What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-02-10 compared with 2025-08-06 · 77 added, 112 removed, 83 unchanged (69% of the section changed)

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unaudited condensed consolidated financial statements, and the notes thereto, and other data contained elsewhere in this Quarterly Report on Form 10-Q.

The following discussion and analysis should also be read in conjunction with our audited consolidated financial statements, and notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended September 27, 2024.

In addition, please see “Information Relating to Forward-Looking Statements” and “Item 1A.

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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.

In fiscal year 2024, we completed our merger with Jacobs Solutions Inc.

(“Jacobs”) Critical Mission Solutions business and portions of the Jacobs Divergent Solutions business (and, together with the Critical Mission Solutions business, referred to as the “CMS Business” or “CMS”), a leading provider of mission-critical, technology-driven services in government and commercial markets.

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

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, clean energy, platform engineering, sustainment and supply chain management across all 7 continents for the U.S.

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

government and allied nations.

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

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

federal government fiscal year (“GFY”) 2025 appropriations bill was passed in March 2025.

The bill provided a 1% increase for defense discretionary spending to $892 billion and a 1% increase in non-defense discretionary spending to $708 billion.

The President’s GFY 2026 budget request was submitted to Congress on May 2, 2025, and if enacted, would maintain defense discretionary spending at $892 billion and reduce non-defense discretionary spending by approximately 21% to $557 billion.

Additionally, the budget request assumes an increase in defense spending based on the defense reconciliation legislation, which would result in total GFY 2026 defense spending of $1.01 trillion, an increase of 13% from the GFY 2025 enacted level.

On July 4, 2025, 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 and energy production.

The bill included $150 billion in additional defense spending and $133 billion in supplemental spending for border security to be spent over the next two years and also added $10 billion in new spending for NASA’s human spaceflight programs and infrastructure modernization.

Under the Trump administration, the Department of Government Efficiency (“DOGE”) was created to propose savings through improvements to technology and increases to productivity in the federal workforce;

we continue to monitor the actions of the new 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 DOGE and other changes in budgetary priorities by the new 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.

For further information, please see Part I.

Risk Factors in our Fiscal Year 2024 Form 10-K.

In May 2025, the President’s U.S.

federal government fiscal year (“GFY”) 2026 budget request was submitted to Congress, which, as compared to GFY 2025 enacted level, maintained defense discretionary spending at $892 billion, reduced non-defense discretionary spending by approximately 21% to $557 billion, and increased defense spending by approximately 13% to $1.01 trillion.

Following a government shutdown from October 2, 2025 to November 12, 2025 and a partial government shutdown from January 31, 2026 to February 3, 2026, final appropriations legislation for GFY 2026 was passed on February 3, 2026, excluding the Department of Homeland Security which was funded via a continuing resolution (“CR”) through February 13, 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.

During those periods of time when appropriations bills have not been passed and signed into law, government agencies operate under a continuing resolution (“CR”), a temporary measure allowing the government to continue operations at prior year funding levels.

During those periods of time when appropriations bills have not been passed and signed into law, government agencies operate under a CR, a temporary measure allowing the government to continue operations at prior year funding levels.

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.

Additionally, the U.S.

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.

The tariffs that have been enacted by the U.S.

or other countries did not materially impact our business or financial results for the three months ended June 27, 2025.

We are currently evaluating the potential future impacts of the announced tariffs on our business and financial condition.

For a discussion of risks related to tariffs and other trade policy issues, see Part II.

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.

For a discussion of risks, see Part II.

Risk Factors in this Report and Part I.

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• Increasing demand for outsourced services and solutions with federal government customers;

• Increased global demand for clean and environmentally sustainable solutions;

• Increased global demand for reliable power sources and nuclear energy;

• Increased spending on government-wide modernization priorities;

• Increasing government focus on near-peer competitors and other nation state threats;

• Increasing discretionary spending for homeland security and regional activities in the Western hemisphere;

• Increasing discretionary spending for Indo-Pacific regional activities and initiatives;

• Increasing discretionary spending to improve the readiness of the defense industrial base;

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

Results of Operations for the Three Months Ended June 27, 2025 and June 28, 2024

Results of Operations for the Three Months Ended January 2, 2026 and December 27, 2024

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

Three Months Ended

June 27, 2025 June 28, 2024 Change

January 2, 2026 December 27, 2024 Change

(Dollars in millions) Dollars Dollars Dollars Percent

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Interest expense and other, net (74) (87) 13 (14.9)

Loss on extinguishment of debt (3) (3) — —

Income (loss) before income taxes 12 (22) 34 (154.5)

Income before income taxes 64 45 19 42.2

Provision for income taxes (20) (24) 4 (16.7)

Net income (loss) including non-controlling interests (1) (24) 23 (95.8)

Net income including non-controlling interests 44 21 23 109.5

net income attributable to non-controlling interests — (9) 9 (100.0)

Net income (loss) attributable to common shareholders $ 10 $ (26) $ 36 (138.5)

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 89.7% for the three months ended June 27, 2025 compared to 90.4% for the three months ended June 28, 2024.

