Booz Allen Hamilton Holding Corp Q3 FY2025 earnings call

• Delivered excellent financial results for the third quarter of fiscal year 2025 with double-digit growth in top and bottom lines.
• Booz Allen continues to achieve strategic and operational momentum, with VoLT (velocity, leadership and technology) positioning the company to capture opportunities from the new administration's agenda.
• Strong performance across all sectors, with solid growth in government and commercial markets.
• Focused on improving productivity of existing staff, maintaining roughly flat client staff head count for the quarter but with total client staff head count up 6% from a year ago.
• Announced expanded partnerships with Palantir Technologies and Amazon Web Services to co-create solutions and accelerate outcomes across U.S. federal missions.

In the third quarter, revenue increased roughly 14% year-over-year to $2.9 billion. Organic revenue grew about 13% year-over-year. Defense business had 19% year-over-year revenue growth, intelligence business posted 11% growth, and civil business grew at a healthy 8% rate year-over-year.

• Expect revenue growth of 12% to 13%, almost all organic.
• Narrowed adjusted EBITDA guidance to a range of $1.31 billion to $1.33 billion.
• Raised ADEPS guidance to a range of $6.25 to $6.40 per share, including an anticipated $15 million gain from the sale of SnapAttack.
• Now expect operating cash flow of between $950 million and $1.025 billion and free cash flow in the range of $850 million to $925 million.

• Presidential transition creating short-term slowdown and uncertainty in the procurement environment as agencies assess and align priorities with new agendas.
• Some agencies taking time for the new team to come in and reevaluate, which could potentially impact business in the near term.

Q: About hiring and preparing for uncertainty as the government adjusts to awarding, how does Booz Allen invest towards being prepared?

A: Booz Allen has a strong balance sheet, is managing the business tightly operationally and strategically, and is uniquely positioned with VoLT, having a dozen big ideas in line with the administration's intent and priorities.

Q: How do commercial companies prepare to work with a government that's not the easiest customer to deal with?

A: Booz Allen has an active partnership program, brings hundreds of companies to clients, uses CVC and scouting process, and co-creates with commercial sector leveraging unique technology and understanding of the environment.

Q: Expectations for book-to-bill in the fourth quarter?

A: Seen some slowdown in procurement environment, but pipeline is good, trailing book-to-bill is 1.4, backlog is strong, and bullish about next year with strong pipeline.

Q: Growth trajectory, especially for intel and Thunderdome?

A: Intel business pivoted with more technology and cyber/space focus, Thunderdome growing at anticipated pace; civil business has opportunities for outcome-based work and is being leaned into aggressively.

Q: Civil clients and areas of change in behavior?

A: Civil business focuses on healthcare, VA, treasury, IRS, DHS; some agencies seeing pause in award timelines, but team is focused on opportunities once things accelerate.

Q: Long-term revenue guidance and DOGE cost-cutting vs sequestration?

A: Historically, mid to upper-single digit organic growth with certain conditions; DOGE is qualitatively different from sequestration, focused on outcome-based and innovation vs low price technically acceptable in past.

Q: Capital deployment and stock performance?

A: Deployed $228 million in third quarter including share repurchases, balance sheet is strong, and will continue to deploy capital aggressively and flexibly to create shareholder value.