Q3 2026 Booz Allen Hamilton Holding Corp Earnings Call

January 23, 2026

Speaker #1: Good morning, and thank you for standing by. Welcome to Booz Allen Hamilton's earnings call covering third-quarter fiscal year 2026 results. At this time, all participants are in a listen-only mode.

Operator: Good morning, and thank you for standing by. Welcome to Booz Allen Hamilton's earnings call covering Q3 fiscal year 2026 results. At this time, all participants are in a listen-only mode. Later, there will be an opportunity for questions. I'd like to turn the call over to the Head of Investor Relations, Dustin Darensbourg.

Speaker #1: Later, there will be an opportunity for questions. I would now like to turn the call over to the head of Investor Relations, Dustin Darensbourg.

Speaker #1: Darensbourg. Thank you.

Dustin Darensbourg: Thank you. Good morning, and thank you for joining us for Booz Allen's Q3 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. With me today to talk about our business and financial results are Horacio Rozanski, our Chairman, Chief Executive Officer, and President; Matthew Calderone, 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 3, 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.

Q3 2026 Booz Allen Hamilton Holding Corp Earnings Call

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Q3 2026 Booz Allen Hamilton Holding Corp Earnings Call

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Friday, January 23rd, 2026 at 1:00 PM

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Dustin Darensbourg: 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 Q3 fiscal year 2026 earnings release and slides. Numbers presented may be rounded and, as such, may vary slightly from those in our public disclosure. It is now my pleasure to turn the call over to our Chairman, CEO, and President, Horacio Rozanski. We are now on slide four.

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 Q3 fiscal year 2026 earnings release and slides. Numbers presented may be rounded and, as such, may vary slightly from those in our public disclosure. It is now my pleasure to turn the call over to our Chairman, CEO, and President, Horacio Rozanski. We are now on slide four.

Horacio Rozanski: Thank you, Dustin. Welcome, everyone, and thank you for joining the call. Today, Christine, Matt, and I will share Booz Allen's financial results for Q3 fiscal year 2026. Before we dive in, I would like to begin by acknowledging the transition of our Chief Financial Officer, Matthew Calderone. As we announced in December, Matt will be leaving on 1 February, and today is his final Booz Allen earnings call. Matt has been with the company for over 23 years and has had a meaningful impact in all his leadership roles. Most recently, as our CFO, he led us through a period of significant growth, deepened our connections with the investor community, and helped many analysts and investors better understand what we do by actually showing them our tech. He also played a pivotal role in strengthening Booz Allen's leadership position in the tech ecosystem through our investments and unique partnerships.

Horacio Rozanski: Matt, I'm grateful to you for all your contributions. On behalf of all of us, we wish you the very best. As we continue our search for a new CFO, Christine Martin Anderson will serve as our interim CFO in addition to her duties as our Chief Operating Officer. Christine is an exceptional leader who has led and grown large businesses and currently drives the execution of Booz Allen's strategic and operational priorities. Thank you, Christine, for leading us through this transition. Now let's turn to our performance. During our October earnings call, we said we expected the macro environment to remain fluid and dynamic for the foreseeable future. We also outlined three priorities we would focus on to strengthen our near-term financial performance, expand our market leadership, and re-accelerate our growth.

Matt, I'm grateful to you for all your contributions. On behalf of all of us, we wish you the very best. As we continue our search for a new CFO, Christine Martin Anderson will serve as our interim CFO in addition to her duties as our Chief Operating Officer. Christine is an exceptional leader who has led and grown large businesses and currently drives the execution of Booz Allen's strategic and operational priorities. Thank you, Christine, for leading us through this transition. Now let's turn to our performance. During our October earnings call, we said we expected the macro environment to remain fluid and dynamic for the foreseeable future. We also outlined three priorities we would focus on to strengthen our near-term financial performance, expand our market leadership, and re-accelerate our growth.

Horacio Rozanski: Those priorities were to reduce our cost, accelerate our transition to outcome-based contracting and product sales, and focus our investment by doubling down on proving growth vectors like cyber, national security, partnerships, and AI. Our Q3 results demonstrate we're making strong progress against those priorities. Our results are in line with the revised fiscal year guidance we shared in October, and we are narrowing the ranges at the top and bottom lines. Our performance reflects Booz Allen's strong execution and our ongoing transformation in a continually evolving and complex macro environment. On today's call, Matt will walk you through the numbers in detail, and Christine will share our outlook for the remainder of the fiscal year. Ahead of that, I will focus my remarks on progress against our three priorities, both in terms of current performance and on strengthening the foundation for the future.

Those priorities were to reduce our cost, accelerate our transition to outcome-based contracting and product sales, and focus our investment by doubling down on proving growth vectors like cyber, national security, partnerships, and AI. Our Q3 results demonstrate we're making strong progress against those priorities. Our results are in line with the revised fiscal year guidance we shared in October, and we are narrowing the ranges at the top and bottom lines. Our performance reflects Booz Allen's strong execution and our ongoing transformation in a continually evolving and complex macro environment. On today's call, Matt will walk you through the numbers in detail, and Christine will share our outlook for the remainder of the fiscal year. Ahead of that, I will focus my remarks on progress against our three priorities, both in terms of current performance and on strengthening the foundation for the future.

Horacio Rozanski: Let's begin with the first priority: reduce cost. Early in the quarter, we took swift action to execute the cost reduction program we described on the October earnings call. These crucial and difficult actions were necessary to enable agility in a changing market. They also create capacity to invest in growth. In parallel with the cost reductions, we navigated the longest government shutdown in history. The shutdown exacerbated an already slow funding and awards environment. Our performance demonstrates our resilience, disciplined cost management, and strong execution. I am particularly proud that we supported our employees who were impacted during the historic shutdown. This decision was consistent with how we handled prior shutdowns. It ensured our people could immediately return to their customers' missions when contracts restarted.