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 4.6% for the three months ended June 27, 2025 from 3.6% for the three months ended June 28, 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.

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 three months ended June 28, 2024 combined with a decrease in interest rates, partially offset by the interest incurred on our Senior Notes during the three months ended June 27, 2025.

Loss on extinguishment of debt — The loss on extinguishment of debt for the three months ended June 27, 2025 and June 28, 2024 was due to a $191 million voluntary principal payment on the Term Loan and a $150 million voluntary principal payment on the previous Second Lien Tranche 1 Term Facility, respectively.

Provision for income taxes — The effective tax rate for the three months ended June 27, 2025 was 108.3%, as compared to (9.1)% for the three months ended June 28, 2024.

The change in the effective tax rate was primarily due to the recognition of a valuation allowance against a disallowed interest expense deferred tax asset relative to income (loss) before income taxes in the respective period.

Net income (loss) attributable to non-controlling interests — Net income (loss) attributable to non-controlling interests includes the utilization of fair market value adjustments assigned to certain non-controlling interests based on the remaining period of performance for the related contract partially offset by the minority interests in our consolidated joint ventures that are not wholly-owned.

Results of Operations for the Nine Months Ended June 27, 2025 and June 28, 2024

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

Nine Months Ended

June 27, 2025 June 28, 2024 Change

(Dollars in millions) Dollars Dollars Dollars Percent

Revenues $ 10,468 $ 6,176 $ 4,292 69.5 %

Cost of revenues (9,372) (5,576) (3,796) 68.1

Selling, general, and administrative expenses (440) (216) (224) 103.7

Amortization of intangibles (358) (171) (187) 109.4

Equity earnings of non-consolidated subsidiaries 47 51 (4) (7.8)

Operating income 345 264 81 30.7

Interest expense and other, net (261) (330) 69 (20.9)

Loss on extinguishment of debt (3) (3) — —

Income (loss) before income taxes 81 (69) 150 (217.4)

Provision for income taxes (59) (36) (23) 63.9

Net income (loss) including non-controlling interests 22 (105) 127 (121.0)

net loss attributable to non-controlling interests 4 (3) 7 (233.3)

Net income (loss) attributable to common shareholders $ 26 $ (108) $ 134 (124.1)

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% for the nine months ended June 27, 2025 compared to 90.3% for the nine months ended June 28, 2024.

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 4.2% for the nine months ended June 27, 2025 from 3.5% for the nine months ended June 28, 2024 primarily due to the merger with CMS and an increase in acquisition, transaction and integration costs.

Equity earnings of non-consolidated subsidiaries — Equity earnings of non-consolidated subsidiaries include our proportionate share of the income from equity method investments partially offset by the utilization of fair market value adjustments assigned to certain equity method investments based on the remaining period of performance for the related contract and was consistent with the nine months ended June 28, 2024.

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 nine months ended June 28, 2024 combined with a decrease in interest rates, partially offset by the interest incurred on our Senior Notes during the nine months ended June 27, 2025.

Loss on extinguishment of debt — The loss on extinguishment of debt for the nine months ended June 27, 2025 and June 28, 2024 was due to a $191 million voluntary principal payment on the Term Loan and a $150 million voluntary principal payment on the previous Second Lien Tranche 1 Term Facility, respectively.

Provision for income taxes — The effective tax rate for the nine months ended June 27, 2025 was 72.8%, as compared to (52.2)% for the nine months ended June 28, 2024.

Segment Results for the Three and Nine Months Ended June 27, 2025 and June 28, 2024

Net income attributable to common shareholders $ 44 $ 12 $ 32 266.7

Revenues — The decrease in revenues was primarily attributable to the impacts from the government shutdowns ($150 million), as well as the transition of certain contracts from consolidated to unconsolidated joint ventures and fiscal year 2025 divestitures ($110 million).

