Booz Allen Hamilton Holding Corporation (BAH) on Q1 2024 Results - Earnings Call Transcript

Nathan Rutledge: Good morning, and thank you for joining us for Booz Allen's First Quarter Fiscal Year 2024 Earnings Call. We hope you've had an opportunity to read the press release we issued earlier this morning. We have also provided presentation slides on our website and are now on Slide 2. With me today to talk about our business and financial performance are Horacio Rozanski, our President and Chief Executive Officer; and Matt Calderone, Executive Vice President and Chief Financial Officer. As shown on the disclaimer on Slide 3, please keep in mind that some of the items we will discuss this morning are forward-looking and may relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from forecasted results discussed in our SEC filings and on this call. All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements and speak only as of the date made. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. During today's call, we will also discuss some non-GAAP financial measures and other metrics, which we believe provide useful information for investors. We include an explanation of adjustments and other reconciliations of our non-GAAP measures to the most comparable GAAP measures in our first quarter fiscal year 2024 earnings release and slides. It is now my pleasure to turn the call over to our CEO and President, Horacio Rozanski. We are now on Slide 4. Horacio Rozanski: Thank you, Nathan, and good morning, everyone. Thank you for joining the call. This morning, Matt and I are excited to share outstanding financial results for the first quarter of fiscal year 2024. Our business is performing extremely well across all metrics. In the first quarter, revenue grew 18% year-over-year, with industry-leading organic growth. The bottom line was exceptional, and our headcount grew at a record pace to more than 32,000 Booz Allen employees. I believe these numbers speak for themselves. I could not be more proud of our people for delivering a truly tremendous first quarter, as we advance our VoLT strategy and serve our clients' most critical missions. This morning, I will put the results in context of our investment thesis and current year outlook. Then I'll discuss how our people and culture are foundational to our sustained performance. And later, Matt will cover the first quarter results and expectations for the full fiscal year in depth. Before I go on, as you know, on July 21, we announced settlement of the U.S. Department of Justice Civil investigation into highly technical elements of our government cost accounting and indirect cost charging practices. The settlement is within the expected range we previously disclosed in our fourth quarter earnings in May and has been factored into our updated cash guidance. We believe the company acted lawfully and responsibly. The settlement provides certainty to our employees, clients and shareholders and allows us to return to regular order with the important work of our DCMA and DCAA regulators. And yesterday, the SEC informed us that they had concluded their investigation into Booz Allen. Returning to this quarter's performance. As always, - it is important to view our latest results in the context of long-term objectives. Our multiyear investment thesis centers on growing adjusted EBITDA and to $1.2 billion to $1.3 billion by fiscal year 2025. We have said we expect to achieve that goal through a combination of above-market organic revenue growth, strong and stable margins with capacity to invest in our people and capabilities and capital deployment that prioritizes strategic acquisitions. Our first quarter results demonstrate we are on track to achieve our adjusted EBITDA target. We have excellent momentum and remain above expectations on organic growth and profit. While strategic acquisitions continue to be a priority, our pipeline of opportunities is more limited than we expected. On balance, this probably means that we will reach our multiyear targets through greater organic contribution while simultaneously retaining increased flexibility to deploy capital in response to market conditions. Shifting to our current fiscal year's expectations. On our May earnings call, we described the growth pattern for the year as a strong first half with less certainty in the second half. At that time, the debt ceiling and federal budget negotiations were ongoing. As a result, we outlined guidance that reflected our momentum and the range of federal funding scenarios after September 30. We also said we expected to start the year at or above the top end of our revenue guidance. One quarter end, our performance is ahead of the expectations we set in May. Demand for our services and solutions, combined with record headcount growth continue to fuel our momentum. While we're pleased that Congress raised a debt ceiling in June, significant uncertainty still remains about the budget for the government's next fiscal year. For us, the key to achieving and exceeding our expectations is our success in selling and starting work before September 30. That was our premise going into the year. It remains our top priority, given the potential for protracted federal budget negotiations. Transitioning to a longer-term view. Over the last three earnings calls, I discussed the three key dimensions of our VoLT strategy, velocity, leadership and technology. Booz Allen's extraordinary team of leaders and colleagues have achieved significant progress in all three dimensions. And perhaps one of the best indicators of our progress is the headcount growth we have experienced in the last four quarters. Therefore, today, I would like to spend a few moments sharing some insights into our people and culture. First of all, credit for our hiring momentum goes to our leaders and team. While it is true that the hiring market is less frantic than a year ago, our record hiring goes well beyond that. Over the past year, our business and recruiting leaders work together to transform our talent acquisition processes. We have streamlined the hiring life cycle and made meaningful improvements to the experience of becoming a new Booz Allen employee. Together, these outcomes set us up well to efficiently hire at speed and scale. Second, I firmly believe we have an industry-leading employee value proposition. We care for our people, and we invest in our people. That means we continuously seek to understand what our employees need to thrive in their lives and careers. And then we align our actions, policies and benefits accordingly. This level of responsiveness was evident in the bold actions we took to protect the health and safety of all our people throughout the COVID-19 pandemic. And today, we continue to respond to the evolving personal and professional needs of our