Let's begin with the first priority: reduce cost. Early in the quarter, we took swift action to execute the cost reduction program we described on the October earnings call. These crucial and difficult actions were necessary to enable agility in a changing market. They also create capacity to invest in growth. In parallel with the cost reductions, we navigated the longest government shutdown in history. The shutdown exacerbated an already slow funding and awards environment. Our performance demonstrates our resilience, disciplined cost management, and strong execution. I am particularly proud that we supported our employees who were impacted during the historic shutdown. This decision was consistent with how we handled prior shutdowns. It ensured our people could immediately return to their customers' missions when contracts restarted.

Horacio Rozanski: Overall, our results this quarter show that even in the midst of uncertainty and change, Booz Allen is managing the business tightly while preparing for the future. Shifting now to our second priority: accelerating our transition to outcomes-based contracting and product sales. As part of the overall transformation of our business, we continue identifying opportunities to reshape our portfolio and deliver more technical, outcome-based work. The recent divestiture of a portion of our DARPA business sets us up to unlock technical performer opportunities that align with our growth vectors. For example, our investments in full-spectrum cyber capabilities are strongly aligned with DARPA's mission. As DARPA accelerates tech acquisition through their Expedited Research Innovation System, or ERIS Marketplace, we are positioned to be a direct supplier of advanced technology and solutions.

Overall, our results this quarter show that even in the midst of uncertainty and change, Booz Allen is managing the business tightly while preparing for the future. Shifting now to our second priority: accelerating our transition to outcomes-based contracting and product sales. As part of the overall transformation of our business, we continue identifying opportunities to reshape our portfolio and deliver more technical, outcome-based work. The recent divestiture of a portion of our DARPA business sets us up to unlock technical performer opportunities that align with our growth vectors. For example, our investments in full-spectrum cyber capabilities are strongly aligned with DARPA's mission. As DARPA accelerates tech acquisition through their Expedited Research Innovation System, or ERIS Marketplace, we are positioned to be a direct supplier of advanced technology and solutions.

Horacio Rozanski: We also continue to partner with our customers to convert existing work and procure new opportunities through more commercially oriented buying practices, including fixed-price models. For our work on Thunderdome, this zero-trust cybersecurity program, we have successfully transitioned the majority of existing task orders to include a fixed-price component. We were also recently awarded nearly $100 million of fixed-price work to expand Thunderdome across the Department of War. Through these efforts, we will continue advancing zero-trust capabilities, including accelerating AI and ML adoption for cyber defense use cases. As we shift more of our portfolio to fixed-price and outcome-based models, we gain more flexibility to innovate how we deliver. This will create cost savings for the government and support Booz Allen's margin expansion over the medium to long term.

We also continue to partner with our customers to convert existing work and procure new opportunities through more commercially oriented buying practices, including fixed-price models. For our work on Thunderdome, this zero-trust cybersecurity program, we have successfully transitioned the majority of existing task orders to include a fixed-price component. We were also recently awarded nearly $100 million of fixed-price work to expand Thunderdome across the Department of War. Through these efforts, we will continue advancing zero-trust capabilities, including accelerating AI and ML adoption for cyber defense use cases. As we shift more of our portfolio to fixed-price and outcome-based models, we gain more flexibility to innovate how we deliver. This will create cost savings for the government and support Booz Allen's margin expansion over the medium to long term.

Horacio Rozanski: Staying on the topic of cyber, Booz Allen's Vellox Reverser is a good example of how we are productizing our IP for commercial sales. Vellox Reverser is our AI-native malware reverse engineering product. This week, we're launching it in general availability to both federal and commercial customers. Vellox Reverser accelerates an organization's response to today's most complex cyber threats. It performs fully automated malware analysis and delivers actionable intelligence in minutes versus what traditionally takes days. As AI-enhanced cyber attacks increase and become one of the primary threats of 2026, this product is a force multiplier for cyber defense efforts. Thus, Booz Allen is redefining our future, innovating what we build, how we build, and how we deliver to ensure the best value for our customers. Lastly, we've made advances in our priority number three, focusing investments by doubling down on proving growth vectors to drive acceleration.

Staying on the topic of cyber, Booz Allen's Vellox Reverser is a good example of how we are productizing our IP for commercial sales. Vellox Reverser is our AI-native malware reverse engineering product. This week, we're launching it in general availability to both federal and commercial customers. Vellox Reverser accelerates an organization's response to today's most complex cyber threats. It performs fully automated malware analysis and delivers actionable intelligence in minutes versus what traditionally takes days. As AI-enhanced cyber attacks increase and become one of the primary threats of 2026, this product is a force multiplier for cyber defense efforts. Thus, Booz Allen is redefining our future, innovating what we build, how we build, and how we deliver to ensure the best value for our customers. Lastly, we've made advances in our priority number three, focusing investments by doubling down on proving growth vectors to drive acceleration.

Horacio Rozanski: Our progress is evident through the expansion of our national security portfolio, which is the combination of our defense and intel businesses, as well as our industry partnerships. First, we continue to see strong demand for our technologies within national security missions. Two United States Navy examples illustrate this point. We recently announced the award of a $99 million contract with the Navy's Military Sealift Command, where we'll deliver wireless capabilities onboard ships around the world. Using low Earth orbit satellites, advanced Wi-Fi, and 5G, our tech will enable ships to have secure, reliable connectivity at the tactical edge. Additionally, many of our customers continue to increase our contract ceiling based on exceptional delivery and how well our exquisite tech works in their missions. We saw this with the Navy's Program Executive Office for Unmanned and Small Combatants.