The reduction in revenue was partially offset by growth on existing programs and the ramp up of new contract awards.

Cost of revenues — The decrease in cost of revenues was primarily attributable to the decrease in revenues discussed above.

As a percentage of revenues, cost of revenues was 89.9% for the three months ended January 2, 2026 compared to 89.4% for the three months ended December 27, 2024.

Selling, general, and administrative expenses (“SG&A”) — The decrease in SG&A was primarily attributable to synergies arising from the spin-off of the Jacobs Solutions Inc.

(“Jacobs”) Critical Mission Solutions business and portions of the Jacobs Divergent Solutions business (and, together with the Critical Mission Solutions business, referred to as “CMS”).

SG&A as a percentage of revenues decreased to 3.6% for the three months ended January 2, 2026 from 3.8% for the three months ended December 27, 2024 primarily due to the reduction in SG&A discussed above.

Amortization of intangibles — Amortization of intangibles primarily relates to the amortization of our backlog and customer relationship intangible assets, which decreased due to the full amortization of backlog associated with the CMS merger in the prior year.

Provision for income taxes — The effective tax rate for the three months ended January 2, 2026 was 31.3%, as compared to 53.3% for the three months ended December 27, 2024.

The change in the effective tax rate was primarily due to the recognition of a valuation allowance against a disallowed interest expense deferred tax asset relative to income before income taxes in the respective period.

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 based on the remaining period of performance for the related contract partially offset by the minority interests in our consolidated joint ventures that are not wholly-owned and decreased due to the completion of certain contracts with follow-on contracts which transitioned to equity method investments.

Segment Results for the Three Months Ended January 2, 2026 and December 27, 2024

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

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Digital Solutions

Three Months Ended Nine Months Ended

June 27, 2025 June 28, 2024 Change June 27, 2025 June 28, 2024 Change

(Dollars in millions) Dollars Dollars Dollars Percent Dollars Dollars Dollars Percent

Three Months Ended

January 2, 2026 December 27, 2024 Change

(Dollars in millions) Dollars Dollars Dollars Percent

Revenues $ 1,337 $ 1,286 $ 51 4 %

Adjusted EBITDA 103 100 3 3 %

The increase in revenues for the three and nine months ended June 27, 2025, as compared to the three and nine months ended June 28, 2024, was primarily attributable to revenues from the merger with CMS, higher volume from new contract awards and growth on existing programs, partially offset by the expected ramp-down of historical programs.

The increase in Adjusted EBITDA for the three and nine months ended June 27, 2025, as compared to the three and nine months ended June 28, 2024, was primarily attributable to the revenue growth factors described above.

The increase in revenues for the three months ended January 2, 2026, as compared to the three months ended December 27, 2024, was primarily attributable to the ramp up of new contract awards partially offset by the fiscal year 2025 divestiture of Rapid Solutions.

The increase in Adjusted EBITDA for the three months ended January 2, 2026, as compared to the three months ended December 27, 2024, was primarily attributable to the revenue growth factors described above.

Global Engineering Solutions

Three Months Ended Nine Months Ended

June 27, 2025 June 28, 2024 Change June 27, 2025 June 28, 2024 Change

(Dollars in millions) Dollars Dollars Dollars Percent Dollars Dollars Dollars Percent

Three Months Ended

January 2, 2026 December 27, 2024 Change

(Dollars in millions) Dollars Dollars Dollars Percent

Revenues $ 1,900 $ 2,130 $ (230) (11) %

Adjusted EBITDA 160 162 (2) (1) %

The increase in revenues for the three and nine months ended June 27, 2025, as compared to the three and nine months ended June 28, 2024, was primarily attributable to revenues from the merger with CMS, the ramp up of new contract awards and growth on existing programs, partially offset by the expected ramp-down of historical programs.

The decrease in revenues for the three months ended January 2, 2026, as compared to the three months ended December 27, 2024, was primarily attributable to the transition of certain contracts from consolidated to unconsolidated joint ventures, a fiscal year 2025 divestiture, and impacts from the government shutdown in the first quarter of fiscal year 2026.

The reduction in revenue was partially offset by growth on existing programs and the ramp up of new contract awards.

The decrease in Adjusted EBITDA for the three months ended January 2, 2026, as compared to the three months ended December 27, 2024, was primarily attributable to the change in revenue described above partially offset by strong operational performance.

