Q1 2026 Booz Allen Hamilton Holding Corp Earnings Call
Good morning, and thank you for standing by. Welcome to the booth Island. Hamilton's earnings call covering first quarter fiscal year 2026 results.
At this time, all participants are in a listen-only mode. Later, there will be an opportunity for questions and now like to turn the call over to the head of investor relations. Dusting darensburg.
Thank you. Good morning and thank you for joining us for Booze Islands. First quarter fiscal year 2026 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.
Speaker Change: With me today to talk about our business and financial results, our harasi rozanski, our chairman chief executive officer and president.
Matt Calderon executive pice, vice president and Chief Financial Officer and Christine Martin Anderson Executive, Vice President and Chief Operating Officer.
Speaker Change: As shown the disclaimer on slide 3, please note that we may make forward-looking statements on today's call.
Speaker Change: which involve known and unknown risk, 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,
Speaker Change: Off forward-looking statements are expressly qualified in their entirety by the foregoing. Cautionary statements and speak only as of the date made.
Except is required by law. We undertake no obligation to update our revised publicly any forward-looking statements,
Speaker Change: During today's call, we will also discuss some non-gaap Financial measures and other metrics which we believe provide useful information for investors.
Speaker Change: 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 2026 earning to release and slides,
Speaker Change: numbers presented, may be rounded and as such may vary slightly from those, in our public disclosures,
Speaker Change: it's now my pleasure to turn the call over to our chairman CEO and president Rosie rosansky. We're now on slide 4.
Rosie rosansky: Thank you, Dustin, welcome everyone. And thank you for joining the call.
Today, Christine Matt and I will share our financial results for the first quarter of fiscal year 2026.
Rosie rosansky: We expect it.
Matt will go deeper into our first quarter results in a few minutes.
Rosie rosansky: 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.
Rosie rosansky: As I've said, previously all presidential transitions create some degree of near-term, disruption, followed by opportunity.
Rosie rosansky: The administration is driving fast change and 6 months in the government is still adapting.
Rosie rosansky: Agencies are realigning their priorities and in many cases restructuring their own operations.
Rosie rosansky: we see overall demand strengthening
Rosie rosansky: But near-term funding continues to move slowly through the procurement environment.
Rosie rosansky: While the overall tenor is more positive than it was weeks ago.
Rosie rosansky: This adjustment period is still underway and some uncertainty remains as submissions and contracts are still being reviewed.
Rosie rosansky: Our quarterly results. Reflect these Dynamics.
Rosie rosansky: Top and bottom line performance, matched our expectations.
Rosie rosansky: With the brightest spots being booked to Bill and the resulting record backlog.
Rosie rosansky: As we look forward, we expect a full effects of the Civil sector reset to manifest in our Q2 financials.
Rosie rosansky: And intend to return to growth in the back half of this year.
Rosie rosansky: our teams are all in working with Mission owners to ensure that as funding solidifies balance can excelerate
Rosie rosansky: as we look ahead we are moving forward, aggressively
Rosie rosansky: We are meeting with senior Administration officials and with customers at all levels.
Rosie rosansky: Our technology-based approach resonates loudly with their agendas.
Rosie rosansky: They see opportunity to invest in technology.
Rosie rosansky: From AI to cyber to Quantum.
Rosie rosansky: To drive both cost efficiency and Mission effectiveness.
Rosie rosansky: And this discussions have reaffirmed, my optimism about the medium and long term.
Rosie rosansky: Our vault strategy, which stands for velocity leadership and technology and especially our unique Investments and positioning in the technology ecosystem.
Rosie rosansky: Are among our key, differentiators.
Having the mission insights to adapt and deploy commercial technology at speed and scale.
Rosie rosansky: Our differentiators for us as well.
Rosie rosansky: Other companies can do this, too, of course.
Rosie rosansky: But none as well as Booze Allen.
Rosie rosansky: We hear this from customers and from technology Partners regularly.
Rosie rosansky: So, we are using this moment of Rapid Market transition to move faster, ourselves
Rosie rosansky: I believe we are on track to shave years off. Our transformation timeline.
To drive that acceleration. We are focusing relentlessly on the 5 priorities. I outlined in May.
Rosie rosansky: Allow me to summarize that progress.
Rosie rosansky: First.
Rosie rosansky: 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.
Rosie rosansky: 1 example is modernization which we know is important to civilian agencies and across government
Rosie rosansky: in may, we were awarded the 51 million 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.
Rosie rosansky: This is a meaningful opportunity to inject new tech into a high priority mission.
Rosie rosansky: 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.
Rosie rosansky: For example.
Rosie rosansky: 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.