talent. Here are some examples. From a well-being perspective, we have expanded our mental health resources, created new wellness incentives and offer greater access to services and treatments at a time of nationwide shortages. We also know learning and professional development are important to our employees, particularly as technological change accelerates. Through our technically focused employee groups, boot camps and upskilling programs, we empower our highly technical workforce to stay on the leading edge. For example, our AI training programs offer a progressive learning journey from basic AI literacy through expert proficiency. This provides all of our employees with the opportunity to hone their skills and thrive as they serve our clients' pressing needs. We have also taken the best of what we've learned in recent years to provide new ways of working that offer more flexibility. And we are investing in leadership development to foster a culture that optimizes performance and strengthens belonging as we grow in a hybrid work environment. Ultimately, people thriving in our culture are at the heart of our sustained growth quarter after quarter. Across the firm, our diverse talent unite around our purpose and live our values, as they contribute to something bigger than themselves. We have veterans, clinicians and technologists working together to help improve access to benefits across the VA. Scientists and digital architects, collaborating and innovating to make climate resilience a reality. Intel and cyber experts working around the clock to secure our homeland, cross-functional teams of data scientists, ethicists, mission experts and physicists using emerging technologies like generative AI and quantum as a force for good. And employees giving back by bringing STEM indication to youth in underserved communities. In sum, we work hard every day to make Booz Allen a place of empowerment, opportunity, accountability and belonging, a place where each person can reach her or his full potential and change the world. Our amazing people, empowered by our unique culture are the reason our strategy works, our results are repeatable and we create sustainable shareholder value. And this is why on these quarterly earnings calls, Matt and I are so proud, so proud to represent the incredible work of the over 32,000 Booz Allen employees. And with that, Matt, over to you. Matt Calderone: Thank you, Horacio, and thanks to all of you for joining us on today's call. As Horacio noted, we are extremely pleased with our start to the fiscal year. Given the momentum in our business, we anticipated that we would come out of the gate strong. On our last call, I indicated that our first quarter growth would be at or above the top end of our guided range. As these numbers demonstrate, our team exceeded these expectations. Thus, while it is early in the year and significant funding uncertainty remains, we are very well positioned against our fiscal 2024 guidance, and we remain on track to deliver on our multiyear investment thesis objectives. Now, please turn to Slide 6 as I cover our first quarter results in detail. Total revenue for the quarter grew 18% year-over-year to approximately $2.7 billion. Organic revenue was up 16.7% year-over-year, including double-digit growth across all of our federal markets. Revenue excluding billable expenses grew 16.9% to approximately $1.8 billion. This is our strongest growth quarter since we went public in 2010. Our VoLT strategy has positioned us well in areas that are primed for long-term growth. Our Defense business continued to accelerate in the first quarter, with revenue increasing approximately 19% year-over-year. In Defense, we remain focused on bringing differentiated scaled solutions to the war fighting mission. In Civil, revenue was up approximately 20% year-over-year. We continue to position ourselves as a critical partner in the federal digital transformation. Our Intelligence business grew by approximately 18% year-over-year, including several exciting new wins and a healthy pipeline of opportunities. We continue to expect the pace of revenue growth in Intel to slow over the balance of the fiscal year due to challenging year-over-year comps and the roll-off of a large classified contract. Finally, our global commercial business, which accounted for 2% of revenue in the quarter, declined approximately 23% year-over-year. This reflects the sale of MENA and Managed Threat services businesses in the second and third quarters of fiscal year 2023. Turning now to headcount. As of June 30, Booz Allen had more than 32,000 people working directly and indirectly in support of our clients' missions. We had a record-setting 12.5% annual increase in client staff. This is the result of continued hiring to meet demand, a more efficient talent acquisition process and enhanced value proposition. Total headcount inclusive of corporate staff, increased 11.2%. Attrition remains well below historical levels. While we very much remain in a growth posture, we do anticipate headcount growth to moderate in comparison to the brisk pace we set last fiscal year. Pivoting to demand, we still see a strong pace in volume of award activity. Net bookings for the first quarter were approximately $2.7 billion. This translates to a quarterly book-to-bill of 1.03 times, an improvement from 0.72 times in the prior year quarter. Our trailing 12-month book-to-bill as of June 30 was 1.24 times, in line with our current growth expectations. Total backlog was up approximately 9.3% year-over-year to $31.3 billion. Funded backlog grew 22% to $4.9 billion, unfunded backlog fell 9.5% to $9 billion and priced options grew 18.6% to $17.3 billion. Looking forward, our qualified pipeline of $41.9 billion is up approximately 12% compared to this time last year. With this pipeline and backlog, we believe we can continue to convert strong demand into industry-leading organic growth. Moving now to the bottom line. We earned $307 million in adjusted EBITDA in the first quarter, up 21.5% from the prior year period. Our adjusted EBITDA margin of 11.6% was approximately 40 basis points higher than the same period a year ago. This was a function of our overall growth, strong contract-level performance and efforts to operate the business more efficiently. First quarter net income increased 16.9% year-over-year to $161 million. Adjusted net income grew 28% year-over-year to $193 million. This excluded the incremental legal reserve of approximately $28 million recorded in the first quarter in connection with the now settled DOJ matter. Diluted earnings per share grew 18.4% year-over-year to $1.22. Adjusted diluted earnings per share, which excludes the incremental reserve, grew 30.1% year-over-year to $1.47. Moving now to the balance sheet. We ended the first quarter with $210 million