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01/11 03:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presented mixed signals: strong technology investments and optimism in defense and cyber sectors contrast with flat civil business and competitive pricing pressures. While full-year guidance is positive, the lack of immediate growth and cautious ramp-up in new contracts tempers enthusiasm. The Q&A highlighted uncertainties and management's non-committal stance on short-term performance, suggesting a balanced sentiment. This leads to a neutral prediction for the stock price movement, as positive long-term strategies are countered by short-term challenges and market uncertainties.
Gross Revenue $2.9 billion, an 8% decline year-over-year. Adjusting for a one-time reduction to provision for claim costs in the prior year, gross revenue was down about 5% year-over-year. The decline is attributed to disruptions in the civil portfolio and slower funding and procurement cycles.
National Security Portfolio Revenue Up 5% year-over-year, exclusive of discrete items from the prior fiscal year. Growth attributed to strong performance in defense and intelligence programs.
Civil Business Revenue Down 22% year-over-year, exclusive of prior year discrete items. Expected to decline in the low 20% range for the full fiscal year. Decline due to procurement gaps, pricing pressures on large procurements, and a challenging market environment.
Funded Backlog Down 6% year-over-year. Decline attributed to slower pace of contract funding and procurement cycles.
Adjusted EBITDA $324 million, down 11% year-over-year. Adjusted EBITDA margin was 11.2%, 40 basis points lower than the prior year. Decline due to mix shift away from higher-margin civil business and slower funding environment.
Net Income $175 million, down 55% year-over-year. Decline driven by lower profitability, unrealized investment gains, tax planning initiatives in the prior year, and higher interest expense.
Adjusted Net Income $183 million, down 21% year-over-year. Decline attributed to lower profitability and other factors.
Diluted Earnings Per Share (EPS) $1.42, down 53% year-over-year. Decline due to lower profitability, prior year benefits from investment gains and tax planning, and higher interest expense.
Adjusted Diluted EPS (ADEPS) $1.49, down 18% year-over-year. Decline attributed to lower profitability and other factors.
Free Cash Flow $395 million, driven by $421 million in cash from operations and $26 million in CapEx.
AI capabilities: Focus on maximizing AI capabilities and commercial technology partnerships to revolutionize delivery and reignite growth in the civil business.
Thunderdome product: Becoming the standard for Zero Trust, met all government milestones 2 years ahead of schedule, and won the 2025 Cybersecurity Breakthrough Award.
Edge technology: Developing modular detachment kits, exquisite tactical gear, and combining own tech with commercial products to empower and protect warfighters.
National security portfolio: 90% of $7.2 billion gross bookings were in national security, including major wins like the $1.2 billion Shadow Raptor task order and three other awards valued over $800 million each.
Civil business: Operating in a challenging market with delayed growth due to procurement environment issues and funding cuts.
Cost reduction: Reducing costs by accelerating AI in internal operations, simplifying the operating model, and reducing senior ranks to save $150 million annually.
Outcome-based contracting: Transitioning to outcome-based contracts and productizing IP to provide cost savings and margin expansion.
Focus on growth areas: Doubling down on cyber, AI, warfighting tech, critical national security programs, and tech ecosystem partnerships.
Restructuring: Taking bold actions to adjust cost structure, improve agility, and align with growth vectors.
Civil Business Challenges: The civil business is operating in a challenging market, with a significant slowdown in procurement activities and funding. This has led to delays in growth and a decline in revenue, with expectations of a low 20% revenue decline for the year. Fixed-price contracts in this segment are also putting downward pressure on margins.
National Security Portfolio Friction: While the national security portfolio is stronger, there are frictions in the funding process, including shorter funding increments and slower ramp-ups in new contract wins. This has created challenges in fully capitalizing on growth opportunities.
Procurement and Funding Environment: The overall procurement and funding environment has not normalized, with slower funding cycles, longer lead times for new initiatives, and smaller funding increments. This has negatively impacted the company's ability to reaccelerate growth.