Rosie rosansky: The Department's zero trust architecture goals.
Rosie rosansky: We are very proud of the outcomes. We've delivered.
Rosie rosansky: We met all of this zero trust standards more than 2 years ahead of schedule.
Rosie rosansky: Third, we are directing resources to the areas that will best position us for growth.
Rosie rosansky: Our defense Technology Group is a great example.
Rosie rosansky: Back in April, we Consolidated these activities into 1 team to focus on an area that is prime for growth.
Rosie rosansky: This group is dedicated to rapidly injecting Advanced Technologies into defense missions that protect and Empower our nation's War Fighters.
Rosie rosansky: Let me describe 3 examples of the momentum we have built.
Rosie rosansky: 1.
We have successfully deployed, our modular Detachment kit or MDK into live fire exercises and operations across Europe and Africa.
Rosie rosansky: 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.
Rosie rosansky: Given our war Fighters, a clearer understanding of the battle space.
Rosie rosansky: 2.
Rosie rosansky: 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.
Rosie rosansky: We recently added 2 new tools.
Cedex and GV streamer.
Rosie rosansky: That help users communicate in real time and live stream full motion video.
These unique capabilities have been successfully deployed in theater.
Rosie rosansky: As well as during Hurricane Relief. Efforts the Super Bowl and the presidential inauguration.
Rosie rosansky: And 3, we were just awarded a new 315 million dollar contract with the United States Air Force.
For our tactical operations center, light battle management system, prototype or talk l.
Rosie rosansky: It's a major program of record in the department of the Air Force's Battle Network.
Rosie rosansky: And it will accelerate information and decision superiority at the edge.
We are going to deploy tell to 70 locations around the world including Europe and the Pacific.
So, taking all together, these are 3 examples of how we are growing. Our business, while outfitting War Fighters with a tech, they need to stay safe ready and lethal.
Rosie rosansky: The fourth priority focuses on advancing our Partnerships across the tech ecosystem.
Rosie rosansky: America needs to maintain Global technological Supremacy and our nation's advanced technology. Ecosystem is the greatest Innovation engine in the world.
Rosie rosansky: Buzz Island's leading role in this ecosystem is unique.
Rosie rosansky: From our Partnerships with hyperscalers.
Rosie rosansky: To our Venture Investments with startups. We are finding and co-creating Next Generation technology and making it work.
Inside our nation's most important missions.
Rosie rosansky: In the moment, Matt will share more on how we are accelerating this priority.
Rosie rosansky: 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.
Rosie rosansky: We are using AI assisted tools to build software faster and reimagine our delivery.
Rosie rosansky: We're using Ai and automation to run the business smartly and more efficiently.
Rosie rosansky: We're integrating commercial Tech from other companies.
Rosie rosansky: 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.
Rosie rosansky: In closing.
Rosie rosansky: These 5 priorities demonstrate how we are accelerating booze, Allen's transformation.
From AI to cyber.
To space and supporting our war Fighters at the edge.
Rosie rosansky: With Alan is delivering Solutions at the center of America's key emissions.
Rosie rosansky: So, I want to thank my colleagues for all that they do.
Rosie rosansky: I'm so inspired by them every day.
Rosie rosansky: And I'm grateful that our country has them on our side.
Rosie rosansky: Are navigating this time of tremendous change and staying ready to help our nation move faster.
And with that, Matt over to you.
Matt: Thank you, Rocio.
Matt: Good morning, everyone.
Speaker Change: As Rocio noted, we anticipated a period of short-term disruption and slowdown in funding.
Speaker Change: Followed by real medium to long-term opportunity as a new administration's priorities, take hold.
Speaker Change: We continue to see both these forces, play out in different ways and on different timelines of the business.
Speaker Change: In this environment, we are attacking opportunities with both ideas and optimism.
Speaker Change: I remain amazed at how quickly Booze Allen can transform and How Deeply impactful our work is for the nation.
Before diving into the numbers. I want to cover my 5 takeaways for the quarter.
Speaker Change: First, the first quarter played out very much as we expected.
Speaker Change: We delivered growth in Revenue X 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 syllable business.
Speaker Change: Second, we are weaning. Deeply, technical high-quality work that is in line with lasting Mission priorities.
Speaker Change: We achieved an excellent quarterly book to Bill of 1.42 times.
And total backlog hit an all-time q1 record of 38 billion dollars.
Speaker Change: 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.
Speaker Change: Third, we deployed a significant amount of capital to generate value for our shareholders.
Speaker Change: In the quarter. We repurchased just over 1% of our outstanding shares.
Speaker Change: Forth. We doubled down on the Strategic bets that will Propel the business forward.
