Earnings call transcript: Booz Allen Hamilton beats EPS in Q1 2026

Booz Allen Hamilton reported its Q1 2026 earnings, surpassing EPS expectations but missing revenue forecasts. The company’s earnings per share came in at $1.48, exceeding the forecast of $1.46, while revenue fell short at $2.92 billion against an expected $2.97 billion. Despite the revenue miss, the stock saw a positive aftermarket reaction, rising 4.98% to $120.85. According to InvestingPro analysis, the company currently appears undervalued, with a "GREAT" financial health score of 3.08 out of 5.

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Key Takeaways

• EPS beat expectations with a reported $1.48 versus a forecast of $1.46.
• Revenue fell short, reported at $2.92 billion against a forecast of $2.97 billion.
• Aftermarket stock price rose by 4.98%, reflecting mixed investor sentiment.
• Strong growth in net income and adjusted EBITDA year-over-year.
• Continued investment in AI and advanced technologies.

Company Performance

Booz Allen Hamilton demonstrated strong profitability in Q1 2026, with net income growing by 64% year-over-year, and adjusted EBITDA increasing by 3%. The company continues to benefit from its strategic focus on AI and advanced technology investments, positioning itself well within the government technology ecosystem. However, a decline in customer-facing staff and a slow government funding environment may pose challenges.

Financial Highlights

• Revenue: $2.9 billion, a 1% decline year-over-year.
• Adjusted EBITDA: $311 million, up 3% year-over-year.
• Adjusted EBITDA margin: 10.6%, an increase of 30 basis points.
• Net income: $271 million, a 64% year-over-year increase.
• Diluted EPS: $2.16, up 70% year-over-year.

Earnings vs. Forecast

Booz Allen Hamilton’s EPS of $1.48 exceeded the forecast of $1.46, marking a 1.37% surprise. However, revenue came in at $2.92 billion, falling short of the $2.97 billion forecast, resulting in a -1.68% surprise. The EPS beat suggests effective cost management and profitability, while the revenue miss highlights potential growth challenges.

Market Reaction

The stock initially dropped 1.8% to $115.12 but rebounded in aftermarket trading, rising to $120.85, a 4.98% increase. This mixed reaction reflects investor confidence in the company’s profitability despite revenue concerns. The stock remains below its 52-week high of $190.59 but above its low of $98.95.

Outlook & Guidance

Looking ahead, Booz Allen Hamilton expects to see growth in the latter half of the fiscal year, with a focus on outcome-based and fixed-price contracts. The company anticipates a reset in the civil sector in Q2 and projects free cash flow between $900 million and $1 billion. Additional investments in Booz Allen Ventures underscore its commitment to innovation.

Executive Commentary

CEO Horacio Rozanski emphasized the company’s role in strengthening national security through technology, stating, "Booz Allen is the advanced technology company committed to making America stronger, safer, and faster." COO Christine Martin Anderson highlighted the productivity gains from technology, noting, "Technology has long been the only source of permanent increases in productivity."

Risks and Challenges

• Slow government funding environment could impact future revenue.
• Decrease in customer-facing staff may affect service quality and delivery.
• Potential challenges in restructuring the civil business.
• Macroeconomic pressures and procurement delays could hinder growth.
• Competition in the technology sector remains intense.

Q&A

During the earnings call, analysts inquired about the funding environment and procurement challenges, as well as the company’s headcount strategy and productivity improvements. Discussions also covered the potential of AI technology and the impact of tax benefits and venture capital investments on future growth.

Full transcript - Booz Allen Hamilton Holding Corp (BAH) Q1 2026:

Conference Operator: Good morning and thank you for standing by. Welcome to the Booth Allen Hamilton’s Earnings Call covering First Quarter Fiscal Year twenty twenty six Results. At this time, all participants are in a listen only mode. Later, there will be an opportunity for questions. I’d now like to turn the call over to the Head of Investor Relations, Dustin Tharensberg.

Dustin Tharensberg, Head of Investor Relations, Booz Allen Hamilton: Thank you. Good morning, and thank you for joining us for Booz Allen’s first quarter fiscal year twenty twenty six 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 two. With me today to talk about our business and financial results are Horacio Rozanski, our Chairman, Chief Executive Officer and President Matt Calderon, Executive Vice President and Chief Financial Officer and Christine Martin Anderson, Executive Vice President and Chief Operating Officer.

As shown in the disclaimer on Slide three, please note that we may make forward looking statements on today’s call, which involve known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from the 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. 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 twenty twenty six earnings release and slides.

Numbers presented may be rounded and, as such, may vary slightly from those in our public disclosures. It It is now my pleasure to turn the call over to our chairman, CEO, and president Hirasiya Rozanski. We’re now on slide four.

Horacio Rozanski, Chairman, CEO, and President, Booz Allen Hamilton: Thank you, Dustin. Welcome, everyone, and thank you for joining the call. Today, Christine,

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: Matt, and

Horacio Rozanski, Chairman, CEO, and President, Booz Allen Hamilton: I will share our financial results for the first quarter of fiscal year twenty twenty six. The headline for today is that our first quarter performance played out as we expected. Matt will go deeper into our first quarter results in a few minutes. Ahead of that, I would like to frame our results in the context of the current environment and describe how we are accelerating our transformation to take advantage of the next inflection point. As I’ve said previously, all presidential transitions create some degree of near term disruption followed by opportunity.

