Booz Allen Hamilton Holding Corp Q4 FY2025 earnings call

FY 2025 Performance

• Delivered strong top - line and bottom - line growth, with adjusted EBITDA reaching $1.315 billion, exceeding the ambitious target range set at the 2021 Investor Day and representing 12% compounded EBITDA growth nearly all organic over the investment thesis period.

FY 2026 Environment

• Federal government is rethinking agency missions, with civilian agencies facing reorganizations, reductions in personnel and spending levels, and contract reviews. Procurements are moving slower than normal, impacting the civil business.

Civil Business

• Largest contracts reviewed, mostly intact but with run rate reductions on five large technology contracts and the end of a large technology contract at the VA leading to redeployment challenges. Decided to restructure and reset the civil business with targeted cost and headcount reductions to match anticipated demand.

Partnerships and Opportunities

• Strong relationship with GSA, with two specific outcomes: GSA understanding the value delivered across missions and opportunity to offer thoughts on outcome - based procurement and bring AgentiKai capabilities. AI business grew over 30% year over year in FY 2025 to approximately $800 million. Strengthening private sector partnerships, including combining expertise in AI, 5G, 6G with NVIDIA's technologies and investing in early - stage technology companies through Booz Allen Ventures. Working on big ideas like cloud migration and consolidation, and collaborating with the US Army on an AI - enabled tactical software system.

Operational Priorities for FY 2026

• Resetting and restructuring civil business to return to growth quickly. Positioning to lead outcome - based opportunities, including reimagining work delivery using AI. Directing resources to areas like Indo - PACOM, space, and critical technologies. Advancing partnerships with established and new technology firms. Creating efficiencies in own business to move faster, invest more, and realize greater shareholder value.

In fiscal year 2025, Booz Allen Hamilton Holding Corporation delivered over 12% revenue growth, nearly all organic. Adjusted EBITDA increased 12% to $1.315 billion. For the fourth quarter of fiscal year 2025, top-line revenue grew 7% year over year to $3 billion. Almost all was organic. Revenue excluding billable expenses was up 6%. Defense and intel businesses saw strong growth in the fourth quarter, with defense revenue up 14% and intel up 5% year over year. For fiscal year 2026, the defense and national security portfolio is expected to grow, while the civil business is expected to decline. The large civil contracts have been reviewed, and the run rate on five large technology contracts has been reduced significantly, leading to a low double-digit revenue decline in the civil business in FY 2026. Bookings for the fourth quarter totaled $2.1 billion, resulting in a quarterly book to bill of 0.71 times. Trailing twelve - month book to bill was 1.39 times. Year - end backlog was $37 billion, up 15% year over year. Qualified pipeline for fiscal year 2026 is $53.4 billion.

Fiscal Year 2026 Guidance

• Expect revenue between $12 billion and $12.5 billion.
• Anticipate adjusted EBITDA dollars in the range of $1.315 billion to $1.37 billion, implying a full - year adjusted EBITDA margin of about 11% on par with fiscal year 2025.
• Expect adjusted EPS to be in the range of $6.20 per share to $6.55 per share, assuming an adjusted effective tax rate between 23% and 25% and marginally higher interest expense, not assuming impact from venture investments.
• Expect free cash flow to be between $700 million and $800 million. Anticipate lower growth in the first half, particularly in the second quarter due to strong prior - year comps and one - time actions, with reacceleration in the second half based on backlog, pipeline, and hiring.

• Government procurement environment changes, including slower procurements, which impact the conversion of bookings to revenue. - Contract reviews in civilian agencies leading to run rate reductions and challenges in re - deploying staff. - Uncertainty in the market dynamics making it more variable to convert bookings to revenue than in previous years. - Potential further descoping or cancellations in the environment which could impact business performance.

Q: In this environment of unpredictable descoping and cancellations, how do you get comfortable that you've got your arms around the impact and that there's not potentially more to come throughout the year?