Speaker Change: These include investing in Solutions aligned with national priorities.
Bolstering our talent base.
Speaker Change: 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.
Speaker Change: And as a sign of our conviction earlier, this week, we increased our commitment to booze on Ventures by 200 million.
Finally, we saw a meaningful increase in our cash flow Outlook.
Speaker Change: The change in R&D capitalization in the 1, big beautiful. Bill will result in roughly 200 million Federal cash tax benefit this fiscal year.
Speaker Change: In addition.
Speaker Change: Based on a negotiated agreement with the IRS on a previously disclosed tax position.
Speaker Change: We now expect to receive a refund of approximately 170 million next fiscal year.
Speaker Change: In summary the first quarter tracked in line with our plan.
Speaker Change: We are working aggressively to drive near-term growth in a dynamic finding environment.
And we continue to strategically transform our business.
Speaker Change: I will now cover our first quarter numbers in more detail.
Speaker Change: For the first quarter, gross revenue was down roughly 1% year-over-year to 2.9 billion.
Revenue excluding billable expenses where most of our profitability is generated grew 2% year-over-year.
Speaker Change: We continue to see strong performance in our defense and Intel businesses.
Speaker Change: Revenue for the quarter was up 7% in defense and up 6% in Intel compared to the prior year period.
Speaker Change: As expected revenue on our civil business was down, 13% year-over-year.
Speaker Change: To demand.
Speaker Change: The volume and quality of our sales continued to be strong.
We booked 4.2 billion in Awards in the quarter.
Speaker Change: Including 2 Awards, greater than 500 million.
Speaker Change: As a result, our first quarter book to build was 1.42 times and our trailing 12 months booked to bill was 1.31 times.
Speaker Change: Our total backlog hit 38 billion up 11% year-over-year.
Speaker Change: For the first quarter, the size of our proposal pipeline was nearly 43 billion.
while lower than fiscal year 2025, which was historically High, our current year pipeline, is 3%, higher than at the same point in fiscal year 2024,
Speaker Change: Advancing, our big ideas for transforming government.
Speaker Change: And co-creating and selling with our commercial technology partners.
Speaker Change: As we noted on the last 2 earnings calls, we are seeing more variability in converting bookings to revenue than we have seen in previous years.
Speaker Change: Pivoting. Now, to headcount.
Speaker Change: Whose all includes the quarter with roughly 33,000 employees.
Speaker Change: As a result of the restructuring actions, our customer facing staff was down 5% year-over-year and 7% sequentially.
Speaker Change: We will continue to effectively match supply and demand in what is a very Dynamic environment.
Speaker Change: 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
Speaker Change: Turning out of profitability. In the first quarter, we generated 311 million in adjusted ebit, da up 3% from the prior year period.
This translated to an adjusted. Evita margin of 10.6% up. 30 basis points year-over-year.
Speaker Change: We continue to run the business sufficiently while investing in the Advanced Technologies, tools and talent needed to support strategic growth.
Speaker Change: Working down the pnl first quarter, net income was 271 million.
Speaker Change: The year-over-year increase of 64% in net income.
Speaker Change: 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.
Speaker Change: As a result of this agreement, we recognized a 1-time income tax benefit of 106 million.
This was partially offset by the impact of the 1 time costs, associated with headcount, reductions in the quarter.
Speaker Change: In addition to this p&l impact.
Speaker Change: We expect to receive a cash refund of approximately 170 million next fiscal year.
Speaker Change: Adjusted. Net income was 184. Million up 2% versus the prior year.
Speaker Change: This excludes both, the 1-time income tax benefit and the impact of the 1-time headcount reduction costs.
Diluted earnings per share grew 70% year-over-year to $2.16 per share.
Speaker Change: An adjusted diluted earnings per share, increase 7% year-over-year to 148 cents per share.
Speaker Change: both diluted earnings per share and date apps benefited from overall profitability, a reduction in share count and an unrealized gain from 1 of our Venture Investments,
which were slightly offset by a higher net, interest expense.
Speaker Change: moving now, to the balance sheet,
Speaker Change: We finished the first quarter with 711 million of cash on hand, net debt of 3.3 billion and a net leverage ratio of 2.5 times adjusted, Evita for the trailing 12 months.
Speaker Change: Our balance sheet is exceptionally strong.
It remains both a key strategic asset.
Speaker Change: And a vehicle for generating incremental, shareholder value.
Speaker Change: Pre-cast flow for the quarter was 96 million. The result of 119 million of cash from operations plus 23 million of capex,
Speaker Change: Turning to Capital deployment during the quarter, we deployed, a total of 233 million to generate additional value for shareholders.