The administration is driving fast change, and six months in, the government is still adapting. Agencies are realigning their priorities and, in many cases, restructuring their own operations. We see overall demand strengthening, but near term funding continues to move slowly through the procurement environment. While the overall tenure is more positive than it was weeks ago, this adjustment period is still underway, and some uncertainty remains as submissions and contracts are still being reviewed. Our quarterly results reflect these dynamics.

Top and bottom line performance matched our expectations, with the brightest spots being book to bill and the resulting record backlog. As we look forward, we expect the full effects of the civil sector reset to manifest in our q two financials and intend to return to growth in the back half of this year. Our teams are all in, working with mission owners to ensure that as funding solidifies, Booz Allen can accelerate. As we look ahead, we are moving forward aggressively. We are meeting with senior administration officials and with customers at all levels.

Our technology based approach resonates loudly with their agendas. They see opportunity to invest in technology, from AI to cyber to quantum, to drive both cost efficiency and mission effectiveness. And these discussions have reaffirmed my optimism about the medium and long term. Our Vault strategy, which stands for velocity, leadership, and technology, and especially our unique investments and positioning in the technology ecosystem, are among our key differentiators. Having the mission insights to adapt and deploy commercial technology at speed and scale are differentiators for us as well.

Other companies can do this too, of course, but none as well as Booz Allen. We hear this from customers and from technology partners regularly. So we are using this moment of rapid market transition to move faster ourselves. I believe we are on track to shave years off our transformation timeline. To drive that acceleration, we are focusing relentlessly on the five priorities I outlined in May.

Allow me to summarize that progress. First, we have restructured and reset our civil business in alignment with the existing demand environment. In the first quarter, we acted quickly to right size our talent, optimize the business, and adapt to short term challenges. Now we are focused on returning to growth by capturing opportunities in priority missions. One example is modernization, which we know is important to civilian agencies and across government.

In May, we were awarded a $51,000,000 task order with customs and border protection or CBP. Through this work, we are using our technologies and partnership with AWS to help CBP move to the cloud. This is a meaningful opportunity to inject new tech into a high priority mission and potentially expand as opportunities arise. Second, we are reimagining how we deliver our work to prepare for a shift to outcome based opportunities. We believe this shift will enable greater innovation and generate cost savings for the government.

For example, ThunderDome is our proven zero trust solution for DOD, and we are in the process of expanding its customer base and transitioning parts of it to be outcome based. Thunderdome is an ideal candidate because it has clearly defined mission outcomes, such as quickly advancing the department’s Zero Trust architecture goals. We are very proud of the outcomes we’ve delivered. We met all of these as Zero Trust standards more than two years ahead of schedule. Third, we are directing resources to the areas that will best position us for growth.

Our defense technology group is a great example. Back in April, we consolidated these activities into one team to focus on an area that is prime for growth. This group is dedicated to rapidly injecting advanced technologies into defense missions that protect and empower our nation’s warfighters. Let me describe three examples of the momentum we have built. One, we have successfully deployed our modular detachment kit or MDK into live fire exercises and operations across Europe and Africa.

This kit offers unprecedented multi domain integration that bridges technological gaps by seamlessly fusing sensor and data link information. MDK is revolutionizing tactical command and control, giving our warfighters a clearer understanding of the battle space. Two, we have been building on our tactical assault kit, which is a series of plug in ready solutions that can be added to a mobile device and used in the field. We recently added two new tools, SIDEX and GV Streamer, that help users communicate in real time and livestream full motion video. These unique capabilities have been successfully deployed in theater as well as during hurricane relief efforts, the Super Bowl, and the presidential inauguration.

And three, we were just awarded a new $315,000,000 contract with the United States Air Force for our tactical operations center light battle management system prototype or TOC L. It’s a major program of record in the Department of the Air Force’s battle network, and it will accelerate information and decision superiority at the edge. We are going to deploy Talk L to 70 locations around the world, including Europe and The Pacific. So taken altogether, these are three examples of how we are growing our business while outfitting war fighters with the tech they need to stay safe, ready, and lethal. The fourth priority focuses on advancing our partnerships across the tech ecosystem.

America needs to maintain global technological supremacy, and our nation’s advanced technology ecosystem is the greatest innovation engine in the world. Booz Allen’s leading role in this ecosystem is unique. From our partnerships with hyperscalers to our venture investments with startups, we are finding and cocreating next generation technology and making it work inside our nation’s most important missions. In a moment, Matt will share more on how we are accelerating this priority. And finally, we are creating efficiencies in our own business so we can move faster and realize greater shareholder value even in a volatile environment.

We are using AI assisted tools to build software faster and reimagine our delivery. We’re using AI and automation to run the business smartly and more efficiently. We’re integrating commercial tech from other companies, and those companies are telling us that we are on the leading edge. We’re not just generating speed to outcomes for our customers. We’re also doing it for ourselves.

In closing, these five priorities demonstrate how we are accelerating Booz Allen’s transformation. From AI to cyber, to space and supporting our war fighters at the edge, Booz Allen is delivering solutions at the center of America’s key emissions. So I want to thank my colleagues for all that they do. I’m so inspired by them every day, and I’m grateful that our country has them on our side. Together, we are navigating this time of tremendous change and staying ready to help our nation move faster.