Our progress is evident through the expansion of our national security portfolio, which is the combination of our defense and intel businesses, as well as our industry partnerships. First, we continue to see strong demand for our technologies within national security missions. Two United States Navy examples illustrate this point. We recently announced the award of a $99 million contract with the Navy's Military Sealift Command, where we'll deliver wireless capabilities onboard ships around the world. Using low Earth orbit satellites, advanced Wi-Fi, and 5G, our tech will enable ships to have secure, reliable connectivity at the tactical edge. Additionally, many of our customers continue to increase our contract ceiling based on exceptional delivery and how well our exquisite tech works in their missions. We saw this with the Navy's Program Executive Office for Unmanned and Small Combatants.

Horacio Rozanski: They recently expanded our work in the areas of unmanned and autonomous systems, mine and mine countermeasures, and mission modules for littoral combat ships. This is in addition to work we're already delivering for the Navy on our visual object localization and tracking solution. It uses machine learning and open architecture interfaces on autonomous platforms to passively detect and track objects in a maritime environment. Our national security portfolio is well aligned to the Trump administration's highest tech and mission priorities and positioned for continued growth and expansion. The other growth vector where we have doubled down is our industry partnerships. We are leveraging the tech ecosystem by engaging and investing in new ways, with a specific focus on the best companies in Silicon Valley. Earlier this month, we announced a new partnership between Booz Allen and Andreessen Horowitz, or a16z, one of the world's premier venture capital firms.

They recently expanded our work in the areas of unmanned and autonomous systems, mine and mine countermeasures, and mission modules for littoral combat ships. This is in addition to work we're already delivering for the Navy on our visual object localization and tracking solution. It uses machine learning and open architecture interfaces on autonomous platforms to passively detect and track objects in a maritime environment. Our national security portfolio is well aligned to the Trump administration's highest tech and mission priorities and positioned for continued growth and expansion. The other growth vector where we have doubled down is our industry partnerships. We are leveraging the tech ecosystem by engaging and investing in new ways, with a specific focus on the best companies in Silicon Valley. Earlier this month, we announced a new partnership between Booz Allen and Andreessen Horowitz, or a16z, one of the world's premier venture capital firms.

Horacio Rozanski: Booz Allen is the first-ever a16z technology acceleration partner for governments. We've been working with a16z portfolio companies for many years and have an exceptional track record in building and delivering transformational technology. That success is the foundation for this expanded partnership, and we look forward to building on our shared passion for driving the future of American technology. Together, we will co-create unique commercial tech for national security, public safety, healthcare, and other government missions. Booz Allen has committed to deploy up to $400 million in a16z's late-stage venture fund over the life of the fund. This is good for Booz Allen. It's good for our shareholders, and it's good for the country. Through this game-changing partnership, we will choose national challenges that need to be solved, build innovative tech solutions, and deliver outcomes at speed and scale.

Booz Allen is the first-ever a16z technology acceleration partner for governments. We've been working with a16z portfolio companies for many years and have an exceptional track record in building and delivering transformational technology. That success is the foundation for this expanded partnership, and we look forward to building on our shared passion for driving the future of American technology. Together, we will co-create unique commercial tech for national security, public safety, healthcare, and other government missions. Booz Allen has committed to deploy up to $400 million in a16z's late-stage venture fund over the life of the fund. This is good for Booz Allen. It's good for our shareholders, and it's good for the country. Through this game-changing partnership, we will choose national challenges that need to be solved, build innovative tech solutions, and deliver outcomes at speed and scale.

Horacio Rozanski: In closing, our performance this quarter and our progress against our three priorities gives me confidence that we are on track operationally and strategically. Looking ahead, we will continue to anticipate change in a dynamic environment. We will operate efficiently and with agility, accelerate our transformation, and we will focus on returning to growth. And now I'll hand off to Matt to cover our Q3 financials. Matt, for the last time, over to you. Thank you, Horacio. And good morning, everyone. As Horacio noted, this has remained a dynamic fiscal year. I share his pride in how Booz Allen has risen to the challenge, as well as his optimism for the future. Here are my five takeaways for the quarter. First, our Q3 results are in line with the revised fiscal year guidance we issued in October, even with the protracted shutdown.

Horacio Rozanski: Revenue ex billables, where most of our profitability is generated, tracked in line with expectations. Both Adjusted EBITDA and ADEPS were stronger than anticipated. Second, we successfully navigated through both the government shutdown and significant cost actions in the quarter. The shutdown pushed some procurements and funding actions to the right. We believe, based on our estimates, that these will have a cumulative impact of about $50 million on revenue and $20 million on profit for the full fiscal year. Additionally, in our national security portfolio, which includes our defense and intelligence businesses, the shutdown caused approximately $60 million in billable expenses to move from Q3 into Q4. In the quarter, we also completed meaningful actions to adjust our cost structure, dropping our run rate spend by approximately $150 million. The full impact of these cost actions on profitability will be felt next fiscal year.

Revenue ex billables, where most of our profitability is generated, tracked in line with expectations. Both Adjusted EBITDA and ADEPS were stronger than anticipated. Second, we successfully navigated through both the government shutdown and significant cost actions in the quarter. The shutdown pushed some procurements and funding actions to the right. We believe, based on our estimates, that these will have a cumulative impact of about $50 million on revenue and $20 million on profit for the full fiscal year. Additionally, in our national security portfolio, which includes our defense and intelligence businesses, the shutdown caused approximately $60 million in billable expenses to move from Q3 into Q4. In the quarter, we also completed meaningful actions to adjust our cost structure, dropping our run rate spend by approximately $150 million. The full impact of these cost actions on profitability will be felt next fiscal year.