Speaker Change: This included 154 million in share of purchases at an average price of $109.42 per share.
Speaker Change: 700 million in quarterly dividends.
And million dollars in strategic Investments made through Brazil and Ventures.
Speaker Change: I'll note that our board of directors has approved a quarterly dividend of 55 cents per share.
Speaker Change: Which will be payable, on August 29th, to stockholders of record, as of August 14th.
Speaker Change: I'm really excited that this week. We announced the commitment of an additional 200 million to Bain Ventures.
Since we launched Bain ventures in July of 2022.
We have deployed the majority of our initial 100 million dollar commitment to 17, exceptional portfolio companies.
Speaker Change: This includes our investment in Firestorm a leading at tradable drone company that we announced just last week.
With Bruce Allen's help.
Speaker Change: These 17 companies have delivered real Mission impact to our customers.
Speaker Change: Performed. Well, above Market financially and driven strategic value.
Company.
We anticipate that this additional million dollars will be deployed against 20 to 25 new companies over the next 5 years.
Speaker Change: Rudd, Alan remains committed to ensuring America's technical superiority over its adversaries.
Speaker Change: Now, please turn to page 7.
Speaker Change: For our full fiscal year outlook.
Speaker Change: We are only updating our full year guidance to reflect the anticipated federal tax impact on our cash flow from the passage of the 1, big beautiful bill.
Speaker Change: We now expect free cash flow.
Speaker Change: To be between 900 million and 1 billion dollars.
Speaker Change: 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.
Speaker Change: Due to a decrease in the provision For claimed costs in a second quarter last year.
Our full year performance will be impacted by the timing of an extent to which we return to a more normalized funding environment.
In closing.
Speaker Change: While the current environment is dynamic, our intent is clear.
Speaker Change: To manage through this fiscal year with flexibility and discipline.
Speaker Change: And to go on offense.
Speaker Change: Lead with transformative technology.
Drive Mission impact.
Speaker Change: And re accelerate growth.
Speaker Change: We remain confident in our volt strategy.
And our ability to continue to generate lasting value. For our customers, our people, and our shareholders,
Speaker Change: With that.
Speaker Change: Operator.
Speaker Change: Please open the line for questions.
Thank you, and I'm sorry. Reminder to ask a question. Simply press star, 1, 1 on your telephone and wait for your name to be announced to withdraw your questions. Simply press star 1 1 again. 1 moment for our first question.
Speaker Change: It is from Lewes De Palma with William Blair, please proceed.
Speaker Change: Greccio, Christine Matt and Dustin. Good morning, good morning. Hey Louis, good morning.
Speaker Change: hey um as as part of your 1.4 times book, the bill, um you won several
I would say polenteria.
Speaker Change: Contracts. But is it fair to say that there is now a greater appreciation for all of the neat texts that you do, bring to the table with all of your, um, commercial Tech Partnerships. And
Speaker Change: Is the procurement environment.
Speaker Change: Um, better than it was 3 months ago.
Louie: Uh, why don't I start Louie? Uh I I think it it is a 2.0 fair to say that the business has stabilized.
Louie: In what is still a very Dynamic environment as we pointed out on the prepared remarks, there are contracts being reviewed. Uh, the tech is holding out extraordinarily well.
Louie: Uh, the impact on mission is very strong. We feel
Louie: very good about that. On our teams are working very closely with each of our customers. You know, our long-standing customers, understand the values, Allen brings and the tech that we are producing and the fact that our technology and the awards you point out
Louie: Uh, what's really neat about them? Is these are all Awards where bus Allen is doing work. Uh,
Louie: For the war fighter.
Louie: Many times in the kill chain that needs to that needs, and the tech needs to work under some of the most extreme conditions and everybody recognizes that. Well, a lot of people can bring Tech. We are the ones that can make it work in those conditions.
Uh, 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, uh, 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
Louie: Has improved, but it's still uh operating below uh historical speeds.
Louie: and uh, we're we're hoping and and looking for and saying very close to it uh, to
Louie: uh, do our part in in ensuring that it it regains
Louie: speed. Um, but, uh, overall, especially when you look past the immediate term, we we feel very optimistic
Louie: And recently, the the department of defense's um, Chief digital and artificial intelligence office, they awarded large contracts to many of the the language learning model providers um from from Silicon Valley. And with the Trump Administration focus on on Commercial Tech, what is the interest from?
Louie: Silicon Valley and, and
Louie: You know, these commercial Tech.
Louie: Providers to partner with you and and secondarily. What is the implications of
Louie: You partnering with commercial Tech with?
Louie: Fixed price outcome based contracts.