And with that, Matt, over to you.

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: Thank you, Horacio. Hey. Good morning, everyone. As Horacio noted, we anticipated a period of short term disruption and slowdown in funding, followed by real medium to long term opportunity as the new administration’s priorities take hold. We continue to see both these forces play out in different ways and on different timelines across the business.

In this environment, we are attacking opportunities with both ideas and optimism. I remain amazed at how quickly Booz Allen can transform and how deeply impactful our work is for the nation. Before diving into the numbers, I wanna cover my five takeaways for the quarter. First, the first quarter played out very much as we expected. We delivered growth in revenue ex billables, where most of our profitability is generated, and at the bottom line.

While difficult, we also quickly reshaped our talent base through targeted cost and headcount reductions that were heavily concentrated in our civil business. Second, we are winning deeply technical, high quality work that is in line with lasting mission priorities. We achieved an excellent quarterly book to bill of 1.42 times, and total backlog hit an all time Q1 record of $38,000,000,000. More important, the type of work we are winning underscores that our pivot to become the premier company bringing advanced technology to mission is working. Third, we deployed a significant amount of capital to generate value for our shareholders.

In the quarter, we repurchased just over 1% of our outstanding shares. Fourth, we doubled down on the strategic bets that will propel the business forward. These include investing in solutions aligned with national priorities, bolstering our talent base, continuing to build mission ready technology, and strengthening our partnerships with commercial and defense tech companies. We continue to gain momentum in all these areas. And as a sign of our conviction, earlier this week, we increased our commitment to Booz Allen Ventures by $200,000,000 Finally, we saw a meaningful increase in our cash flow outlook.

The change in R and D capitalization in the One Big Beautiful bill will result in roughly $200,000,000 federal cash tax benefit this fiscal year. In addition, based on a negotiated agreement with the IRS on a previously disclosed tax position, we now expect to receive a refund of approximately $170,000,000 next fiscal year. In summary, the first quarter tracked in line with our plan. We are working aggressively to drive near term growth in a dynamic finding environment, and we continue to strategically transform our business. I will now cover our first quarter numbers in more detail.

For the first quarter, gross revenue was down roughly 1% year over year to $2,900,000,000 Revenue excluding billable expenses, where most of our profitability is generated, grew 2% year over year. We continued to see strong performance in our Defense and Intel businesses. Revenue for the quarter was up 7% in Defense and up 6% in Intel compared to the prior year period. As expected, revenue in our Civil business was down 13% year over year. Moving to demand, the volume and quality of our sales continued to be strong.

We booked $4,200,000,000 in awards in the quarter, including two awards greater than $500,000,000 As a result, our first quarter book to bill was 1.42 times, and our trailing twelve month book to bill was 1.31 times. Our total backlog hit $38,000,000,000 up 11% year over year. At the end of the first quarter, the size of our proposal pipeline was nearly $43,000,000,000 While lower than fiscal year twenty twenty five, which was historically high, our current year pipeline is 3% higher than at the same point in fiscal year twenty twenty four. We are adding to this pipeline by investing in areas central to the priorities of the current administration, advancing our big ideas for transforming government, and co creating and selling with our commercial technology partners. As we noted on the last two earnings calls, we are seeing more variability in converting bookings to revenue than we have seen in previous years.

Pivoting now to headcount. Booz Allen closed the quarter with roughly 33,000 employees. As a result of the restructuring actions, our customer facing staff was down 5% year over year and 7% sequentially. We will continue to effectively match supply and demand in what is a very dynamic environment. Through the balance of the fiscal year, we aim to increase hiring to support the ramp of our significant recent wins as well as areas where we see demand accelerating.

Turning now to profitability. In the first quarter, we generated $311,000,000 in adjusted EBITDA, up 3% from the prior year period. This translated to an adjusted EBITDA margin of 10.6%, up 30 basis points year over year. We continue to run the business efficiently while investing in the advanced technologies, tools and talent needed to support strategic growth. Working down the P and L, first quarter net income was $271,000,000 The year over year increase of 64 in net income was primarily a result of a favorable agreement we reached with the IRS in the quarter that is related to strategic tax planning initiatives from prior years.

As a result of this agreement, we recognized a one time income tax benefit of $106,000,000 This was partially offset by the impact of the one time costs associated with headcount reductions in the quarter. In addition to this P and L impact, we expect to receive a cash refund of approximately $170,000,000 next fiscal year. Adjusted net income was $184,000,000 up 2% versus the prior year. This excludes both the onetime income tax benefit and the impact of the onetime headcount reduction costs. Diluted earnings per share grew 70% year over year to $2.16 per share, and adjusted diluted earnings per share increased 7% year over year to $1.48 per share.

Both diluted earnings per share and Datapps benefited from overall profitability, a reduction in share count, and an unrealized gain from one of our venture investments, which were slightly offset by higher net interest expense. Moving now to the balance sheet. We finished the first quarter with $711,000,000 of cash on hand, net debt of $3,300,000,000 and a net leverage ratio of 2.5 times adjusted EBITDA for the trailing twelve months. Our balance sheet is exceptionally strong. It remains both a key strategic asset and a vehicle for generating incremental shareholder value.