of cash on hand. Free cash flow for the quarter was negative $82 million, the result of $71.5 million of cash used for operating activities and $10.5 million of CapEx. This was in line with our expectations as the first quarter is typically our low point in cash flow for the year. Operating cash was seasonally light due to the timing of bonus payouts but was aided by strong collections in overall revenue growth. We continue to spend on strategic investments and use working capital to support our outsized growth. Our net debt at the end of the first quarter was approximately $2.7 billion, and our net leverage ratio was approximately 2.5 times adjusted EBITDA. Our balance sheet remains strong with ample capacity to generate strong future cash flow and to deploy capital to drive additional shareholder value. Turning to Slide 8. During the first quarter, we returned approximately $175 million of capital to shareholders. This included $63 million in quarterly cash dividends and approximately $112 million in share repurchases at an average price of $96.04 [ph] per share. On capital deployment, we are staying patient and disciplined as we navigate macroeconomic conditions, budget uncertainty and a challenging M&A environment. Strategic acquisitions remain a key part of our investment thesis, and we continue to focus on finding small- to medium-sized tuck-in acquisitions that are aligned with our VoLT strategy, act as accelerants to growth, create new pathways for client value and meet our financial parameters. Finally, today, I am pleased to announce that our Board has approved a quarterly dividend of $0.47 per share that will be payable on August 31 to stockholders of record as of August 15. Turning now to our full year fiscal outlook. Please go to Slide 9. Last quarter, we set annual guidance ranges that anticipated an aggressive first half, followed by a more conservative second half. We noted this was due to macroeconomic and budget uncertainty, the pattern of prior year comparable performance and a typical first half second half pattern in our business. These dynamics have not changed and it is still early in our fiscal year. Today, I will give you a little more color on the three factors I indicated will determine where we fall within our guidance range. First, the budget environment. While the recent debt ceiling agreement took certain worst-case scenarios off the table, the timing and nature of fiscal 2024 federal appropriations are still unclear. Second, our conversion of demand. The second quarter is typically our strongest in terms of bookings. As Horacio noted, it is especially crucial this year. Leading up to the government's fiscal year-end, there is a big ramp in tactical selling, bids and proposals. Our entire team is focused on staying ahead of pace so that we add to our backlog and efficiently start work on new or extended contracts across our portfolio. The third factor is the timing and pace of headcount growth. The net hedge we added in the first quarter give us confidence we will meet our target of adding 3% to 5% client staff this fiscal year. In addition, we are still assessing certain aspects of the financial impact of the settlement with the Department of Justice, apart from the impact on our operating cash flow, which I will walk you through shortly. We expect to see a modest increase to our full fiscal year interest expense and a modest decrease in our provision for income tax expense and adjusted EBITDA. Given our exceptional first quarter performance, we are confident about our outlook. Other than cash, we are not updating guidance at this time. As a reminder, our full year fiscal guidance is as follows, at the top line, we expect revenue growth of 7% to 11%, 6% to 10%, of which will be organic. We expect adjusted EBITDA margins in the high 10% to 11% range. This translates to an adjusted EBITDA dollar range of between $1.075 billion and $1.105 billion or approximately 6% to 9% growth year-over-year. Our ADEPS guidance range is between $4.80 and $4.95 per share. For our updated cash guidance, we now expect operating cash flow of between $160 million and $260 million. This reflects an estimated net impact of $340 million related to our settlement with the Department of Justice, inclusive of expected tax and interest impacts. In closing, I am extremely proud of our first quarter results and confident that we can build on the success. We have the right strategy, and more importantly, we have the right people. Our stellar first quarter results are a direct product of their hard work and dedication. With that, operator, let's open the line for questions. Operator: Thank you. [Operator Instructions] And our first question coming from the line of Sheila Kahyaoglu with Jefferies. Your line is open. Sheila Kahyaoglu: Hi. Good morning, Horacio and Matt. Thank you so much. Horacio Rozanski: Good morning, Sheila. Matt Calderone: Good morning. Sheila Kahyaoglu: Morning. I don't know if you guys are going to like my question here, but obviously, stellar results on the revenue and profit line. So nothing to talk about there. But I just wanted to ask about the DOJ settlement. And how you think about -- Matt, you mentioned some comments about the fiscal '24 guide. But aside from that, do you think it impacted your ability to win business? It doesn't seem like it from the organic growth you've put up, but how do you think it's impacted your business or cash generation over the last few years? Horacio Rozanski: Thanks for the question, Sheila. I mean the specific answer to your question is we remain very close to our clients. We connect with them all the time. We've been very transparent throughout about all of these and our clients understand it and have put it into context. So I don't believe, and I think the numbers would bear out that this has affected our ability to win business or to execute our business, and we're now able to look ahead. I mean, I think to put the whole thing in context, we just had a record quarter. We're extremely pleased with that. And I think it is a reflection in some ways of how much upside there is in our business when we have a stable environment on the labor side and on the funding side. I think there's two underlying drivers there. The first one, which I spoke to in the prepared remarks is, of course, our people who are at the heart of everything. And the second is that for over a decade, from Vision 2020 now to VoLT, we've been positioning against key issues that matter to our clients the most. I've talked in recent calls about China. I've talked about AI where you're going to see us talk more about Quantum and other things coming forward. And so that's how we're seeing the business. We're looking ahead. We're excited and optimistic. And we love this virtuous circle that we can create when amazing people do great