Government Shutdown Impact: The government shutdown has introduced additional friction, with an estimated $30 million revenue loss and $15 million profit loss for October. A prolonged shutdown could exacerbate these losses.
Cost Structure and Workforce Adjustments: The company is reducing costs by cutting $150 million annually, including workforce reductions and simplifying operations. These actions, while necessary, may have short-term negative impacts on morale and operational efficiency.
Pricing Pressures on Recompetes: There is an expectation of pricing pressures on large recompete contracts, which could further impact revenue and profitability.
Civil Agency Prioritization Shifts: Civil agencies are reevaluating priorities, leading to uncertainty and delays in contract awards and funding.
Mix Shift Away from Civil Business: The shift away from the higher-margin civil business to other segments is putting downward pressure on overall margins.
Revenue Expectations: Revenue for fiscal year 2026 is expected to be between $11.3 billion and $11.5 billion, reflecting a reduction in guidance due to slower-than-expected funding and procurement trends.
Adjusted EBITDA Margins: Adjusted EBITDA margins are expected to be in the mid-10% range for fiscal year 2026, translating to an adjusted EBITDA dollar range of $1.19 billion to $1.22 billion.
Adjusted Diluted Earnings Per Share (ADEPS): ADEPS is projected to be between $5.45 and $5.65 per share for fiscal year 2026.
Free Cash Flow: Free cash flow is expected to be between $850 million and $950 million for fiscal year 2026.
National Security Portfolio Growth: Revenue in the national security portfolio, including defense and intelligence businesses, is anticipated to grow in the mid-single-digit range for fiscal year 2026.
Civil Business Revenue Decline: Revenue in the civil business is expected to decline in the low 20% range for fiscal year 2026 due to procurement delays and funding challenges.
Cost Restructuring Impact: The company plans to reduce costs by $150 million annually, with full impact expected in fiscal year 2027, while having a modestly negative impact on revenue for cost-plus contracts.
Government Shutdown Impact: The government shutdown is estimated to result in a $30 million revenue loss and $15 million profit loss if it extends through October 31, with similar impacts expected for each additional month of shutdown.
Quarterly Dividend: $0.55 per share, payable on December 2 to stockholders of record as of November 14.
Share Repurchase: $208 million in share repurchases at an average price of $107.15 per share, repurchasing nearly 2% of outstanding shares in the quarter.
Increase in Share Repurchase Authorization: Board approved an increase of $500 million to share repurchase authorization, bringing available capacity to approximately $880 million as of September 30.
The earnings call presented mixed signals: strong technology investments and optimism in defense and cyber sectors contrast with flat civil business and competitive pricing pressures. While full-year guidance is positive, the lack of immediate growth and cautious ramp-up in new contracts tempers enthusiasm. The Q&A highlighted uncertainties and management's non-committal stance on short-term performance, suggesting a balanced sentiment. This leads to a neutral prediction for the stock price movement, as positive long-term strategies are countered by short-term challenges and market uncertainties.
The earnings call shows mixed signals: strong AI business growth and positive strategic partnerships, but concerns over civil business revenue decline and uncertain funding environment. Management's optimistic guidance and cash flow benefits are tempered by unclear responses on key issues and a lack of specific guidance, leading to a neutral sentiment.
Booz Allen Hamilton Holding Corporation exceeded EBITDA targets and provided optimistic guidance for FY 2026, despite acknowledging risks. The company beat EPS expectations and initiated a $200 million share repurchase program, both positive indicators. The Q&A revealed confidence in defense growth and AI programs, though uncertainties remain in civil business stability. Overall, strong financial performance and shareholder returns suggest a positive stock price movement.
The earnings call reveals strong financial performance, with a 12% revenue growth and a 51% increase in net income. Share repurchases and dividend payments indicate a focus on shareholder returns. The Q&A section highlights growth opportunities in defense and intel sectors, despite challenges in the civil business. Management's strategic positioning and robust backlog support a positive outlook. Although some responses were vague, the overall sentiment is optimistic, with a solid financial foundation and growth potential in key areas.
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