Free cash flow for the quarter was $96,000,000 the result of $119,000,000 of cash from operations, plus $23,000,000 of CapEx. Turning to capital deployment, during the quarter, we deployed a total of $233,000,000 to generate additional value for shareholders. This included $154,000,000 in share repurchases at an average price of $109.42 per share, dollars 70,000,000 in quarterly dividends, and $9,000,000 in strategic investments made through Booz Allen Ventures. I’ll note that our Board of Directors has approved a quarterly dividend of $0.55 per share, which will be payable on August 29 to stockholders of record as of August 14. I’m really excited that this week we announced the commitment of an additional $200,000,000 to Booz Allen Ventures.

Since we launched Booz Allen Ventures in July, we have deployed the majority of our initial $100,000,000 commitment to 17 exceptional portfolio companies. This includes our investment in Firestorm, a leading attributable drone company that we announced just last week. With Booz Allen’s help, these 17 companies have delivered real mission impact to our customers, performed well above market financially, and driven strategic value for the company. We anticipate that this additional $200,000,000 will be deployed against 20 to 25 new companies over the next five years. Booz Allen remains committed to ensuring America’s technical superiority over its adversaries.

Now please turn to page seven for our full fiscal year outlook. We are only updating our full year guidance to reflect the anticipated federal tax impact on our cash flow from the passage of the One Big Beautiful bill. We now expect free cash flow to be between $900,000,000 and $1,000,000,000 As we noted last quarter, we anticipate that revenue and profit growth will be comparatively lower in the first half of our fiscal year, particularly in our second quarter due to a decrease in the provision for claim costs in the second quarter last year. Our full year performance will be impacted by the timing of and extent to which we return to a more normalized funding environment. In closing, while the current environment is dynamic, our intent is clear, to manage through this fiscal year with flexibility and discipline and to go on offense, lead with transformative technology, drive mission impact, and reaccelerate growth.

We remain confident in our Voalte strategy and our ability to continue to generate lasting value for our customers, our people, and our shareholders. With that, operator, please open the line for questions.

Conference Operator: Thank you. And it’s from Louis De Palma with William Blair. Please proceed.

Louis De Palma, Analyst, William Blair: Horacio, Christine, Matt and Dustin, good morning.

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: Good morning. Hey, Louie. Good morning.

Louis De Palma, Analyst, William Blair: Hey. As part of your 1.4 times book to bill, you won several, I would say, Palantir slash Andoril esque awards over the past few months under the new administration. And you could also call these awards vintage Booz Allen with this Air Force Data Fusion Award. You said that the Department of Defense continues to review contracts. But is it fair to say that there is now a greater appreciation for all of the neat tech that you do bring to the table with all of your commercial tech partnerships?

And is the procurement environment better than it was three months ago?

Horacio Rozanski, Chairman, CEO, and President, Booz Allen Hamilton: Why don’t I start, Louis? I think it it is, as you point out, fair to say that the business has stabilized in what is still a very dynamic environment. As as we pointed out in the prepared remarks, there are contracts being reviewed. The tech is holding out extraordinarily well. The impact on mission is very strong.

We feel very good about that, and our teams are working very closely with each of our customers. You know, our long standing customers understand the value Booz Allen brings and the tech that we are producing and the fact that our technology and the awards you point out, what what’s really neat about them is these are all awards where Booz Allen is doing work for the warfighter many times in the kill chain that needs to that need and the tech needs to work under some of the most extreme conditions. And everybody recognizes that while a lot of people can bring tech, we are the ones that can make it work in those conditions. And so that’s why we’re accelerating our transformation. That’s why we’re so excited about the work that we’re winning.

And and we’re why we are spending all of our time really positioning for upside and for opportunities along the lines that that you’re describing. You know, as we said, the the the procurement environment has improved, but it’s still operating below historical speeds. And we’re we’re hoping and and looking for and staying very close to it to do our part in ensuring that it it regains speed. But, overall, especially when you look past the immediate term, we we feel very optimistic.

Louis De Palma, Analyst, William Blair: Thanks. And and recently, the the Department of Defense’s Chief Digital and Artificial Intelligence Office, they awarded large contracts to many of the language learning model providers from Silicon Valley. And with the Trump administration’s focus on commercial tech, what is the interest from Silicon Valley and these commercial tech providers to partner with you? And and, secondarily, what is the implications of you partnering with commercial tech with fixed price outcome based contracts?

Horacio Rozanski, Chairman, CEO, and President, Booz Allen Hamilton: Well, as as you know, working with commercial tech companies has been a big part of our strategy now for years. We work with the smallest of companies, series a, through our venture fund, all the way to significant partnerships with hyperscalers. We’ve been working closely with NVIDIA for seven or eight years. We’ve been working closely with AWS for years. And and it makes sense to me that the department is is getting more interest and getting more involved with the people that are building the foundational models that that are powering the AI revolution.

And at the same time, they need Booz Allen because we are the ones that make the tech work in mission. That’s understood, I believe, by the department, but it’s also understood by the commercial tech providers. In our discussions with them, they see us as the best at doing that. They see us as the people they want to partner with. In many cases, I’m told by very senior people, by my counterparts in these companies that we are the the the one partner they would like to have in their portfolio, and we feel the same way about them.