A: Horacio Rozanski said they are proud of the last year and three years' performance. There are two sets of overlapping dynamics. Civil business is going through a reset with most reviews positive but facing deceleration in spending against a few technology contracts. Defense and intel business is strong with winning work against a strong procurement environment. They have taken significant restructuring in civil business and are positioned to grow in defense and intel with strong procurement activity there.

Q: Maybe if we could talk about some of the comments you made around kind of reset and what your expectation is on the multiyear growth environment. Maybe just kind of digging into how you think about kind of defense and civil and and kind of where we stand on the reality of FY 2025 sup versus FY 2026 request. Kind of what they're hearing from congressional folks. And then and then also maybe Matt, if you could talk about kind of how you think about repurchases and what the vote is for the year?

A: Horacio Rozanski started with the macro level, Christine Martin Anderson talked about civil business with slowdowns but positive responses to big ideas, and Matt Calderone talked about the balance sheet, capital deployment, and commitment to deploying capital to generate value for shareholders including share repurchases, M&A, and venture investment.

Q: So maybe if we could talk about the low double-digit decline for civil and fiscal 2026. You know, how do we think about the catalyst for that stability in the business? We're talking about second half improving. And t terms is maybe a few points of that. How do we think about other program specific that are driving it And when do you think about the improvement in civil again?

A: Christine Martin Anderson said most civil programs have been reviewed, tech and talent fared well, but there's short - term slowdown in burn rates as agencies position for transformation. Horacio Rozanski added they wanted to do a one-time reset and restructuring of civil business to regain growth trajectory quickly, and now beginning to see opportunities with new administration's agendas fleshed out.

Q: Yeah. Hey, guys. I'm on for Mariana today. She's traveling. Just a a couple of things. And and you alluded to it a little bit earlier. You know, if the government's looking for more commercial terms even in in defense, how do you invest in the the right things to do that? How are you set up to do that? It it does seem like in the defense market, the government is looking at different ways of of contracting, and there's a a bigger push for commercial terms. So and how do you think about it, and how does that impact your business?

A: Horacio Rozanski said they've been tracking the trend, built partnerships with various firms, are the preferred player in helping commercial solutions get missionized, have built tech on top of others' stacks, and are making investments in some companies like Shield. Matt Calderone added they are aggressively managing cost structure and expect to continue to do so.

Q: Horacio, in the wake of the Budget Control Act, 2011 and sequestration, there was obviously a lot of consolidation in the industry. Seems like if the government wants to actually drive efficiencies, they probably need to consolidate a lot of contracts. So do you expect this to drive a push or another wave of consolidation among the government services providers?

A: Horacio Rozanski said the industry is fragmented. They are being aggressive, strategically advantaged, not standing still, and optimistic about medium and long - term success despite current challenges in civil business.

Q: Morning. Horacio, in the wake of the Budget Control Act, 2011 and sequestration, there was obviously a lot of consolidation in the industry. Seems like if the government wants to actually drive efficiencies, they probably need to consolidate a lot of contracts. So do you expect this to drive a push or another wave of consolidation among the government services providers?

A: Horacio Rozanski said the industry is fragmented. They are being aggressive, strategically advantaged, not standing still, and optimistic about medium and long - term success despite current challenges in civil business.

Q: Morning. Horacio, in the wake of the Budget Control Act, 2011 and sequestration, there was obviously a lot of consolidation in the industry. Seems like if the government wants to actually drive efficiencies, they probably need to consolidate a lot of contracts. So do you expect this to drive a push or another wave of consolidation among the government services providers?

A: Horacio Rozanski said the industry is fragmented. They are being aggressive, strategically advantaged, not standing still, and optimistic about medium and long - term success despite current challenges in civil business.

Q: Morning. Horacio, in the wake of the Budget Control Act, 2011 and sequestration, there was obviously a lot of consolidation in the industry. Seems like if the government wants to actually drive efficiencies, they probably need to consolidate a lot of contracts. So do you expect this to drive a push or another wave of consolidation among the government services providers?

A: Horacio Rozanski said the industry is fragmented. They are being aggressive, strategically advantaged, not standing still, and optimistic about medium and long - term success despite current challenges in civil business.