work, clients ask for more. So we grow that allows us to invest in attracting more amazing people and then building new capabilities and the like. So that's - hopefully, that answers your question. Sheila Kahyaoglu: Yes. No, super helpful. Matt Calderone: I was going to answer the cash portion of your question, Sheila. As Horacio said, we are very much looking forward to getting back to normal course with our DCMA and DCA colleagues. And over time, I do believe that we'll have a benefit to our cash performance. As you others have noted, there is a meaningful unbilled sitting on our balance sheet right now, and we look forward to working with our regulators to work through outstanding audits and get back to normal course. Sheila Kahyaoglu: Great. And I just wanted to ask about Civil as well. I mean it continues to lead growth of 20% off of a double-digit comp. So we got to see Helix, is there any one particular program driving that growth? Or is that just your AI capabilities coming through? If you could talk about that a bit. Horacio Rozanski: Sure. I'll start. What's powered the Civil growth now for several years is the emphasis on digital transformation across multiple civil agencies, a lot of emphasis on the health agencies, not just the VA but also CDC, NIH, CMS and the like. And so - that continues to be a big growth engine. We're seeing really at this point, growth across our entire civil portfolio really driven, first of it was cloud and digital transformation. We're now seeing more demand for cyber for AI. And all of that comes together because we bring both the mission and the technology aspects together in ways that our clients value and we believe nobody else can. Sheila Kahyaoglu: Okay. Thank you. Operator: Thank you. One moment please for our next question. And our next question coming from the line of Bert Subin with Stifel. Your line is open. Bert Subin: Good morning. Horacio Rozanski: Good morning. Bert Subin: Hey, Horacio, just following up to your comments there, you said you're seeing more interest in AI on the Civil side. As we think about your comments from last earnings call, have you seen any marked change in AI interest from customers? And if so, where is that coming from? Is it Civil, Intel, Defense or some combination? Horacio Rozanski: I think the short form of the answer is all of the above. This is a topic that, as you know, we've been investing in and thinking about for years. At the beginning, there was sort of, I'll call it more curiosity than interest, then you turn to interest, then it turn into demand. Our AI team is growing extraordinarily fast. And it's - this is permeating really the entirety of our business, I can't say this with absolute precision, but essentially, all of our largest contracts have some form of AI in scope or the possibility for AI in scope, I don't think our visionary clients who write a 5 or a 10-year contract now that does not include these capabilities because we all know they're transformational. And Booz Allen, I'm proud to say, is at the forefront. Bert Subin: Great. And just following up, Matt, to some of your comments there around guidance. You achieved 30% of the midpoint of your FY '24 ADEPS guide in the first quarter which compares to 25% last year. As you mentioned, sort of those three items, which of those are you most focused on to hitting or beating your guide? Is it mainly the bookings side this quarter as you lose the Intel contract later in the year? Or are there other discrete headwinds you're watching? Matt Calderone: Yes, I'll pick two of the three. It certainly Q2 sales is critical. It's - as we said in the script, it's important every year, particularly this year, given the second item I'll highlight, which is the funding uncertainty. And really, our Q2 sets us up not just for this fiscal year but for next fiscal year as well. And that's what we're trying to do, not just on the bookings side, but obviously, with headcount as well as produce the year-over-year organic growth that we desire and our investors expect. Bert Subin: Great. Thank you, Matt, and thank you, Horacio. Horacio Rozanski: Thank you. Operator: Thank you. And our next question coming from the line Matt Akers with Wells Fargo. Your line is open. Matt Akers: Thanks for the question. Good morning. I wanted to ask about how you're thinking about capital deployment kind of as we go through this year, obviously, the settlement is a little bit of a drag on cash and how you think about maybe balancing that with maybe using the balance sheet to continue repurchases? Matt Calderone: Yes, Matt, I'll start and Horacio may add to it. Certainly, it's a significant payment. So of course, it has an impact. But that said, we're still very much committed to using the balance sheet to drive incremental strategic and financial value. We have the balance sheet strength to do that and organic performance on the EBITDA side certainly fortifies that. Strategic acquisitions remain our priority. But as we've said, that [ph] market remains challenging. We're leaning into it. We've got a good pipeline that we're prosecuting, but deals are harder to consummate. I'm sure you've heard, not just from us, but from others that a lot of deals are dying at the finish line, but we're going to continue to lead into it. That said, we have the flexibility to deploy capital in other ways, it's appropriate to create shareholder value. And I think you saw that last quarter, we bought back a lot of shares. Matt Akers: Great. Thanks. I leave it there. Thank you. Operator Thank you. And our next question coming from the line of Robert Spingarn with Melius Research. Your line is open. Robert Spingarn: Thanks. Good morning. Horacio, we talk about AI all the time. It's already come up a bit on this call. How are you using AI internally to improve the cost structure or wherever else you can apply it at Booz? Horacio Rozanski: I appreciate that question. And this has been an actual -- a fair amount of discussion internally because it's important to us. Our clients ask us the same question. And so we are looking for the highest opportunity areas where AI would have the most leverage to our business. And the obvious one is talent acquisition. And so we began by using a somebody else's tool that we purpose into our environment to go through all of our requisitions and make sure that it essentially read all the requisitions for bias language for things that we didn't want to have in there and to make us be the right kind of face to the market. And we've now moved into another phase, which is for matching. As you know, we have thousands of open requisitions at all times. They change all the time. We have hundreds of thousands of resumes coming in. We have 32,000 people internally who want to expand what they know in their career. And AI is an extraordinary