, utilization of certain fair market value adjustments assigned in purchase accounting, and stock-based compensation.

While we believe Adjusted EBITDA is a useful metric in evaluating operating performance by allowing better evaluation of underlying segment performance and better period-to-period comparability, it is not a metric defined by GAAP and may not be comparable to non-GAAP metrics presented by other companies.

For a reconciliation of net income (loss), the most directly comparable financial measure calculated in accordance with GAAP, to adjusted EBITDA for the years ended October 3, 2025, September 27, 2024 and September 29, 2023, see Note 18 — Segment Information in Part II of this Annual Report on Form 10-K.

The Company's backlog represents the estimated amount of future revenues to be recognized under negotiated contracts.

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• Unfunded backlog represents estimated values that have the potential to be recognized as revenues from negotiated contracts for which funding has not been appropriated and from unexercised contract options.

As of September 27, 2024, the Company had total backlog of $45.0 billion, compared with $26.8 billion as of September 29, 2023, an increase of $18.2 billion primarily due to the acquisition of CMS.

Funded backlog as of September 27, 2024 was $7.6 billion.

As of October 3, 2025, the Company had total backlog of $47.1 billion, compared with $45.0 billion as of September 27, 2024, an increase of $2.1 billion primarily due to new contract awards partially offset by revenue recognized during the year ended October 3, 2025.

Funded backlog as of October 3, 2025 was $5.6 billion.

The Company's backlog, by reportable segment and in total, consisted of the following (in millions):

For the years ended

October 3, 2025 September 27, 2024

DS GES Total DS GES Total

Funded backlog $ 2,634 $ 2,951 $ 5,585 $ 3,736 $ 3,828 $ 7,564

Unfunded backlog 17,989 23,570 41,559 15,148 22,258 37,406

Total backlog $ 20,623 $ 26,521 $ 47,144 $ 18,884 $ 26,086 $ 44,970

There is no assurance that all backlog will result in future revenues being recognized, and the backlog balance is subject to increases or decreases based on the execution of new contracts, contract modifications or extensions, deobligations, early terminations, and other factors.

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For a discussion of the types of contracts under which we generate revenues, see “Critical Accounting Policies” below.

The following table summarizes revenues by contract type for the periods presented:

The following table summarizes revenues by contract type as a percentage of each reportable segment and total Amentum for the periods presented:

For the years ended

September 27, 2024 September 29, 2023 September 30, 2022

(Dollars in millions) Dollars Percent Dollars Percent Dollars Percent

October 3, 2025 September 27, 2024 September 29, 2023

DS GES Total DS GES Total DS GES Total

Cost-plus-fee 64 % 61 % 63 % 49 % 66 % 62 % 46 % 68 % 63 %

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Time-and-materials 10 % 15 % 13 % 18 % 9 % 11 % 19 % 8 % 11 %

Total revenues $ 8,388 100 % $ 7,865 100 % $ 7,676 100 %

Total 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 %

Effects of Inflation

Given the nature of our operations and contract type mix, we expect the impact of inflation on our business may be limited for some of our contracts.

During the fiscal year ended September 27, 2024, 62% of our revenues was generated under cost-plus-fee type contracts that have limited inflation risk as they include provisions that adjust revenues to cover costs affected by inflation.

During the fiscal year ended October 3, 2025, 63% of our revenues was generated under cost-plus-fee type contracts that have limited inflation risk as they include provisions that adjust revenues to cover costs affected by inflation.

The remainder of our revenues was generated under time-and-materials or fixed-price type contracts which we have historically been able to price in a manner that accommodates inflation and cost increases over the period of performance but changes in our expectations with respect to inflation rates or in the overall mix of our contract types could cause future results to differ substantially.

Liquidity and Capital Resources

Existing cash and cash equivalents and cash generated by operations are our primary sources of liquidity, as well as sales of receivables under our Master Accounts Receivable Purchase Agreement (“MARPA”) and available borrowing capacity under the revolving credit facility provided for in the new senior credit facility (“New Credit Facility”).

On September 27, 2024, we entered into the New Credit Facility, which provides for a seven year, $3,750 million term loan facility (“Term Loan”) and a five year, $850 million revolving credit facility (“Revolver”), including a $200 million letter of credit subfacility and a $100.0 million swingline subfacility.

The Revolver and the Term Loan mature on September 27, 2029 and September 27, 2031, respectively.

The Term Loan requires quarterly principal amortization payments of $9 million with the remainder of the principal thereunder being due at maturity.