Horacio Rozanski: Third, we continue to operate the business very well. We are running the business efficiently and seeing strong contract-level execution. This is reflected in our strong margin performance in the quarter. Fourth, while Q3 hiring and near-term funding were impacted by the shutdown, the overall demand outlook has improved. As of December 31, our qualified pipeline for next fiscal year, that is fiscal year 2027, stands at nearly $53 billion. This is 12% higher than where our fiscal year 2026 pipeline was at the same point last year. And finally, we saw a meaningful decrease in our tax rate from a change in estimate related to the finalization of our fiscal year 2025 return. These changes included a higher R&D tax credit for more qualified technical work in our portfolio, as well as additional revenues qualifying for the foreign-derived intangible income deduction.

Third, we continue to operate the business very well. We are running the business efficiently and seeing strong contract-level execution. This is reflected in our strong margin performance in the quarter. Fourth, while Q3 hiring and near-term funding were impacted by the shutdown, the overall demand outlook has improved. As of December 31, our qualified pipeline for next fiscal year, that is fiscal year 2027, stands at nearly $53 billion. This is 12% higher than where our fiscal year 2026 pipeline was at the same point last year. And finally, we saw a meaningful decrease in our tax rate from a change in estimate related to the finalization of our fiscal year 2025 return. These changes included a higher R&D tax credit for more qualified technical work in our portfolio, as well as additional revenues qualifying for the foreign-derived intangible income deduction.

Horacio Rozanski: We expect this to provide $0.47 of incremental benefit to ADEPS for the full fiscal year. Importantly, we also anticipate that a meaningful portion of this benefit will be recurring. I will now walk you through our Q3 performance in more detail. For the quarter, gross revenue totaled $2.6 billion, representing a roughly 10% decline versus the prior year period and a 7% decline on a revenue ex billable basis. The government shutdown had two impacts on revenue in the quarter, one permanent and one temporal. We lost some revenue due to work not performed, and we also saw some revenue push from Q3 to Q4, given timing delays in billable expenses. Adjusting for these impacts, gross revenue in the quarter was down about 6% year-over-year. This was roughly in line with our expectations. Within these consolidated results, our performance remains bifurcated across markets.

We expect this to provide $0.47 of incremental benefit to ADEPS for the full fiscal year. Importantly, we also anticipate that a meaningful portion of this benefit will be recurring. I will now walk you through our Q3 performance in more detail. For the quarter, gross revenue totaled $2.6 billion, representing a roughly 10% decline versus the prior year period and a 7% decline on a revenue ex billable basis. The government shutdown had two impacts on revenue in the quarter, one permanent and one temporal. We lost some revenue due to work not performed, and we also saw some revenue push from Q3 to Q4, given timing delays in billable expenses. Adjusting for these impacts, gross revenue in the quarter was down about 6% year-over-year. This was roughly in line with our expectations. Within these consolidated results, our performance remains bifurcated across markets.

Horacio Rozanski: Our national security portfolio declined about 1% year-over-year in the quarter, inclusive of the impact of billable expenses shifting out of Q3. Adjusting for the impact of the government shutdown, our national security portfolio grew about 4% year-over-year. As anticipated, our civil business declined about 28% year-over-year. We continue to expect this business to remain stable through the remainder of the fiscal year and are optimistic about its future. Turning now to demand. Awards in the quarter were seasonally light, and as noted earlier, the shutdown caused delays in some funding actions and shifted some award activities to subsequent quarters. Net bookings for the Q3 totaled $888 million. This equated to a quarterly book-to-bill ratio of 0.3 times and a trailing 12-month book-to-bill of 1.1 times. The overall pace of funding was meaningfully slower than prior Q3s, down 32% year-over-year.

Our national security portfolio declined about 1% year-over-year in the quarter, inclusive of the impact of billable expenses shifting out of Q3. Adjusting for the impact of the government shutdown, our national security portfolio grew about 4% year-over-year. As anticipated, our civil business declined about 28% year-over-year. We continue to expect this business to remain stable through the remainder of the fiscal year and are optimistic about its future. Turning now to demand. Awards in the quarter were seasonally light, and as noted earlier, the shutdown caused delays in some funding actions and shifted some award activities to subsequent quarters. Net bookings for the Q3 totaled $888 million. This equated to a quarterly book-to-bill ratio of 0.3 times and a trailing 12-month book-to-bill of 1.1 times. The overall pace of funding was meaningfully slower than prior Q3s, down 32% year-over-year.

Horacio Rozanski: As a result, funded backlog fell 10% year-over-year. However, we did see a meaningful pickup in funding activity in December, as customers worked through backlog related to the government shutdown. Despite friction in the funding environment, we ended the calendar year with a record year-end backlog of over $38 billion, up about 2% over the prior year. As we look ahead, our qualified pipeline for next fiscal year, Q3 2027, stands at nearly $53 billion. This is 12% higher than where our Q3 2026 pipeline was at the same point last fiscal year. Our pipeline growth is broad-based. The national security pipeline is up 12%, while civil is up 10% year-over-year. Turning now to headcount. Booz Allen ended the calendar year with roughly 32,000 employees. Our customer-facing staff was down 2% sequentially in the quarter.