tool to do that. We have something in prototype that is showing tremendous upside. And I think it's going to be really the next wave of our value proposition to really help our people understand this is where I want my career to go, what kinds of opportunities are out there that get me there? What kind of training do I need to have to connect into those opportunities and be qualified to do it that there's a ton of upside there. And then beyond that, as you can imagine, every aspect of our business, we need to think through. And again, we're prioritizing high leverage areas first. Robert Spingarn: Thank you. That's helpful. And then just in terms of the award environment as we look out through the year, I think you talked about Intel coming down. But are there any major recompetes that we should be aware of that might point you to the low end or the high end of your range and at the same time, any big opportunities that we should be on the lookout for? Horacio Rozanski: It's the answer I guess would be yes on both sides of it. Our portfolio, as you've known us for a long time, it used to be so many small contracts and very few large ones. And now the portfolio has still a lot of small contracts and a lot of small task orders into the thousands and a significant share of really large programs. On the large program side, we - those when they get recompeted, each - any one of those can move the needle some. What we're seeing there is that recompetes come in generally a larger scope and even larger ceiling than the original programs. So that's obviously a source of upside, and it's a source of increased competition because they attract more attention. And our pipeline is rich. We have a good number of recompetes over the next 12 to 18 months. We have a very good number of things were going at that are either new or potential takeaways. And all in all, we're optimistic about where we are and how we're positioned. Robert Spingarn: Something specifically... Horacio Rozanski: In addition to what we're seeing from a book-to-bill perspective, we're seeing significant demand from inside existing contracts, particularly in our Civil business. So that's a dynamic that as we produce a tremendous value for clients, we're seeing additional tasking on existing contracts at a pace, quite frankly, we haven't seen in the past. Robert Spingarn: Okay. So there's nothing specific either of you would call out, though? Horacio Rozanski: There's large contracts being competed all the time. We have a couple of large contracts in health that are up for competition. We have a couple of large contracts in our Defense business they are up for recompete. And obviously, we're tracking those very closely. We're well positioned if we lost any of those. Obviously, that would not be good. But at the same time, where we have a number of very large, very exciting contracts that were awaiting word on and so forth. So -- on balance, as we think about the business, we think about contract vehicles, obviously, they're important, but we think about them as a means to an end and the end is to really serve the mission. And to create overlap between these contracts when we can so that we are actually well positioned to continue to serve a mission if we lose part of the scope because of a contract going away, if we win something our commitment is to the mission and to continue to grow into the missions that matter. Robert Spingarn: Right. Well, you've certainly managed it well so far. Thanks for the color. Horacio Rozanski: Thank you. Operator: Thank you. And our next question coming from the line of Cai von Rumohr with Cowen. Your line is open. Cai von Rumohr: Hello. So I'm a little confused. Your headcount went up 2% in the quarter. That's an almost unprecedented first quarter increase. And the top end of your guide assumes that revenues over the next three quarters will average $110 million less than the first quarter. And per your 10-K focus Fox [ph] was only about $55 million to $60 million a quarter run rate. So it looks like either you have too many people on board or your revenue guide has to come up? Matt Calderone: Cai, I'll take that one. Look, we had an exceptional Q1. We knew it was going to be strong. And as both Horacio and I said, it exceeded expectations, and it positions us very, very well within our guided range. And we are seeing, as Horacio said, significant momentum in the business across all three sectors on both the supply and demand side. It is early. We do want to see how Q2 plays out. There is, as you know, significant uncertainty in the funding environment that remains. And as I'm sure you know, our comps do get harder. We've generated 2% to 3% headcount growth each quarter for the last quarter, four quarters, which is really unprecedented. We're not going to replicate that. Utilization spiked in Q2, Q3, we added ever watch. There are a handful of reasons why I think the year-over-year comps get more challenging. But none of this should take away from the underlying momentum that we see. We're just going to see the pace of growth moderate some over the back half. Horacio Rozanski: Yes, Cai, just to be very specific, we have not over hired. Our team is fully utilized, and we are leaning forward. Cai von Rumohr: Great. And the second one is now that the DOJ uncertainty is behind you. Any thoughts about kind of taking on some more permanent debt and reducing the exposure of the term? Matt Calderone: Cai, we're always looking at opportunities to revise our capital structure. Cai von Rumohr: Thank you. Operator: Thank you. And our next question coming from the line Louie DiPalma with William Blair. Your line is open. Horacio Rozanski -: Hi, Louis. Good morning. We can hear you. Operator: Louis, your line is open. Your might be on mute. Sorry, you might be having some cell phone issue. I'm not showing any further questions. I will now turn the call back over to Mr. Rozanski for any closing remarks. Horacio Rozanski: Thank you very much, and thank you all for your questions and for taking the time to join us this morning. As we close today, I'd like to once again recognize this incredible Booz Allen team. They are the reason that I feel so optimistic about our future. So if you'll allow me for a moment, let me take a second to just say to all my Booz Allen colleagues, thank you. Thank you for your hard work and for all that you do. Your passion and your commitment are truly all inspiring. And to everyone on the call, thanks once again for joining us. Have a great day, and enjoy the rest of the summer. Operator: Thank you. Ladies and gentlemen, that does conclude conference for today. Thank you for your participation. You may now disconnect.
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Booz Allen Hamilton Holding Corporation (NYSE:BAH) Financial Performance Analysis