Revenues by Contract Type

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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, as a percentage of revenues, for the periods presented:

Three Months Ended Nine Months Ended

June 27, 2025 June 28, 2024 June 27, 2025 June 28, 2024

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

Three Months Ended

January 2, 2026 December 27, 2024

DS GES Total DS GES Total

Cost-plus-fee 59 % 56 % 57 % 61 % 65 % 64 %

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Time-and-materials 13 % 15 % 14 % 11 % 13 % 12 %

Total revenues 100 % 100 % 100 % 100 %

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

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 June 27, 2025, the Company had total backlog of $44.6 billion, compared with $26.9 billion as of June 28, 2024, an increase of $17.7 billion primarily due to the merger with CMS.

Funded backlog as of June 27, 2025 was $5.6 billion.

As of January 2, 2026, the Company had total backlog of $47.2 billion, compared with $45.2 billion as of December 27, 2024, an increase of $2.0 billion primarily due to new contract wins partially offset by revenue recognized on current contracts.

Funded backlog as of January 2, 2026 was $6.9 billion.

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

January 2, 2026 December 27, 2024

DS GES Total DS GES Total

Funded backlog $ 2,645 $ 4,232 $ 6,877 $ 2,722 $ 3,883 $ 6,605

Unfunded backlog 18,329 22,023 40,352 16,171 22,396 38,567

Total backlog $ 20,974 $ 26,255 $ 47,229 $ 18,893 $ 26,279 $ 45,172

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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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 nine months ended June 27, 2025, 64% 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 three months ended January 2, 2026, 57% 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.

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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 a seven year, $3,750 million term facility (“Term Loan”) and a five year, $850 million revolving facility (“Revolver”), including a $200 million letter of credit subfacility and a $100 million swingline subfacility.

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

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.

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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 plus an applicable margin based upon our net leverage ratio.

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.

We were in compliance with all covenants as of June 27, 2025.

We were in compliance with all covenants as of January 2, 2026.

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.

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 and $250 million on June 27, 2025 and July 31, 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.

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 5 — Sales of Receivables” and “Note 8 — Debt” of the notes to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.

Cash Flow Information

Nine Months Ended

(Amounts in millions) June 27, 2025 June 28, 2024

Net cash provided by operating activities $ 273 $ 160

Net cash provided by (used in) investing activities 236 (8)

Three Months Ended

(Amounts in millions) January 2, 2026 December 27, 2024

Net cash (used in) provided by operating activities $ (136) $ 110

Net cash used in investing activities (33) (8)

Net cash used in financing activities (20) (16)

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Net change in cash and cash equivalents $ (190) $ 70

Net cash provided by operating activities increased by $113 million for the nine months ended June 27, 2025 when compared to the nine months ended June 28, 2024 as a result of a $289 million increase in cash earnings due to contributions from the merger with CMS and offset by $176 million in changes in operating assets and liabilities.

Net cash provided by investing activities increased by $244 million for the nine months ended June 27, 2025 when compared to the nine months ended June 28, 2024 primarily due to the sale of the Rapid Solutions business partially offset by the cash payment made as part of the Transaction based on the final net working capital position.

Net cash used in financing activities increased by $42 million for the nine months ended June 27, 2025 when compared to the nine months ended June 28, 2024 primarily due to increased principal payments on our Term Loan and distributions to non-controlling interests.

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.

The sale of Rapid Solutions, which was part of the DS segment, was not classified as discontinued operations as it did not represent a strategic shift in our business.

Net cash used in operating activities decreased by $246 million for the three months ended January 2, 2026 when compared to the three months ended December 27, 2024 as a result of $263 million in changes in operating assets and liabilities and a $17 million increase in cash earnings.

The changes in operating assets and liabilities was primarily due to an additional pay cycle in the first quarter of fiscal year 2026 as compared to the first quarter of fiscal year 2025 and the impact of the government shutdown.

Net cash used in investing activities increased by $25 million for the three months ended January 2, 2026 when compared to the three months ended December 27, 2024 primarily due to contributions to equity method investments.

Net cash used in financing activities increased by $4 million for the three months ended January 2, 2026 when compared to the three months ended December 27, 2024 primarily due to the principal payment on our Term Loan, which was not required in first quarter of fiscal year 2025, partially offset by distributions to non-controlling interests.

Critical Accounting Policies and Estimates

There have been no significant changes to the Company’s critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended September 27, 2024.

There have been no significant changes to the Company’s critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended October 3, 2025.

Recent Accounting Pronouncements

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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-Q

Item 2. Management’s Discussion and Analysis