As a result, funded backlog fell 10% year-over-year. However, we did see a meaningful pickup in funding activity in December, as customers worked through backlog related to the government shutdown. Despite friction in the funding environment, we ended the calendar year with a record year-end backlog of over $38 billion, up about 2% over the prior year. As we look ahead, our qualified pipeline for next fiscal year, Q3 2027, stands at nearly $53 billion. This is 12% higher than where our Q3 2026 pipeline was at the same point last fiscal year. Our pipeline growth is broad-based. The national security pipeline is up 12%, while civil is up 10% year-over-year. Turning now to headcount. Booz Allen ended the calendar year with roughly 32,000 employees. Our customer-facing staff was down 2% sequentially in the quarter.

Horacio Rozanski: Notably, this includes involuntary terms of about 2.5% and headcount losses from the divestiture that were about 0.5%. Our focus remains on ensuring we have the right talent to execute our backlog and support pipeline growth. As funding flows and contracts continue to ramp, we are scaling hiring accordingly. Moving now to profitability. Strong contract execution and disciplined cost management helped drive profitability in the quarter. Adjusted EBITDA for Q3 was $285 million. This translated to an adjusted EBITDA margin of 10.9%. Through the first three quarters of the fiscal year, our EBITDA margin was also 10.9%. We still expect margins to step down in the Q4 due to normal spending patterns and the anticipated catch-up in billable expenses. Further down the income statement, Q3 net income was $200 million, a 7% increase year-over-year.

Notably, this includes involuntary terms of about 2.5% and headcount losses from the divestiture that were about 0.5%. Our focus remains on ensuring we have the right talent to execute our backlog and support pipeline growth. As funding flows and contracts continue to ramp, we are scaling hiring accordingly. Moving now to profitability. Strong contract execution and disciplined cost management helped drive profitability in the quarter. Adjusted EBITDA for Q3 was $285 million. This translated to an adjusted EBITDA margin of 10.9%. Through the first three quarters of the fiscal year, our EBITDA margin was also 10.9%. We still expect margins to step down in the Q4 due to normal spending patterns and the anticipated catch-up in billable expenses. Further down the income statement, Q3 net income was $200 million, a 7% increase year-over-year.

Horacio Rozanski: We are also pleased to announce that today our board of directors has approved a quarterly dividend of $0.59 per share, which will be payable on 2 March 2026 to stockholders of record as of 13 February 2026. Finally, before Christine walks you through the outlook for the remainder of our fiscal year, I want to take a brief moment to thank the people of Booz Allen. Booz Allen is an extraordinary place that does essential work for our nation, often in areas and in places that we cannot discuss. It has been a great joy and an absolute privilege to be part of this company. I am truly excited for Booz Allen's future. With that, Christine, over to you. Thanks, Matt. I want to add my thanks to Matt for his incredible contributions to Booz Allen's success. He will be missed, and we wish him great success in his new role.

Horacio Rozanski: I will now walk you through our updated fiscal year 2026 outlook. Please turn to slide 7. We remain focused on execution in the remaining months of a dynamic year. We expect Q4 funding to improve over Q3, but remain slower than usual. We will continue running the business effectively and efficiently. As a result, we are tightening towards the lower end of our guided range for revenue and adjusting cash flow accordingly. We are also narrowing our EBITDA range, increasing adjusted EPS. We now expect to deliver revenue between $11.3 billion and 11.4 billion, given some of the impacts from the prolonged government shutdown. We expect an adjusted EBITDA dollar range of between $1.195 billion and 1.215 billion. We are raising our ADEPS guidance to a range of $5.95 to 6.15 per share. Lastly, we expect to generate free cash flow between $825 million and 900 million.

I will now walk you through our updated fiscal year 2026 outlook. Please turn to slide 7. We remain focused on execution in the remaining months of a dynamic year. We expect Q4 funding to improve over Q3, but remain slower than usual. We will continue running the business effectively and efficiently. As a result, we are tightening towards the lower end of our guided range for revenue and adjusting cash flow accordingly. We are also narrowing our EBITDA range, increasing adjusted EPS. We now expect to deliver revenue between $11.3 billion and 11.4 billion, given some of the impacts from the prolonged government shutdown. We expect an adjusted EBITDA dollar range of between $1.195 billion and 1.215 billion. We are raising our ADEPS guidance to a range of $5.95 to 6.15 per share. Lastly, we expect to generate free cash flow between $825 million and 900 million.

Horacio Rozanski: We engaged our allies on zero-trust and warfighter tech solutions, and we co-developed innovative solutions with our tech partners, from long-term partners like NVIDIA, AWS, and Shield AI to newer venture portfolio companies. We are shaping our future. With that, operator, let's open the line for questions. Thank you so much. And as a reminder to ask a question, simply press Star 11 to get in the queue. To remove yourself, press Star 11 again. One moment for our first question, please. It's from Colin Canfield with Cantor. Please proceed. Hey, thank you for the question. And, Matt, thank you for your leadership. Character is the long-run determinant of many nations alike. And honestly, it's something you've exhibited in spades from your 2022 starting point, a Russian invasion of Ukraine, to this year's volatility. So certainly want to thank you.

Horacio Rozanski: And then switching over to maybe the question side of it, as we think about the end market expectations for FY27, is it fair to characterize defense and intelligence as growing with civil flat? And then essentially, when do you expect the downdrafts to lift on civil in FY27? Thank you. Hey, Colin. Good morning. Let me start. Let me frame the conversation. First of all, I think the headline for this quarter is about strong execution across all aspects of our business and about positioning for the future by investing in our growth vectors and transforming the business, especially with an eye towards growing the bottom line and re-accelerating our overall growth. Our national security business continues to see good growth and very good prospects. But I think what's really exciting to us is our civil business is beginning to reignite.