And so I think that from the standpoint of where we go forward, our ability to productize on top of their tech, the department’s desire to do more outcome based, and this entire move towards deploying this technology faster are all positive secular trends for Booz Allen.

Louis De Palma, Analyst, William Blair: Great. And and and for for Matt, with with fixed price contracts, is this potentially a a win win for you and and the customer?

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: Absolutely. I think we’ve been talking about, you know, our desire to move to more outcome based and and fixed price contracts for for years now. So it certainly has a potential to be win win for everybody.

Louis De Palma, Analyst, William Blair: Great. Thanks, everyone.

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: Thank you.

Conference Operator: Thank you. Our next question is from Gautam Khanna with TD Cowen. Please proceed.

Gautam Khanna, Analyst, TD Cowen: Hi, good morning guys.

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: Good morning. Good morning.

Gautam Khanna, Analyst, TD Cowen: I had a couple of questions. First, I was curious if you could comment on the funded backlog trends. It’s been down a couple of quarters in a row. I just wanted to square that with the overall book to bill.

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: Yeah. I think it’s entirely consistent with what we said, which is, you know, we’re willing we’re winning work. We’ve got a lot of positive demand signals, not just from our customers, but from commercial tech partners that we’re working with, but funding is a little bit slow. So that’s why you’re seeing a relative decline in funded backlog, but increases in other portions.

Gautam Khanna, Analyst, TD Cowen: Does that portend kind of a big catch up at some point or is there, I mean, at what point is there an absolute level at which we should actually get concerned or you know, I just wonder how do we at what point does it become a worry issue if at all?

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: I, you know, we’ve said that our year, you know, really will hinge on the extent to which funding environment normalizes. You know, this is an industry wide issue. We’re hearing it not just from companies like ours, but, you know, from our venture port goes. So, you know, we’re not concerned. We got a lot of confidence in the medium term.

It’s really just a timing issue, Gautam.

Horacio Rozanski, Chairman, CEO, and President, Booz Allen Hamilton: Yeah. If I I’ll just build on that by by saying, you know, if if you look at the the passage of the one big beautiful bill and the amount of money that is being directed towards significant technology investments both in DOD and across the government. You know, I I I think it it portends that that that money needs to be put on contract, needs to be spent the for the administration to advance its key priorities. So, you know, we fully expect that that there will be increases along the line. The only question in our mind is how quickly do those get turned on.

Gautam Khanna, Analyst, TD Cowen: Yeah. Fair enough. I guess I’m I’m also trying to get it. Typically, we have a September fiscal year end flush or, you know, money has to be allocated. Do you anticipate that same seasonality this time around given all the noise?

Christine Martin Anderson, Executive Vice President and Chief Operating Officer, Booz Allen Hamilton: Yeah. We’re we’re still planning for an acceleration. I mean, there’s there are significant mission needs. As Horacio mentioned, there is also the new funding in the one big, beautiful bill. And also, with the procurement environment being slow, there’s a bit of a backlog for funding needs.

But as Matt said, it’s really a matter of timing, and we’re waiting to see how that plays out.

Gautam Khanna, Analyst, TD Cowen: Okay. Question I get frequently from investors is on the headcount targets for the end of the fiscal year for you guys. I believe it has to be about flat with the year end threethirty one. Just if you could talk about any sort of challenges in hiring, are you seeing any and how comfortable you are with the ability to onboard the people you need to hit the guidance.

Christine Martin Anderson, Executive Vice President and Chief Operating Officer, Booz Allen Hamilton: Yeah. We are very comfortable. We are pacing our hiring to demand. We are not seeing challenges in getting the talent that we need. It’s just a matter of timing and matching the hiring with the demand.

We’re also driving more productivity in our teams, you know, using advanced technology and delivery. And we, as Matt said, wanna keep switching to an outcomes based contracting approach. And I think taken all together, we’re very confident.

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: Yeah, just to build up what Christine said, I think it’s important to say we are still hiring. Right? We hired almost a thousand people in the quarter and attrition remains low. Large portions of our business, you know, we’re winning work and expanding work. As Christine said, this really is about matching supply and demand.

So we’re, you know, our focus right now is staying close to customers, driving mission impact and getting funding on contract, and and head count will follow.

Gautam Khanna, Analyst, TD Cowen: Terrific. Last one for me. The Advanta contract, there seems to be some relook at that and just wondered if there’s any impact to Boost this year or next.

Horacio Rozanski, Chairman, CEO, and President, Booz Allen Hamilton: You know, I did I I think that the immediate form of the answer is I think that the the department is still thinking through their acquisition strategy for the the next the next period. But at the same time, you know, we’re extremely proud of the work that we’re doing, the impact that we’re having. To my knowledge, Avana is the only scale platform that can do what it can do across the federal government. I think that’s widely recognized. And, frankly, we’ve been able to win work across the government, including, in some key civil missions because what we do what we did in Havana, can be, can be replicated.

So, you know, I I I think overall, this is really positive. The other thing that I will say is we’ve done some interesting work in Havana around populating and bringing AI into those data streams, and that knowledge has allowed us to continue to drive AI across the vast majority of our contracts to the place where our AI business is still growing and expected to grow significantly this year. We’re engaging in in a number of discussions about how do we make that happen faster and especially given the conversations that we’re having this week in Washington around the AI summit and the subsequent executive orders. We see a lot of upside.