  • Booz Allen Hamilton's ROIC of 17.85% significantly surpasses its WACC of 5.09%, indicating efficient capital utilization.
  • Compared to peers, BAH's ROIC to WACC ratio of 3.50 showcases its superior return on invested capital.
  • While competitors like Leidos Holdings, CACI International, and SAIC also generate returns above their cost of capital, BAH leads in efficiency.

Booz Allen Hamilton Holding Corporation (NYSE:BAH) is a management and information technology consulting firm, primarily serving the U.S. government in defense, intelligence, and civil markets. It competes with firms such as Leidos Holdings, CACI International, and Science Applications International Corporation, offering similar consulting and technology services to government and commercial clients.

In evaluating Booz Allen Hamilton's financial performance, the Return on Invested Capital (ROIC) is a key metric. BAH's ROIC stands at 17.85%, which is significantly higher than its Weighted Average Cost of Capital (WACC) of 5.09%. This results in a ROIC to WACC ratio of 3.50, indicating that BAH is generating returns well above its cost of capital.

When comparing BAH to its peers, Leidos Holdings has a ROIC of 14.48% and a WACC of 6.37%, resulting in a ROIC to WACC ratio of 2.27. This shows that while Leidos is also generating returns above its cost of capital, it is not as efficient as BAH in doing so.

CACI International, another peer, has a ROIC of 8.62% and a WACC of 6.11%, leading to a ROIC to WACC ratio of 1.41. This suggests that CACI is generating returns above its cost of capital, but at a lower efficiency compared to BAH.

Science Applications International Corporation (SAIC) has a ROIC of 12.41% and a WACC of 5.24%, resulting in a ROIC to WACC ratio of 2.37. While SAIC is performing well, BAH's higher ratio indicates superior capital utilization.

Booz Allen Hamilton Holding Corp (NYSE:BAH) Insights and Financial Overview

  • CEO Horacio Rozanski's significant stock purchase of 23,800 shares at $84.66 each, increasing his total ownership to 687,745 shares.
  • The Q2 2026 earnings call on October 24, 2025, provided insights into the company's financial performance and strategic plans.
  • Current trading price of $82.82 with a yearly high of $190.59 and a low of $82.23, indicating significant stock price volatility.

Booz Allen Hamilton Holding Corp (NYSE:BAH) is a management and information technology consulting firm, primarily serving the U.S. government in defense, intelligence, and civil markets. Competing with giants like Accenture and Deloitte, the company has recently seen significant actions from its CEO, Horacio Rozanski, who made a notable purchase of 23,800 shares at $84.66 each, increasing his total ownership to 687,745 shares.

The recent Q2 2026 earnings call on October 24, 2025, was a pivotal event for Booz Allen Hamilton. This call, featuring top executives including Rozanski, provided a platform for the company to discuss its financial performance and strategic plans, offering insights into its future direction.

Currently, BAH is trading at $82.82 on the NYSE, experiencing a slight decrease of 0.01% today. The stock's trading range for the day has been between $82.23 and $85.04. Over the past year, BAH has seen a high of $190.59 and a low of $82.23, indicating significant volatility in its stock price.

Booz Allen Hamilton's market capitalization stands at approximately $10.35 billion, reflecting its size and influence in the consulting industry. The trading volume today is 2,383,592 shares, indicating active investor interest which can impact the stock's price movement and overall market perception.

Rozanski's recent stock purchase and the company's strategic discussions during the earnings call highlight Booz Allen Hamilton's commitment to growth and shareholder value. Investors and analysts closely monitor these developments to assess the company's future performance and potential investment opportunities.