Horacio Rozanski: The pipeline is up double digits, both in national security and in civil. And we're beginning to see some movement on the world activity on the civil side, which we have not seen all year. So my cautiously optimistic take is that the market does feel like it's at an inflection point. We obviously need to get through still a couple of quarters of challenging comps. But the business is certainly starting to feel a different energy across the board. And where we see the uplift is really in the areas that we're describing as our growth vectors. Our AI business continues to grow strongly. We see both good growth and acceleration in our cyber business. Our defense tech business looks good. And this work that we're doing with commercial partnerships is also going to bring another wave of opportunity. Got it. No, I appreciate the call.

The pipeline is up double digits, both in national security and in civil. And we're beginning to see some movement on the world activity on the civil side, which we have not seen all year. So my cautiously optimistic take is that the market does feel like it's at an inflection point. We obviously need to get through still a couple of quarters of challenging comps. But the business is certainly starting to feel a different energy across the board. And where we see the uplift is really in the areas that we're describing as our growth vectors. Our AI business continues to grow strongly. We see both good growth and acceleration in our cyber business. Our defense tech business looks good. And this work that we're doing with commercial partnerships is also going to bring another wave of opportunity.

Horacio Rozanski: And then in terms of the kind of multi-year civil setup, can you maybe kind of talk to, as we think of the pieces that have been downdrafts this year that are likely to get made up over a multi-year period, maybe just frame kind of that construct versus the concept of just a high level of rebuilding the civil administration and maybe how you think about the multi-year level of work, not just the quantitative makeup from this year, but essentially the level of cuts that have gone through civil this year. Conceptually, how do you think about that as being an opportunity for Booz Allen Hamilton over a multi-year period? Yeah, thanks, Colin. I would say that civil has changed. And that happens across administrations. We got a bit of a delay this time, certainly with all the cuts.

Horacio Rozanski: The biggest trend is that modernization and transformation has moved from a focus on cloud to a focus on readiness of data platforms that are critical for AI. You see consolidation of platforms within and across agencies, and that's a focus and still a strength of ours. Definitely, our delivery track record is what has them turn back to us. In terms of specific missions, while a smaller proportion of our forward-looking pipeline, healthcare will always be a national priority. We are seeing green shoots in AI-enabled public health, bio-threat detection, and fraud detection. At FAA, we're focused on an AI-powered aviation safety data platform. At Homeland Security, we're focused on autonomy at the edge, where integration of sensing and compute and decision-making is required. Then weather infrastructure, ground processing, AI/ML for multi-source intelligence, integrating commercial sources. There's just a few examples. Okay. No, I appreciate it.

The biggest trend is that modernization and transformation has moved from a focus on cloud to a focus on readiness of data platforms that are critical for AI. You see consolidation of platforms within and across agencies, and that's a focus and still a strength of ours. Definitely, our delivery track record is what has them turn back to us. In terms of specific missions, while a smaller proportion of our forward-looking pipeline, healthcare will always be a national priority. We are seeing green shoots in AI-enabled public health, bio-threat detection, and fraud detection. At FAA, we're focused on an AI-powered aviation safety data platform. At Homeland Security, we're focused on autonomy at the edge, where integration of sensing and compute and decision-making is required. Then weather infrastructure, ground processing, AI/ML for multi-source intelligence, integrating commercial sources. There's just a few examples.

Horacio Rozanski: Thank you. Thank you so much. One moment for our next question. That comes from Gautam Khanna with TD Cowen. Please proceed. Yes, thank you. And congratulations, Matt. I was wondering if you could talk about the cost production plan. How much of that is yet to unfold? And how much, if you could maybe you said, but how much was realized in the quarter? Yeah, thanks, Gautam. I mean, the actions are done. Obviously, they happened over the course of the quarter. And remember, given the nature of how we do accruals in the sort of cost recoverable environment, there's not always a one-to-one impact of cost reductions to the P&L in a given quarter. They're essentially done. We'll see a little bit of the impact in Q4, but this really is about setting us up for next year.

Horacio Rozanski: And maybe, I don't know if you're comfortable sharing, but what do you anticipate submitting over the next couple of quarters in terms of, I don't know if you can quantify, you gave the big pipeline opportunity set, but what are you actually pursuing in the upcoming over the next couple of quarters? We are seeing more movement in December post the shutdown. So funding in December was more than twice what October and November were combined. And January has started off strong as well, seeing some movement in the awards and just funding overall. We are pursuing the kind of work that we've talked about in AI, in cyber, in defense tech, doing a ton of co-creating with our partners. We have focused in national security in areas like space ground systems and full spectrum operations, AI-enabled cyber operations. And I've just talked a bit about civil.

Horacio Rozanski: So, still very much tied to our growth vectors. Yeah, because the other thing I would say is, as you know, we have plenty of contracts billing. And so we're looking for rebid signs, and we're beginning to see signs, but it's early signs of demand picking up. And as Christine pointed out, demand in civil is picking up. And demand against our key defense growth areas and national security growth areas remains strong. Thank you. Thank you. Our next question comes from the line of Sheila Kahyaoglu with Jefferies. Please proceed. Hi. Good morning, guys. And congratulations, Matt, and thank you for all the help. So maybe if we could just start off in terms of the civil, Christine, you talked about the green shoots, and the color is really helpful with the pipeline growing double digits, but it was down 28% in the quarter, lower sequentially.

Horacio Rozanski: As you know, the US government is one of the largest, if not the largest, payer in the world, if you think about all the payments they have to process. And the idea of bringing commercial solutions to that, we reimagined how we would approach that, not just from the solution standpoint, but even from how we would have the conversation, how we would sell it, how we would run a pilot, who we would bring in. And we were able to put together a couple of companies from the Valley that have great capabilities, one of which was focused on this topic, one of which had nothing to do with this topic that was in the a16z portfolio. And we see more of that in the future, and we see ourselves as advantaged because we can truly create a complete solution across all of these technologies.