Gautam Khanna, Analyst, TD Cowen: Thank you, guys.

Horacio Rozanski, Chairman, CEO, and President, Booz Allen Hamilton: Thank you.

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: Thank you.

Conference Operator: Thank you. Our next question comes from the line of Mariana Perez Mora with Bank of America. Please proceed.

Mariana Perez Mora, Analyst, Bank of America: Good morning, everyone.

Horacio Rozanski, Chairman, CEO, and President, Booz Allen Hamilton: Good morning.

Mariana Perez Mora, Analyst, Bank of America: So my first question is gonna be about Golden Dawn. Now that the reconciliation bill actually funded the purpose, and it has been a while since the president announced this. What is the role that Busanen could play there and how much visibility you have on how fast that could play out? Is more like a data operating system integrator, like what you’re doing with TalkHealth for the Air Force, or, like, what else could Booz Allen be exposed to?

Horacio Rozanski, Chairman, CEO, and President, Booz Allen Hamilton: So, Mariana, we are very close to what’s happening with Golden Dome. As you know, Golden Dome itself got funded to the tune of 25,000,000,000 in the reconciliation package, and there’s about another 24 additional billion for missile defense that in that has some overlap or some surrounding things, and then there’s also intelligence aspects to this. And and we are very close to everybody who’s developing different piece parts. Booz Allen can play a variety of roles, and we’re positioning to play a variety of roles. Some are more traditional aligned to the type of work that we do, especially on cyber and intel.

Some are are more aligned with with other things that we’ve done, like you said, around data platforming and and the like. But as we’ve discussed publicly around our our Brilliance forms approach, we have, if not the one of the few meaningful answers to the Boost mid course space based interception where our solution is modeled extremely well. And so we’re we’re excited about all of the possibilities, staring very close to it, and participating in the procurement process as it ramps up.

Mariana Perez Mora, Analyst, Bank of America: Thank you so much. And then two more specific questions about the near term. About Matt, you mentioned in the prepared remarks that civilian work or, like, the civilian revenue was expected to bottom into next quarter. How much of a headwind remains? And the second one, Christine, you you mentioned that the challenge on hiring was not, like, attracting that talent but matching the demand and the ramp up.

Could you please give us some color around, like, how you think about that? How fast can you actually hire talent and actually deploy that talent, especially when you think about more like deeply technical roles or roles that need clearances? Thank you.

Christine Martin Anderson, Executive Vice President and Chief Operating Officer, Booz Allen Hamilton: Thank you. I’ll start with civil. I mean, our civil business is very stable even though the environment is really dynamic. And weire still doing excellent work bringing AI into software development, securing some highly visible national events using our public safety tech solutions, stopping fentanyl at the border, speeding veteran benefit eligibility determinations, our core work that we have in many agencies is still continuing. So the one time reset from the first quarter, now that we have that behind us, is actually quite stable in Civil and we are very confident moving into the medium term, and as Matt said, preparing to return to growth in Civil.

With respect to hiring, I think when I talk about matching, it’s not so much technical worried so much about matching from a technical perspective. We do a great job recruiting across all the technical disciplines that we need. It’s more that as civil declined and intel and defense are growing faster, just matching with the security clearances, location, etcetera, for where the work is growing. We are actually quite good at this and have done a lot of work last fiscal year in automating a lot of those processes and getting much better matching algorithms and using AI in our hiring and recruiting. And so that’s an area that we’re quite confident in that we can handle that going forward.

Mariana Perez Mora, Analyst, Bank of America: Thank you so much for the color.

Conference Operator: Thank you. Our next question is from Colin Kenfield with Cantor. Please proceed.

Colin Kenfield, Analyst, Cantor: Hey, thanks for the question. Maybe talking through the non operational cash flow building blocks, starting with cash tax, you suggested 200,000,000 in twenty six million and $170,000,000 in 27,000,000 Is it fair to assume that there are continued repeat benefits in ’28 to track to that sort of curve? And then if we think about the VC kind of funding tailwind environment, like using albedo as an example, right, where it’s already doubled in terms of private valuation. But maybe talking through kind of how we should think about potential tailwinds from that in the ’27 and ’28 time period in terms of like a cash flow number or something like a net income number. Thank you.

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: Yeah. Thanks, Colin. I’ll take them. So, look, we had two really positive cash occurrences in the quarter. First, the passage of the one big beautiful bill that’s gonna create about a $200,000,000 cash tax benefit for us this year.

And I will highlight that that’s federal cash tax benefit only as we’re waiting to see how the states will will react and implement. And then second, you know, in q one, we reached a favorable agreement with the IRS related to strategic tax planning initiatives from prior years around R and D tax credits. We talked about this for a couple years now and had approximately 150,000,000 receivable on the books, as well as an uncertain tax position reserve related to this topic. So really positive outcome there. You saw the impact from an accounting standpoint flow through our gap P and L this quarter, and we anticipate getting a a cash refund of a 170 next.