Booz Allen Hamilton (NYSE:BAH) Faces Challenges Despite Growth in National Security Portfolio

  • Booz Allen Hamilton's stock dropped 8.6% after reporting disappointing fiscal Q2 2026 earnings, missing expectations with an adjusted profit of $1.49 per share on sales of $2.9 billion.
  • The company's GAAP earnings fell to $1.42 per share, a 53% decrease from the previous year, attributing weak results to a "continued funding slowdown."
  • Despite challenges in the civil business, Booz Allen's national security portfolio showed solid growth, with the stock currently priced at $91.40, reflecting an approximately -8.86% decrease.

Booz Allen Hamilton (NYSE:BAH) is a management and information technology consulting firm, primarily serving the U.S. government in defense, intelligence, and civil markets. The company competes with firms like Accenture and Deloitte. On October 24, 2025, Stifel Nicolaus set a price target of $106 for BAH, suggesting a potential upside of 15.97% from its trading price of $91.40.

Despite this optimistic outlook, BAH's stock experienced a significant decline, dropping 8.6% by late morning after reporting disappointing fiscal Q2 2026 earnings. The company reported an adjusted profit of $1.49 per share on sales of $2.9 billion, missing expectations of $1.51 per share on nearly $3 billion in sales. This miss contributed to the stock's decline.

The company's GAAP earnings fell to $1.42 per share, a 53% decrease from the previous year. Adjusted earnings saw a decline of less than 18%, while revenue decreased by 8%. Booz Allen attributed these weak results to a "continued funding slowdown," which was not related to the government shutdown that occurred after the quarter ended.

Despite these challenges, Booz Allen's national security portfolio showed solid growth. However, the civil business faced difficulties, contributing to the overall downturn. The stock for BAH is currently priced at $91.40, reflecting a decrease of 8.89 points or approximately -8.86% in percentage terms. During the trading day, the stock reached a low of $88.12 and a high of $96.13.

Over the past year, BAH's stock has seen a high of $190.59 and a low of $88.12. The company's market capitalization stands at approximately $11.26 billion. The trading volume for the day is 8,341,547 shares on the NYSE, indicating significant investor activity following the earnings report.

Booz Allen Hamilton (NYSE:BAH) Receives New Price Target from UBS

  • Gavin Parsons from UBS sets a new price target for Booz Allen Hamilton (NYSE:BAH) at $119, indicating an expected increase of about 8.74%.
  • Booz Allen reports a mixed first-quarter fiscal 2026 performance with EPS increasing by 7.25% to $1.48, but revenue slightly declining by 0.6%.
  • The company's fiscal year 2026 EPS is projected to be between $6.20 and $6.55, with concerns over revenue dips and weaker backlog metrics clouding the outlook.

On July 28, 2025, Gavin Parsons from UBS set a new price target for Booz Allen Hamilton (NYSE:BAH) at $119. At the time, the stock was trading at $109.44, indicating an expected increase of about 8.74%. Booz Allen Hamilton is a management and information technology consulting firm, competing with companies like Accenture and Deloitte.

Booz Allen recently reported its first-quarter fiscal 2026 results, showing a mixed performance. The company's earnings per share (EPS) increased by 7.25% to $1.48, surpassing the Zacks Consensus Estimate by 1.4%. Despite this positive earnings report, the stock price has remained unchanged since the announcement, currently priced at $107.76.

On the revenue side, Booz Allen experienced a slight decline of 0.6%, bringing in $2.92 billion, which was 0.5% below the consensus estimate. The company's total backlog increased by 10.7% to $38 billion, but the funded backlog and book-to-bill ratio saw a year-over-year decline, raising concerns about future growth.

Looking forward, Booz Allen's fiscal year 2026 EPS is projected to be between $6.20 and $6.55, with revenue growth expected to range from 0% to 4%. The company also anticipates generating free cash flow between $900 million and $1 billion. Despite the positive earnings performance, concerns over revenue dips and weaker backlog metrics have clouded the fiscal 2026 outlook.

The stock has fluctuated between a low of $107.11 and a high of $112.69 during the day. Over the past year, BAH has reached a high of $190.59 and a low of $98.95. The company's market capitalization is approximately $13.37 billion, with a trading volume of 1,063,373 shares on the NYSE.

Booz Allen Hamilton Holding Corporation (NYSE:BAH) Earnings Preview

  • Booz Allen Hamilton is expected to report a 5.1% increase in EPS, indicating positive growth.
  • Revenue is projected to reach approximately $2.95 billion, with a slight anticipated decline.
  • The company's debt-to-equity ratio is high at 4.21, but it maintains a strong current ratio of 1.79.

Booz Allen Hamilton Holding Corporation, listed on the NYSE as BAH, is a management and information technology consulting firm. It provides services primarily to the U.S. government, including defense, intelligence, and civil markets. The company competes with other consulting firms like Accenture and Deloitte. Booz Allen Hamilton is set to release its quarterly earnings on July 25, 2025, before the market opens.

Wall Street analysts estimate Booz Allen Hamilton's earnings per share (EPS) to be $1.46, while the Zacks Consensus Estimate suggests $1.45. This marks a 5.1% increase from the previous year, indicating positive growth. Over the past 30 days, analysts have revised the EPS estimate upward by 0.3%, reflecting a positive reassessment of the company's performance.