Horacio Rozanski: Now, part of the way that plays out is once we take more control over the delivery, we can actually lower the cost to the government, which is why this is good for the government. While, at the same time, if we perform well driving our profitability, which is why I've been saying over the next couple of years, I would expect Booz Allen's bottom line to grow faster than the top line as we, again, deliver more value and capture more value. Great. Thank you so much. Sure. Thank you. Our next question comes from Scott Mikus with Melius Research. Please proceed. Good morning, Horacio and Matt. Nice results. And good job on the cost data. Your headcount was down 12% year-over-year. Just as the business returns to growth and you leverage AI-based solutions, should we expect organic revenue growth to outpace headcount growth going forward?

Horacio Rozanski: Is that enough to offset the pricing pressures you're seeing on some of the civil programs as they come up for recompetes? Yeah, thanks, Scott. The short answer is yes, right? I think we're running the business efficiently, and we're also getting more leverage out of technology. As even the things Horacio described, we're leading with solutions that are more tech-forward. So you did see our revenue and profit per employee go up. I think that's a trend that you'll see persist into the future. Okay. Then one other modeling question. Previously, you had mentioned you expected a $170 million cash tax refund in fiscal 2027. Does the cash tax benefit from this year and the change in tax rate impact that refund you're expecting next year? Could it be a little bit higher?

Horacio Rozanski: No, but we do see there are still three cash tax headwinds for next year. There's the continued unwind of 174, and states' ongoing assessment of the One Big Beautiful Bill. There's what you just mentioned, the $170 million refund from the IRS. And then the benefit from the incremental R&D tax credit recognized this quarter. We don't expect to convert to cash this year. You're going to see some of that next year. And then given the recurring nature of at least some of that tax credit, it should be a longer-term cash tax headwind. Okay. Got it. Thank you. Thank you. One moment, please, for our next question. It comes from the line of John Godyn with Citi. Please proceed. Hey, guys. Thanks for taking my question. I wanted to just kind of dialogue a little bit about the defense budget outlook.

Horacio Rozanski: There's this idea of the possibility of a $1.5 trillion budget. I don't expect you guys to take a view on that, but what I was hoping was you could just offer thoughts on how a company kind of prepares for even the possibility of something like that. Do we look out there and say, "Let's make some investments ahead of that"? We've seen other companies engage in M&A possibly ahead of a change in an inflection in the budget. Do we just look at it and say, "Let's wait and see what really happens"? Maybe you take a view and you say, "All right, it could be 1.2 or 1.3." There seem to be so many permutations. I'm just curious when the customer's messaging the possibility of that kind of growth, how does that kind of feed into the strategic thinking? It's not a leading question.

Horacio Rozanski: Obviously, we don't know. I just wanted to kind of dialogue a little bit about it. Well, it's a great question. The president has been clear all along about rebuilding the industrial base, the defense industrial base around recapitalizing some aspects of it, around bringing new technology to bear for our war fighters in the battlefield. I think a larger budget, whatever the number ends up being, is consistent with the messaging that's been going on all along. From our perspective, we have been preparing all along to support those priorities. If you go back a year ago, we were talking already about leaning forward heavily into opportunities with Golden Dome. Even before that got fully articulated, we expect that to accelerate in the coming year. As one example, we're doing a lot of work on space.

Horacio Rozanski: Our traditional strength in cyber, we expect next year to be a significant year for cyber across the board, in part because of what we're seeing with the budget, but frankly, in part because the agentic cyber attacks. And the first publicized one was when Anthropic had the courage of coming in and explaining how Claude was used maliciously for an attack. All of that is going to, in our view, accelerate the need for more cyber at the intersection of cyber AI in the next year. And we have been making significant investments in all those areas, right? That's why the way we pick it up is there's a few growth vectors that we believe will ultimately drive significant growth for Booz Allen and significant value, excuse me, against these key priorities: cyber, AI, national security, especially related to space and the border, defense technology, right?

Our traditional strength in cyber, we expect next year to be a significant year for cyber across the board, in part because of what we're seeing with the budget, but frankly, in part because the agentic cyber attacks. And the first publicized one was when Anthropic had the courage of coming in and explaining how Claude was used maliciously for an attack. All of that is going to, in our view, accelerate the need for more cyber at the intersection of cyber AI in the next year. And we have been making significant investments in all those areas, right? That's why the way we pick it up is there's a few growth vectors that we believe will ultimately drive significant growth for Booz Allen and significant value, excuse me, against these key priorities: cyber, AI, national security, especially related to space and the border, defense technology, right?

Horacio Rozanski: It sounds like, needless to say, regardless of what happens, a budget like that is something that you think Booz will find ways to participate in in a meaningful way. Completely. Yeah. Okay. Thanks a lot. Thank you. Our next question comes from the line of Seth Seifman with JP Morgan. Please proceed. Hey, thanks very much. And good morning. And congratulations, Matt. I wanted to ask, when we think about the funded backlog and recognizing that the award situation depressed Q3, where do you think you can end the year on funded backlog? And will that be enough to allow for growth in fiscal '27? Yeah. Thank you. As I mentioned, we are starting to see awards accelerate. We hope that continues through the rest of the quarter, although it has been choppy. Good months and bad months in terms of pushing funding out.

Horacio Rozanski: Are there places you'd point out in the business where you see that threat being more acute or maybe where you already see more competition from new competitors? The competitive market has already evolved. If you looked at the people that we would have listed as primary competitors five years ago, and even primary teammates five years ago, and the people that we team with now, it's a different competitive set. For us, we look at this more as where can we create opportunities by taking advantage of the fact that we have a unique set of relationships with the tech world. Certainly, the work we're doing with AWS. I'll give you an example. We're working with AWS on an agentic AI platform that would transform intelligence analysis, as one example. The fact that AWS is interested in co-investing with us and co-creating with us there is hugely exciting.

Horacio Rozanski: Does that mean that another tech company will work with somebody else on a competitive platform? Probably. And that's okay. We believe that teaming together, we can do more. The work we've done with NVIDIA all the way back to 2017 positions us uniquely. And again, I could go through the list, right? But from Shield AI to Hidden Level, small companies that you never heard of to the largest companies, we have built, I believe, a unique ecosystem that can take advantage of the different trends that we see in the market. Great. Great. Thanks very much. Sure. Thank you so much. Our next question comes from the line of Jonathan Siegmann with Stifel. Please proceed. Good morning. Thank you for taking my question. And good luck, Matt. Just in the past, you've highlighted tactical selling and on-contract growth as one of the challenges of this dynamic environment.

Horacio Rozanski: Christine, you had some encouraging comments about seeing a recovery in civil. I just wanted to clarify whether this has normalized for the entire portfolio, or is it still below trend and expecting that there'll be a challenge next year? Thank you. Sure. On-contract growth will always be important. It's really just a matter of matching the customer's needs with solutions that we can bring forward to them. There's always a constant selling that's going on. As we mentioned, the funding environment has been choppy, right? So does two months make a trend? I hope so. We're going to see here over time. There is a trend toward just funding smaller amounts more frequently, and that's a lot more activity for a lessened workforce. We do see encouraging signs in that area, both in the funding and also, as we mentioned, in the pipeline.

Horacio Rozanski: That includes pipeline for on-contract growth as well as pipeline for new awards. That's great. Thank you. And then if I can slip in another one about a larger new program, Golden Dome, the company's capabilities are really well suited for the mission. Can you just maybe level set what, if anything, we might hear about the company's role publicly, understanding a lot of it's happening in the dark world? Thank you again. Yeah. We're excited about our space business in general, from space domain awareness to ground systems and bringing AI to developing common ground systems and virtualizing that entire infrastructure. On Golden Dome, in particular, we have been very active pursuing a number of opportunities, many of which we are not prepared to talk about yet. But we see this as an area where Booz Allen, as you said, has a lot to contribute.

Horacio Rozanski: We expect and hope to see significant growth there. Again, I mean, I'll take it back to something Christine said. The environment is still choppy and uncertain. Part of what we need to do and we need to continue to do is find these areas where the mission priorities, the funding, and our capabilities are well aligned and double down on those areas, which is why you're hearing us talk about these growth vectors. You're going to hear us talk about those growth vectors. You're going to see us invest in these areas to drive both top line and, in particular, profit growth. Thank you. Thank you so much. Our last question will come from Tobey Sommer with Truist. Please proceed. Thank you. Good luck, Matt. I was wondering if you could comment on what you might see as the interplay.

Horacio Rozanski: And so we interpret things going into next year as, again, the president and administration picking key areas of focus and doubling down on funding and national investment against those areas with an expectation that that industry will follow suit and participate in that. Part of what we're trying to do is anticipate it from the standpoint of the positions that we're taking, the capabilities that we're funding, the growth vectors that we're investing in. But a big part of it is we've built more agility into our system. Again, I point you to the cost reduction. I point you to the fact that we've flattened and simplified the management layers in order to be able to respond more quickly to the fact that as funding potentially gets reprogrammed against these priorities, even if overall funding is higher, we need to be well-positioned to respond to that.

Horacio Rozanski: I believe that we've made significant strides. I would also add that if you go back a couple of years when I was a civil sector president, I used to talk about enduring missions. These are missions that have to be done in civil, regardless of administration, but what changes is the approach. So we're seeing that, right? You still need a strong FAA and aviation safety. You still need to deliver healthcare. You still need secure borders. You still need to have the right infrastructure to drive the nation. So we're seeing exactly that, that the missions are enduring, the same ones that we have invested in for years, but the focus area has changed, and now they're really ready to move forward to impact. Thank you. I appreciate that. With respect to capital deployment, you've got a strong balance sheet.

Horacio Rozanski: This is a period of significant change. Do you think you'll lean in and utilize the balance sheet more to affect change in the portfolio? And maybe inclusive in your response, could you talk about the EO and share repurchase and whether or not you feel constrained in future repurchases as a result? Yeah. Let me start by saying let me start with the EO. The EO was focused on making sure that defense contractors, especially the ones that the Department of War field are underperforming, got back up on track and made sure that they invested consistent with the requirements in order to create the capacity and then to prioritize the government's missions. I think Booz Allen is already there. In addition to the fact that our work is much less capital-intensive, we are very proud of our delivery, and we do not have any performance issues.

Horacio Rozanski: So we don't think that on the whole end of the main, the EO applies to us in a negative way. Having said that, to the other part of your question, absolutely, right? I mean, our capital deployment priorities remain unchanged. The balance sheet is strong, and it's a strategic asset. We continue to look for, call it smaller, but impactful M&A that can behave as a strategic accelerator, especially in the growth vectors that we've been talking about all morning. So hopefully, you'll see us be more active, especially in those areas. Beyond that, of course, we'll continue to support the dividend. Share repurchases become something that's more opportunistic because, obviously, our investors should not want us, do not want us, and we don't want to have an idle balance sheet. So that's the overall thought process.

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Q3 2026 Booz Allen Hamilton Holding Corp Earnings Call

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