So 200,000,000 in cash this year, 170 approximately next year. We’re still waiting to see what’s gonna happen from a state perspective on the one big beautiful bill. There will be a small recurring benefit because there’s no more $1.74 drag in our cash taxes going forward. It’s not gonna be nearly to the magnitude of $200,000,000 We actually haven’t quantified that yet, but you’ll see some small recurring benefit from a federal cash perspective cash tax perspective at minimum. On the venture side, look, I’m really pleased with the performance of Booz Allen Ventures and excited about the increase in our commitment.

We’ve been at the forefront of bringing commercial tech to government for decades. And so Booz Allen Ventures has been a very natural extension of this commitment to ensuring America’s technical superiority of our adversaries long term and near term that some of our critical mission gaps in our clients or our customers are filled. So it’s still early, but the fund’s financial performance to date is in the top decile of comparable funds. It’s all been on paper so far. To your point, we do expect to see some cash tailwinds as, you know, gains from these investments are realized, but we’re also gonna be investing.

So I wouldn’t build anything in your models, right? Because we’re upsizing our commitment, but we’re also gonna be seeing the returns from some of our early investments. But look, we continue to grow and innovate with these portcos, whether it’s integrating hidden layers products into our commercial cybersecurity and incident response solutions or building on top of Seek’s technology or bringing hidden level onto our programs where we’re having real impacts at the edge. I think it’s, you know, our commitment to Booz Allen Ventures is just another sign of how we’re going on offense and how we’re accelerating our strategic transformation.

Colin Kenfield, Analyst, Cantor: Got it. That’s that’s great color. I appreciate it. And then in terms of, like, quarter to date, do you have a good sense of kind of how many like, how much bookings we have quarter to date and kind of what that bridges us to in terms of a potential book to bill for the next fiscal quarter?

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: Yeah. It’s still early in the quarter, Colin. But as we said a couple times here, you know, right now, we’re not focused on bookings as much as getting funding and getting things started and ramped up. We got a really robust pipeline. We’re excited about not just the quantity, but the quality of the things that we have in our pipeline.

You know, whether it’s realized this quarter or next quarter, less important to us right now than getting work started.

Colin Kenfield, Analyst, Cantor: Got it. And then as long as we’re kind of asking multi part questions here, can you maybe speak to the contracting officer environment and how the big beautiful bill spend getting passed is interacting with the accounts of funding officers in terms of outlays versus awards and like that translation of basically freeing up money now alongside what I’d say is a constructive 25 versus waiting for Congress to get back and pass 26 full regular budgets?

Christine Martin Anderson, Executive Vice President and Chief Operating Officer, Booz Allen Hamilton: Yeah. As we said a couple of times, the funding is moving more slowly. Part of that is having fewer contracting officials to actually move the funding. And some of it is just the, I think, drag from the last quarter of multiple reviews and getting back on solid footing. There is a lot of demand you know, for for the work on the mission areas, not just at the one big beautiful bill.

And so, you know, we are still planning for that log jam to break, and and that will play out over the next few weeks.

Colin Kenfield, Analyst, Cantor: Got it. Thank you.

Conference Operator: Thank you. One moment for our next question. It comes from Sheila Kahyaoglu with Jefferies. Please proceed.

Sheila Kahyaoglu, Analyst, Jefferies: Good morning, guys, and thank you for the time. And maybe

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: two Good morning.

Sheila Kahyaoglu, Analyst, Jefferies: Hey, guys. Maybe two questions. One on both on headcount, but one long term and one shorter term. So longer term, big picture, how do we think about headcount as it relates to booze? Is this administration maybe buying differently than other administrations where booze has typically been very successful in adding contract scope and work given the work you guys do, but this administration might be more focused on, like, transformational contracts like Golden Dome

So does that put you at a disadvantage and how do you think about that?

Horacio Rozanski, Chairman, CEO, and President, Booz Allen Hamilton: Why don’t I start? I think it’s a combination. Think as Christine pointed out, there’s a lot of demand on the contracting shops. And so using existing vehicles is the the way to accelerate funding onto contracts. And so we expect to see movement there.

The fact that, you know, we we’re at record backlog levels and have ample ceiling makes us feel good about that dynamic as things hopefully begin to accelerate shortly. But at the same time, as you point out, there’s significant new demands against new areas. There’s you know, the the the big beautiful bill had very targeted funding and and against new priorities, and and those will likely play out as as new contracts. Certainly, that’s what we’re seeing largely, for example, around Golden Dome, which you were talking about before. So so I think it’s really an an all of the above on that.

You know, as we’ve been saying for the last couple of calls, the impact on headcount is the the work needs to be performed differently. I think AI is here and here to stay. We again, we’ve been preparing for this for years. We both understand the technology, our drivers of it, and are using it very aggressively in into our own programs to both increase the the efficiency of the work, make it happen faster, and deliver to the government better value. And together with that, I think there’s resonance around the fact that some of these contracts, to operate that way, need to move more towards fixed price or southbound based.

And and that should give us, if we continue to be at the leading edge of this, both, again, opportunity to create value, but also opportunity to capture that value through upsized margins. Now that’s gonna play out over the medium to to long term because as we’re saying in the near term, there’s a lot of things that need to get done right away, and moving something to fixed price or outcome based is is an onerous task. So, you know, still work to be done, but but a lot of optimism both on the demand and the supply side for us.

Christine Martin Anderson, Executive Vice President and Chief Operating Officer, Booz Allen Hamilton: Yeah. And I I would add that, you know, technology has long been the only source of, you know, permanent increases in productivity, and our early experience with AI assisted coding is exactly that in terms of supercharging that effect. But as we stand today, there’s a lot of tech debt in government. We’ve had a lot of focus on this, on why it takes so long to do transformation and modernization. And our experience so far is that in using some of these AI assisted tools, we can get through that tech debt a little bit faster.

And then I think what’s really exciting is how we can use AI to push the limits, you know, because federal missions are so far scaled beyond other missions and they operate at the limit of technology, and so better technology is going to get better mission outcomes.

Sheila Kahyaoglu, Analyst, Jefferies: Got it. And maybe to that point then, you know, when you look at your revenue per employee, it was up 8% in the quarter. How do we think about the that revenue per employee number? How should that trend? Is that like a pricing benefit?

And maybe

Mariana Perez Mora, Analyst, Bank of America: yeah.

Sheila Kahyaoglu, Analyst, Jefferies: I guess how how does that trend and how do we think about headcount to end the year?

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: Yeah. I’ll I’ll take that. You know, I think look. Over time, you know, these trends, you know, should disconnect our growth algorithm a little bit from headcount growth. Right?

If you talk about outcome based contracting or fixed price contracting, you know, empowering our incredible talent with AI assisted coding and other tools as Christine just described, that should make them more productive and therefore revenue per employee go up. In the short term, Sheila, I think we’ve talked about this year our performance really being predicated on, you know, when and to what extent we see a normalization in funding. And I would expect normalization in hiring to follow along with that. You know, in the short run, the, you know, our folks are being more productive, but the core algorithm is probably going to hold for this year.

Sheila Kahyaoglu, Analyst, Jefferies: And so headcount stays flat from here. Is this the stable level?

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: We certainly anticipate adding headcount based on when and how funding comes in.

Sheila Kahyaoglu, Analyst, Jefferies: Got it. Thank you.

Conference Operator: Thank you. And our last question comes from the line of Jonathan Siegman with Stifel. Please proceed.

Dustin Tharensberg, Head of Investor Relations, Booz Allen Hamilton0: Good morning. Thank you very much for taking my question.

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: Good morning. Good morning.

Gautam Khanna, Analyst, TD Cowen: Good morning.

Dustin Tharensberg, Head of Investor Relations, Booz Allen Hamilton0: There’s been various directives and executive orders referencing changing software acquisition, trimming the FAR, and we’ve already talked about moving to outcome based contracting. Could you maybe characterize just how you’re thinking about how disruptive are these changes, and what are you most excited about for the long term in this new environment? Are there specific actions that we should be really watching to get a sense of

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: how things are changing? Thank you.

Horacio Rozanski, Chairman, CEO, and President, Booz Allen Hamilton: Sure. So I’ll get us started. As we’ve been saying, there’s a number of things that we believe are both good for the nation and for the government and therefore good for Booz Allen. Certainly, a rewrite of the FAR is overdue. The FAR over time, you know, it has been sort of layer upon layer upon layer to a level of of regulatory burden that that adds a ton of cost to the entire industry, certainly to Booz Allen, and because it adds it to the entire industry, to the federal government itself.

And so clearing that out, I think, would give everybody an opportunity to operate faster, more nimbly, and more efficiently, which, again, benefits everybody. So, hopefully, that will land, relatively soon and and and will land into a a more streamlined environment. The second thing I would say is there’s a all of the executive orders, including the ones from this week around accelerating the use of technology and especially accelerating the use of AI are fundamental. So I think you’ve heard me talk about the fact that we need to move faster certainly in a geopolitical competition. Our nation needs to move faster.

And some of the things that we’re talking about even this week, and, again, the the most recent EOs around streamlining, accelerating data center construction, especially the things around exporting AI around the world, we think are fundamental. And Booz Allen has a role to play in that and an opportunity to capture value from it. So you know? And and I could keep going. But and certainly, outcome based, we’ve talked about forever.

And the more we move to outcome based, the better for the nation, the better for Booz Allen. So we think that this environment of of pushing technology faster into mission and and removing some of the barriers to that are are the things that both excite us the most and give us, over the medium term, the most upside.

Matt Calderon, Executive Vice President and Chief Financial Officer, Booz Allen Hamilton: Thank you.

Conference Operator: Thank you. And this concludes our Q and A session, and I will turn it back to Horace Rozanski for final remarks.

Horacio Rozanski, Chairman, CEO, and President, Booz Allen Hamilton: Thank you, Carmen. And thank you, all of you, joining us today and for your questions. I hope we gave you a sense of the environment, of our near term performance, but especially of our excitement over the medium term around how our business is evolving and and the upside that we see. I’m really proud of Booz Allen in this period of change. Booz Allen is the advanced technology company committed to making America stronger, safer, and faster.

And I’m particularly proud of the people of Booz Allen that are making all of this happen. They truly are special, and, I’m proud to call them my colleagues. And with that, thank you. Have a great rest of the summer, and we’ll talk to you soon.

Conference Operator: Thank you, everyone, for participating in today’s program, and you may now disconnect. And have a great day, everyone.

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