Existing cash and cash equivalents and cash generated by operations are our primary sources of liquidity, as well as sales of receivables under our Master Accounts Receivable Purchase Agreement (“MARPA”) and available borrowing capacity under the revolving credit facility provided for in the senior secured credit facility (the “Credit Facility”).

The Credit Facility consists of our term facility (“Term Loan”) maturing on September 27, 2031 and a $850 million revolving facility (“Revolver”) maturing on September 27, 2029, which includes a $200 million letter of credit subfacility and a $100 million swingline subfacility.

The Term Loan requires quarterly principal amortization payments of $9 million, which commenced on March 31, 2025, with the remainder of the principal thereunder being due at maturity.

In August 2024, the Company also completed an offering of $1,000 million in aggregate principal amount of 7.250% senior notes due August 1, 2032 (the “Senior Notes”).

The New Credit Facility and the Senior Notes are guaranteed by substantially all of our wholly owned material domestic restricted subsidiaries, subject to customary exceptions set forth in the credit agreement and indenture, respectively.

The interest rates applicable to the Term Loan are floating interest rates equal to an Alternate Base Rate or Canadian Prime Rate plus applicable margin or Term Secured Overnight Financing Rate (“SOFR”) or Term CORRA plus an applicable margin based upon our first lien net leverage ratio.

The Credit Facility and the Senior Notes are guaranteed by substantially all of our wholly owned material domestic restricted subsidiaries, subject to customary exceptions set forth in the credit agreement and indenture, respectively.

The interest rates applicable to the Term Loan are floating interest rates equal to an Alternate Base Rate or Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin based upon our net leverage ratio.

Each of the credit agreement and indenture requires us to comply with certain representations and warranties, customary affirmative and negative covenants and, in the case of the Revolver, under certain circumstances, a financial covenant.

As of September 27, 2024 and September 29, 2023, we have been in compliance with all such covenants.

We were in compliance with all covenants as of October 3, 2025 and September 27, 2024.

We believe that the combination of internally generated funds, available bank borrowings, and cash and cash equivalents on hand will provide the required liquidity and capital resources necessary to fund on-going operations, capital expenditures, scheduled principal and interest payments on our debt obligations, scheduled lease payments, and other working capital requirements over at least the next twelve months.

Over the longer term, our ability to generate sufficient cash flows from operations necessary to fulfill the obligations under the New Credit Facility, Senior Notes and any other indebtedness we may incur will depend on our future financial performance which could be affected by factors outside of our control, including worldwide economic and financial market conditions.

On June 26, 2025, we completed the sale of a hardware and product business, Rapid Solutions, to Lockheed Martin Corporation for a purchase price of $360 million in cash.

As part of our debt reduction initiatives, we made voluntary principal payments on the Term Loan of approximately $191 million, $250 million and $281 million on June 27, 2025, July 31, 2025 and September 30, 2025 , respectively.

Over the longer term, our ability to generate sufficient cash flows from operations necessary to fulfill the obligations under the Credit Facility, Senior Notes and any other indebtedness we may incur will depend on our future financial performance which could be affected by factors outside of our control, including, but not limited to, worldwide economic and financial market conditions.

See “Note 7 — Sales of Receivables” and “Note 12 — Debt” in Part II of this Annual Report on Form 10-K for additional information.

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For the years ended

(Amounts in millions) September 27, 2024 September 29, 2023 September 30, 2022

(Amounts in millions) October 3, 2025 September 27, 2024 September 29, 2023

Net cash provided by operating activities $ 543 $ 47 $ 67

Net cash provided by (used in) investing activities 228 475 (17)

Net cash (used in) provided by financing activities (382) (112) 1,724

Net cash used in financing activities (790) (382) (112)

Effect of exchange rate changes on cash and cash equivalents 4 7 1

Net increase (decrease) in cash and cash equivalents $ 147 $ (61) $ 57

Net (decrease) increase in cash and cash equivalents $ (15) $ 147 $ (61)

Cash Flows - October 3, 2025 vs September 27, 2024

Net cash provided by operating activities increased by $496 million when compared to the year ended September 27, 2024 primarily as a result of a $542 million increase in cash earnings due to contributions from the merger with CMS and offset by $46 million in changes in operating assets and liabilities.

Net cash provided by investing activities decreased by $247 million when compared to the year ended September 27, 2024 primarily as a result of the change in cash flows associated with the merger with CMS, partially offset by cash received from divestitures in the year ended October 3, 2025.