The company's revenue is projected to reach approximately $2.95 billion, although a slight decline of 0.1% to $2.94 billion is anticipated for the quarter ending June 2025. Despite this, Booz Allen Hamilton's price-to-earnings (P/E) ratio of 15.72 suggests a reasonable market valuation of its earnings. The price-to-sales ratio of 1.20 indicates how much investors are willing to pay per dollar of sales.

Booz Allen Hamilton's enterprise value to sales ratio stands at 1.48, considering its debt and cash. The enterprise value to operating cash flow ratio is 17.56, reflecting the company's valuation in relation to its cash flow from operations. The company's earnings yield is 6.36%, indicating the return on investment for shareholders.

The company's debt-to-equity ratio is notably high at 4.21, showing a significant reliance on debt financing. However, with a current ratio of 1.79, Booz Allen Hamilton demonstrates a strong ability to cover its short-term liabilities with its short-term assets. The upcoming earnings report could influence the stock's price movement, with management's discussion playing a crucial role in determining future projections.

Booz Allen Hamilton's Strategic Expansion in Venture Capital

  • Booz Allen Hamilton (NYSE:BAH) upgrades its venture capital commitment to $300 million, aiming for growth and innovation.
  • The stock price of Booz Allen Hamilton is currently at $109.32, with minor fluctuations indicating market volatility.
  • Booz Allen's market capitalization stands at approximately $13.56 billion, showcasing its significant industry presence.

Booz Allen Hamilton, trading on the NYSE under the symbol BAH, is a management and information technology consulting firm. The company provides services primarily to the U.S. government in defense, intelligence, and civil markets. Booz Allen competes with other consulting giants like Accenture and Deloitte. Recently, William Blair upgraded NYSE:BAH to an "Outperform" rating, with the stock priced at $109.32 at the time of the upgrade.

Booz Allen's recent decision to triple its venture capital commitment from $100 million to $300 million highlights its strategic focus on expanding its influence in the venture capital space. This move aligns with the company's efforts to enhance its capabilities and adapt to the evolving market landscape. The increased investment could potentially drive future growth and innovation for Booz Allen.

The stock price of NYSE:BAH is currently $109.32, showing a slight decrease of 0.01%. Today, the stock has fluctuated between a low of $108.76 and a high of $110.70. Over the past year, BAH has experienced a high of $190.59 and a low of $98.95. These fluctuations indicate the stock's volatility and the market's response to Booz Allen's strategic decisions.

Booz Allen's market capitalization is approximately $13.56 billion, reflecting its significant presence in the consulting industry. The company's trading volume on the NYSE today is 1,429,058 shares, indicating active investor interest. This level of trading activity suggests that investors are closely monitoring Booz Allen's performance and strategic moves, such as its increased venture capital commitment.

Booz Allen Hamilton Holding Corporation's Financial Overview and Outlook

  • Earnings Per Share (EPS) of $1.61, surpassing the estimated $1.59, indicating a positive trend in financial performance.
  • Revenue of $2.97 billion fell short of the estimated $3.16 billion, missing the Zacks Consensus Estimate by 1.50%.
  • Projected adjusted EPS for fiscal 2026 between $6.20 and $6.55, with revenue expectations ranging from $12 billion to $12.5 billion, below analysts' forecasts.

Booz Allen Hamilton Holding Corporation, listed as NYSE:BAH, is a prominent consulting firm and government contractor based in McLean, Virginia. The company specializes in providing management and technology consulting services to the U.S. government and commercial clients. Booz Allen Hamilton competes with other consulting giants like Accenture and Deloitte in the industry.

On May 23, 2025, Booz Allen Hamilton reported earnings per share (EPS) of $1.61, surpassing the estimated $1.59. This marks a positive trend, as the company has exceeded consensus EPS estimates three times in the past four quarters. Despite this, the company's revenue of $2.97 billion fell short of the estimated $3.16 billion, missing the Zacks Consensus Estimate by 1.50%.

The company's fiscal 2026 outlook has raised concerns among investors. Booz Allen Hamilton projects adjusted EPS between $6.20 and $6.55, with revenue expected to range from $12 billion to $12.5 billion. These figures are below analysts' expectations of $6.92 EPS and $12.82 billion in revenue, leading to a decline in the company's stock during pre-market trading.

CEO Horacio Rozanski attributes the disappointing outlook to the Trump administration's cost-cutting measures, which have impacted contracts with civilian agencies. In response, Booz Allen Hamilton plans to restructure its civil business, implementing cost reductions and layoffs. CFO Matt Calderone announced a 7% workforce reduction in the first quarter, primarily affecting the civil business.

Despite these challenges, Booz Allen Hamilton anticipates growth in its defense and intelligence segments. The company's financial metrics, such as a P/E ratio of 16.4 and a price-to-sales ratio of 1.20, reflect the market's valuation of its earnings and revenue. Additionally, the company's debt-to-equity ratio of 2.97 highlights its financial leverage, while a current ratio of 1.57 indicates its ability to cover short-term liabilities.