Louie: Well, as you know, uh, working with commercial tech companies has been a big part of our strategy now for years.
Louie: We work with the uh 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 7 or 8 years. We've been working closely with AWS
Louie: For years. And and it makes sense to me, that the department is, is getting more interested in getting more involved, with the people that are building, the foundational models, uh, that that are powering the AI Revolution. And at the same time, uh, they need bus Allen because we are the ones that make the tech work in Mission.
Louie: Uh, that's understood I Believe by the department, but it's also understood by the commercial Tech providers in our discussions with them.
Louie: 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, uh, by very senior people buy my counterparts. In these companies that we are the the, the 1 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,
Uh, our ability to productize on top of their Tech.
Louie: Uh, the Departments uh, desire, to do more outcome based. And this entire move towards deploying these technology faster are all positive. Secular transfer Booze Allen,
Louie: 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.
Absolutely, I think we've been talking about, you know, our desire to move to more outcome based, and, and fixed price contracts.
Louie: For for years now. So certainly, it has a potential to be win-win for everybody.
Great. Thanks. Everyone.
Louie: Thank you.
Louie: Thank you.
Speaker Change: Our next question is from gaoan Cana with TD Cohen, please proceed.
gaoan Cana: Hi. Good morning guys. Good morning morning.
gaoan Cana: I had a couple questions. First of curious, if you could comment on the funded backlog Trends, it's been down a couple quarters in a row, I just wanted to square that with the overall book to Bill.
gaoan Cana: Yeah, I think it's entirely consistent with what we said, which is, you know, we're willing, we're winning work. Uh we've got a lot of um, positive demand signals, not just from our customers but from commercial, uh, Tech partners that uh, we're working with, um, but funding is a little bit slow. So that's, uh, that's why you're seeing, you know, a, a relative decline in funded backlog but increases in other portions.
Does that, uh, portend kind of a big catch up at some point or is there?
I mean, at at what point is there an absolute level at which we should actually get concerned or
gaoan Cana: I can I just wonder how do we
gaoan Cana: At, what point does it become a worry issue at all?
gaoan Cana: I, you know.
gaoan Cana: We've said that our year, you know, really will hinge on the extent to which the funding environment normalizes, you know. This is an industry-wide issue. Um, we're hearing it, um, not just from, uh, companies like ours, but, you know, even from, uh, from our Venture Port goes. Um, so, you know, we're not concerned, we got a lot of, um, confidence in the medium-term. It's really just a timing issue. Got them.
Speaker Change: Yeah, if I I'll just build on that by by saying, you know, if if you look at the, the passage of the 1, big, beautiful bill and the amount of money that is being directed towards significant, technology, Investments, both in DOD, and across the government.
Speaker Change: Um, you know, I I, I think it it portends that, that, that money needs to be put on contract needs to be spent the, uh, for the administration to advance its key priorities. So, uh, you know, I we fully expect
Speaker Change: that that there will be uh,
Speaker Change: increases along the line. Um, the only question in our mind is how quickly you do. Those get turned on.
Speaker Change: We have a September fiscal year end Slasher.
You know, money has to be allocated. Do you anticipate that same seasonality this time around?
Given all the noise.
Speaker Change: Yeah, we're, we're still planning for an acceleration. I mean, there's there are significant Mission needs as harass you mentioned. There is also the new funding and the 1, big beautiful Bill and um and also with the procurement environment being slow, there's a bit of a backlog um for funding needs. Uh, but as Matt said, you know, it's really a matter of timing and we're
waiting to see how that plays out.
At 3:31.
Speaker Change: Just if you could talk about any sort of
Speaker Change: Challenges in in hiring. Are you seeing any and
Speaker Change: Um, you know how comfortable you are with the ability to to onboard the people, you need to hit the guidance.
Speaker Change: Yeah, we are um very comfortable. Um we are pasting our hiring to demand.
And 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. Um, we're also driving more productivity in our teams, you know, using advanced technology and delivery and we, as Matt said, want to keep switching to an outcomes-based Contracting approach and I think taken all together. We're very confident.
Matt: Yeah, just to build up what Christine said I think it's important to say, we are so hiring, right? We hire almost a thousand people in the quarter, um, and nutrition remains low, uh, large portions of our business. You know, we're we're winning work and, and and expanding work is, is 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 headcount will follow
Matt: Terrific. Last 1 for me, the advana contract. Uh, there seems to be some we look at that and just wondered if there's any impact to those this year or next,
um, you know, I did
Matt: I think that the immediate form of the answer is I think the, the
uh, the department is still uh,
Matt: thinking through their acquisition strategy for the the next uh,
Matt: The next period, but at the same time, you know, uh, we're extremely proud of the work that we're doing. Uh, the impact that we're having to my knowledge Havana 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 uh, in some key Civil missions because what we do what we did in advana, uh can be uh, can be replicated. So um,
Matt: You know, I I I think overall, uh, this is really positive. The other thing that I will say is we've done some interesting work in advana around. Uh, populating and bringing AI
Matt: Into uh, those data streams. And that knowledge is 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. Uh, our engaging in, in a number of discussions about how do we make that happen, faster, and especially given the conversations that we're having in this week.
In Washington around the AI Summit on the subsequent executive orders. Uh, we see a lot of upside.
Matt: Thank you guys. Thank you. Thank you.
Matt: Thank you.
Our next question comes from the line of Mariana Perez Mora with Bank of America. Please proceed.
Speaker Change: Good morning, everyone.
Speaker Change: Good morning.
Speaker Change: So my first question is going to be about golden dome. 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 boosts Allen 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 topel for the Air Force or like, what else could be exposed to?
Speaker Change: Uh so Mariana, we are very close to what's happening with golden dome. As you know, uh golden dome itself. Got funded to the tune of 25 billion in the reconciliation package and there's about another 24 additional billion for, uh,
Missile defense. Ding that has some overlap or some, uh,
Speaker Change: Surrounding things. And then there's also uh,
Speaker Change: We are very close to everybody, who's developing different piece Parts, uh, whose island can play a variety of roles and we're, uh, 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. Uh, some are are more aligned with with other things. I we've done like you said around data platforming and and the like but uh as we've discussed uh publicly around our, our Brilliance forms,
Speaker Change: Approach. Uh we have if not the 1 of the few uh meaningful answers to the Boost midcourse. Space base interception, uh where uh our solution has modeled uh extremely well. And so we're.
Speaker Change: We're excited about all of the possibilities starting, very close to it and participating in the procurement process as it ramps up.
Thank you so much. Um and then 2 more like specific questions about the near term uh, 1 about uh, M, you mentioned in the prepared, remarks that civilian work or like the civilian Revenue was expected to bottom until next quarter. Um, how much of a headwind remains and the second 1. Um, Christine you, you mentioned that the challenge on hiring was not like attracting that talent but matching the demands and the ramp up. Could you please give us some color around? Like how you think about that? How fast can you actually
Speaker Change: Higher talent. And actually, deploy that Talent. Especially when you think about more like deeply, technical roles, or or roles that need clearances, thank you.
Speaker Change: Thank you. Um, I'll start with civil. I mean, our our civil business is very stable, um, and the Dynam, even though the environment is really Dynamic and we're still doing you know, excellent work. You know, um, bringing AI into software development, um, securing some highly visible National events using our, um, Public Safety Tech Solutions stopping Fentanyl at the border, you know, speeding veteran benefit eligibility determinations and, and our core Works, uh, that we have in um, in many agencies is is still continuing. So the 1 time reset from the first quarter. Um, now that we have that behind us, it's actually quite stable and civil and we are very confident, um, moving into the, the medium term. Um, and as Matt said, you know, preparing to return to growth in civil. Um, with respect to hiring. Um, they, I think the when I talk about matching
Speaker Change: It's not so much technical worried so much about any uh matching from a technical perspective. We do a, a great job recruiting across all the technical disciplines that we need. It's more that as as civil declined and Intel and defense are growing faster. Just matching with the security clearances location etc, for where the work is growing. Um 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 in our hiring and recruiting and so um
Speaker Change: That's an area that we're quite confident in that we can handle that going forward.
Speaker Change: Thank you so much for the caller.
Speaker Change: Thank you. Our next question is from Colin Kenfield with caner, please proceed.
Speaker Change: Hey, thanks for the question.
Maybe talk you through the non-operational, cash flow building blocks. Um, you know, starting with cash tax, you suggested, 200 million and 26 and 170 million. In 27, is it fair to assume that there are continued repeat benefits in in 28th of track to that sort of curve and that if we think about the the VC kind of um funding Tailwind like using a elbow, as an example right where where it's already or already doubled in terms of private valuation. But maybe talking through, kind of how we should think about potential, Tailwind from that in the 27 to 28 time period. In terms of like a
Speaker Change: A cash flow number or or something like a net income number. Thank you.
Speaker Change: Yeah, thanks Colin. Uh, I'll take them. Um,
Speaker Change: So look, we had 2 really positive cash occurrences in the quarter. Um first the passage of the 1 big beautiful bill that's going to create about a hundred million dollar cash tax benefit for us this year and I will highlight that that's Federal cash tax benefit. Only is we're waiting to see how the states will will react and implement
Speaker Change: um,
Speaker Change: And then second, you know, q1 we reached a favorable agreement with the IRS related to strategic tax planning initiatives from prior years. Um,
Speaker Change: as well as an uncertain tax position, reserved
Later this topic so really positive outcome there. Um, you saw the impact from an accounting standpoint flow through our Gap p and all this quarter and we anticipate getting a a cash refund of 170 next. So, 200 million cash this year, um, 170. Approximately next year, we're still waiting to see what's going to happen from a, a state perspective, on the 1, big, beautiful bill. Um, there will be a small recurring benefit, um, because there's no more 174 drag in our cash taxes. Going forward. It's not going to be nearly to the magnitude of 200 million. Um, we actually haven't Quantified that yet, um, but you'll see some small recurring.
Speaker Change: benefits from a, from a federal cash perspective, cash tax perspective, at minimum, uh, on the Venture side,
Speaker Change: look, I'm really pleased with the performance of buzz, on Ventures and excited about.
Speaker Change: The increase in our commitment. We've been at the Forefront of being in commercial Tech to government for decades. Um, and so it moves on Ventures has been a very natural extension of this commitment to ensuring America's technical superiority of our adversaries, um, long term and near-term that some of our critical Mission gaps in our clients or customers are are filled. So it's still early. But the, the funds financial performance to date is in the top, that's all of comparable funds. Um, so I've been on paper so far. Um, to your point, we do,
Speaker Change: Expect to see some cash Tailwind. Um,
As you know, gains from these Investments are are are realized. Um, but we're also going to be investing. So I I wouldn't build anything in your models, right? Because, you know, we're upsizing our commitment. Um, but we're also going to be seeing the returns from some of our early Investments. Um, but look, we continue to grow in innovate with these Port codes, whether it's integrating hidden, layers products into our commercial, cyber security and incident response Solutions or building on top of Sikh technology or bringing hidden level onto our programs, where we're having real impacts at the edge. Um,
I think it's, you know, our commitment to boost on Ventures is just another sign of how we're going on offense and how we're accelerating our strategic transformation.
Got it. That's, that's a great color. I appreciate it. And then in terms of um, my 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?
Speaker Change: In terms of a potential book to bill for the next fiscal quarter.
Speaker Change: yeah, it's still early in the quarter Colin, but as we've said a couple of times here, you know,
Speaker Change: Right now, we're not focused on booking as much as getting funding. Um, and getting things started and ramped up. Uh, we got a really robust pipeline, we're excited about, um, not just the quantity, but the quality of the things that we have in our pipeline, you know, whether there's a realize this quarter or next quarter, um, less important to us right now than, um, than getting work started.
Speaker Change: 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? Um, and how the big beautiful Bill spend getting passed is interacting with, um, the accounts of funding officers in terms of outweighs versus, um, Awards. And like that translation of basically freeing up money. Now alongside what I'd say is a constructive 25 Crescent versus waiting for a Congress to get back and pass. Um, 26 foot full regular budgets,
Speaker Change: yeah, as
Speaker Change: a couple of times the funding,
Speaker Change: Um, is moving more slowly part of that is having fewer Contracting officials to actually, uh, move the funding. Um, and some of it is just the, I think drag from the last quarter of, um, multiple reviews and and getting back on South solid footing. There is, um, a lot of demand, you know, for, for the work on the mission areas. Not just at the 1, big, beautiful Bill. And so, um, you know, we are still planning for that. Um, blog Jam to break, uh, and
Speaker Change: And that will play out over the next few weeks.
Speaker Change: Got it. Thank you.
Speaker Change: Thank you. 1 moment for our next question.
Speaker Change: It comes from Sheila Cayo awe with Jeffries, please proceed.
Speaker Change: Does that put you at a disadvantage and how do you think about that?
Speaker Change: Um, why don't I start? I, I think it's a combination. I, I think, as Christine pointed out. Um, there's
Speaker Change: There there's a lot of Demand on the Contracting shops and so using existing Vehicles is the the way to accelerate funding on to contracts. And so we expect to see movement there. The fact that, you know, we we're at the record backlog levels uh, and have ample ceiling uh makes us feel good.
About that dynamic as things. Uh, hopefully begin to accelerate.
Speaker Change: Shortly. But at the same time, uh, as you point out, there's significant new demands against new areas. There's, uh, you know, the the, the big beautiful Bill had
very targeted funding. Uh,
Speaker Change: And, and again, new priorities and, and those will likely play out as as new contracts, uh, certainly that's what we're seeing.
Speaker Change: uh, largely for example, around golden dome, which you were talking about,
Speaker Change: before so, so I think it's really and and
Speaker Change: All of the above on that uh, you know, as we've been saying for the last couple of calls, the impact on headcount is uh the the work needs to be performed differently. I think AI is here and here to stay. Um, we again
Speaker Change: We've been preparing for this for years, we both understand the technology, our drivers of it and are using it, uh, very aggressively in into our own programs to both increase the, uh, the efficiency of the work make it happen faster, and deliver to the government. Um,
Speaker Change: Better value and together with that, I think there's resonance around the fact that some of these contracts to operate that way, to need to move more to a fixed price towards outcome based. And, and that should give us if we continue to be a Leading Edge of this both again opportunity to create value, but also opportunity to capture that value through. Uh,
Speaker Change: Upsized margins. Now that's going to play out over the medium to to long term because as we were 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.
Speaker Change: Uh, is is an onerous task. So um, you know, still work to be done but but a lot of optimism both on the demand and the supply side for us. 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, um, AI assisted coding is exactly that for, in terms of supercharging that effect. Um, but as we stand today, you know, um, 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
Speaker Change: Modernization and our experience so far is that in using some of these AI assisted tools we can. Um, go 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, you know, 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.
Speaker Change: Got it. Uh and maybe to that point then um 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 um yeah I guess how, how does that Trend and how do we think about headcount to end the year?
Speaker Change: Yeah, I'll take that. You know, I think look over time. You know, these Trends you should disconnect our growth algorithm a little bit from headcount growth, right? If you talk about outcome based Contracting, um, or fixed price contract and, um, you know,
Empowering our incredible Talent with AI, assisted coding and other tools. As Christine just described that should make them, you know, more productive and therefore Revenue per employee go up. Um, anyway, in the short term, Sheila, you know, I think
We've talked about, you know, this year, um, our performance really being predicated on, you know, when to, what extent we we see a normalization in in funding, and I would expect, normalization in hiring to follow along with that. Um, you know, the in the short run the, you know, our folks are being more productive, um, but the the core algorithm is probably going to hold for this year.
And so headcount.
Speaker Change: From here is this the stable level?
Speaker Change: We certainly anticipate adding headcount um, based on how uh, when and how funding comes in right got it. Thank you.
Speaker Change: Thank you.
Speaker Change: Good morning. Thank you very much for taking my question. Morning, morning morning.
There's been various directives and executive orders uh referencing changing software, acquisition trimming trimming the far and we've already talked about moving to outcome based, uh, Contracting. Um, could you maybe characterize just how you're thinking about? What are the, you know, how disruptive are these changes? And what are you most excited about? For the long term in this new environment are, there are specific actions that we should be really, uh, watching to, to, to get a sense of how things are changing. Thank you sure. Uh, so I'll I'll get us started the, the
You know, the as we've been saying there's a number of things that that we believe are both good for the nation and for the government and therefore good for Booze Allen. Uh certainly a rewrite of the far is overdue the Far Over time. You know. It it has been sort of layered upon layer upon layer to a level of of regulatory burden that that adds a ton of cost to the entire industry, certainly to buzz 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 n and more efficiently which, uh, again benefits, everybody. So, hopefully that will land uh, relatively soon and and, and we'll land into a a, a
More streamlined. Uh, 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. Uh it's a I think you've heard me talk about the fact that we need to move faster. Uh certainly in a geopolitical uh competition.
Speaker Change: Our nation needs to move faster and some of the things that we're talking about even this week. And again, the most recent EOS around, uh, streamlining accelerating, uh, data center construction, especially the things around the exporting. AI around the world, we think are fundamental and M, Allen has a role to play in that and opportunity to capture value.
Speaker Change: Uh, 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 balance. So, uh, we think that this environment of, of pushing technology faster into Mission. Uh, and and removing some of the barriers to that are, are the things that both excite us the most and give us, uh, over the medium term. The most topside
Speaker Change: Thank you.
Rozensky: Thank you. And this concludes our Q&A session and I will turn it back to harass you rozensky for final remarks.
Harash Rozensky: Thank you Carmen. Uh and thank you. Uh, all of you to for joining us today and and for your questions, I hope we gave you a sense of of the environment of uh our near-term performance. But especially of our excitement over the medium-term uh around how our business is evolving. And uh and the upside that we see I'm really proud of boo Allen in this period of change uh Bell and is the advanced technology company committed.
Rozensky: To making America stronger.
Rozensky: Safer and faster, and I'm particularly proud of the people whose island that are making all of this happen. Uh, they truly are special and uh, 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.
Rozensky: Thank you everyone for participating in today's program. And you may now disconnect and have a great day, everyone.