Net cash used in financing activities increased by $408 million when compared to the year ended September 27, 2024 primarily due to increased principal payments on our Term Loan partially offset by financing activities completed in the year ended September 27, 2024 associated with the merger with CMS.

Cash Flows - September 27, 2024 vs September 29, 2023

Net cash provided by operating activities decreased by $20 million primarily as a result of the Transaction and debt modification and higher tax and interest payments, partially offset by cash inflows from sales of receivables under the MARPA.

Net cash provided by investing activities increased by $492 million primarily as a result of the CMS Business acquisition in fiscal year 2024.

Net cash used in investing activities decreased by $492 million primarily as a result of the merger with CMS in the year ended September 27, 2024.

Net cash used in financing activities increased by $270 million primarily as a result of repayment of the prior first and second lien credit agreements partially offset by proceeds from the borrowings under the Term Loan and Senior Notes, and a capital contribution provided in connection with the Transaction.

Cash Flows - September 29, 2023 vs September 30, 2022

Net cash provided by operating activities decreased by $59 million primarily as a result of higher interest payments and the timing of collections, partially offset by an increase related to the timing of vendor payments.

Net cash used in investing activities decreased by $1,770 million primarily as a result of the acquisition of PAE in fiscal year 2022.

Net cash used in financing activities changed by $1,836 million primarily as a result of new borrowings associated with the acquisition of PAE partially offset by repayment of the Tranche 2 Term Loan (as defined below).

Cash used in financing activities during the year ended September 29, 2023 was primarily used toward debt repayments.

On June 26, 2025, we completed the sale of a hardware and product business, Rapid Solutions, to Lockheed Martin Corporation for a purchase price of $ 360 million in cash.

Rapid Solutions was part of the DS segment.

Contractual Obligations

For a description of the Company’s contractual obligations related to debt, pensions, leases, and retirement plans refer to “Note 10 — Retirement Plans”, “Note 11 — Pension Benefit Obligations”, “Note 13 — Debt” and “Note 15 — Leases” in Part II of this Annual Report on Form 10-K.

For a description of the Company’s contractual obligations related to debt, pensions, leases, and retirement plans refer to “Note 10 — Retirement Plans”, “Note 12 — Debt” and “Note 14 — Leases” in Part II of this Annual Report on Form 10-K.

Commitments and Contingencies

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Revenue Recognition

The Company generates revenue from service arrangements primarily with the U.S.

government, including subcontracts with other contractors performing work for the U.S.

The Company also serves state, local and foreign governments and commercial customers.

Our services are generally performed under cost-plus-fee, fixed-price, or time-and-materials contracts which typically involve an annual base period of performance followed by renewal option periods that, once exercised, are generally accounted for as separate contracts.

We account for a contract when the parties have approved the contract and are committed to perform their respective obligations, the rights of each party and the payment terms are identified, the contract has commercial substance, and collectability is probable.

To determine the proper revenue recognition, we assess whether the distinct goods or services to be provided are to be accounted for as a single performance obligation or as multiple performance obligations.

The majority of our contracts have a single performance obligation as the promise to transfer the respective goods or services is not separately identifiable from other promises in the contract and is therefore not distinct.

We also evaluate whether modifications to existing contracts should be accounted for as part of the original contract or as a separate contract.

Contract modifications that create new enforceable rights and obligations are accounted for prospectively.

Contract modifications that do not add distinct goods or services are accounted for through cumulative catch-up adjustments.

Contract modifications that add distinct goods or services and increase the contract value by an amount that reflects the standalone selling price are accounted for as separate contracts.

The transaction price is the estimated amount of fixed and variable consideration we expect to receive for performance of our contracts.

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Under the market approach, we estimate the fair value of a reporting unit based on comparable public companies within our industry that have operations with observable and comparable economic characteristics and are similar in nature, scope and size to the reporting unit being compared.

Under the income approach, we estimate the fair value of a reporting unit using a discounted cash flow model which includes significant judgments and assumptions about expected growth rates, terminal earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins, discount rates based on weighted-average cost of capital, assumptions regarding future capital expenditures and observable inputs of other comparable companies.

Under the income approach, we estimate the fair value of a reporting unit using a discounted cash flow model which includes judgments and assumptions about expected growth rates, terminal earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins, discount rates based on weighted-average cost of capital, assumptions regarding future capital expenditures and observable inputs of other comparable companies.

The fair value of each reporting unit is compared to the carrying amount of the reporting unit and if the carrying amount of the reporting unit exceeds the fair value, then an impairment loss is recognized for the difference.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis