Group 1 - The U.S. Treasury Department has cancelled all contracts with Booz Allen Hamilton due to a data leak incident involving an employee, which is part of a broader initiative to eliminate waste, fraud, and abuse [1][2][4] - The cancellation affects 31 contracts with Booz Allen, amounting to annual revenue of $4.8 million and total commitments of $21 million [4] - Following the announcement, Booz Allen's shares dropped nearly 11%, reflecting investor concerns about potential further cancellations of government contracts under the Trump administration [1][5][6] Group 2 - The company has been facing challenges in a difficult environment, with the Trump administration reportedly eliminating many government contracts with consulting firms [6][7] - Booz Allen's stock has seen a significant decline, being roughly cut in half since November 2024, indicating ongoing struggles within the consulting industry [7] - Despite the current situation, Booz Allen has condemned the actions of the employee responsible for the data leak and has expressed support for the U.S. government's investigation [6]

Core Viewpoint - The Treasury Department has cancelled all contracts with Booz Allen Hamilton due to a data leak incident involving a former contractor, Charles Littlejohn, who was sentenced for leaking sensitive tax return information [1][2]. Group 1: Contract Cancellation - The Treasury Department will cancel a total of 31 contracts with Booz Allen, which are valued at $4.8 million annually and $21 million in total obligations [1][2]. - Booz Allen's stock experienced a significant decline, falling over 11% following the announcement of the contract cancellations [1][2]. Group 2: Data Security Concerns - Secretary Scott Bessent stated that the cancellation was aimed at restoring trust in the Treasury Department, citing Booz Allen's inadequate safeguards for protecting sensitive data [2]. - The incident involved Charles Littlejohn, who pleaded guilty to stealing and leaking tax return data from 406,000 taxpayers, including high-profile individuals [2][4]. Group 3: Background on the Incident - Littlejohn utilized broad search parameters to evade detection and stored the stolen tax information on personal devices, including an iPod, before delivering it to news organizations [4]. - The leaks coincided with reporting by The New York Times and ProPublica regarding the tax returns of wealthy Americans [4].

Core Viewpoint - The Treasury Department has canceled all contracts with Booz Allen Hamilton following a leak of sensitive tax records, which has led to a significant drop in the company's stock price [1][2]. Group 1: Contractual Details - The Treasury Department had 31 contracts with Booz Allen Hamilton, amounting to $4.8 million in annual spending and total obligations of $21 million [2]. Group 2: Government Trust and Accountability - Treasury Secretary Scott Bessent emphasized that canceling these contracts is a crucial step in enhancing Americans' trust in the government, aligning with President Trump's directive to eliminate waste, fraud, and abuse [2].

Core Viewpoint - Booz Allen Hamilton (BAH) is showing potential as a strong investment opportunity due to its recent technical performance and positive earnings estimate revisions [1][2][3] Technical Analysis - BAH has recently crossed above the 200-day moving average, indicating a long-term bullish trend [1] - The stock has rallied 19.7% over the past four weeks, suggesting upward momentum [2] - The 200-day simple moving average serves as a key support level, which traders and analysts use to assess long-term market trends [2] Earnings Estimates - There have been no downward revisions in earnings estimates for BAH in the past two months, with one estimate being revised higher [3] - The consensus estimate for BAH has increased, reinforcing the bullish outlook for the company [3] - Positive earnings estimate revisions combined with favorable technical indicators suggest potential for further gains [3]

Core Insights - Booz Allen Hamilton Holding Corporation (BAH) is a management and information technology consulting firm primarily serving the U.S. government in defense, intelligence, and civil markets [1] - BAH competes with companies such as Leidos Holdings, CACI International, Science Applications International Corporation, Huntington Ingalls Industries, and CDW Corporation [1] Financial Performance - BAH's Return on Invested Capital (ROIC) is 18.09%, significantly higher than its Weighted Average Cost of Capital (WACC) of 5.00%, resulting in a ROIC to WACC ratio of 3.62, indicating efficient capital utilization [2][6] - Leidos Holdings, Inc. (LDOS) has a ROIC of 14.77% and a WACC of 5.98%, leading to a ROIC to WACC ratio of 2.47, which is lower than BAH's [3] - CACI International Inc (CACI) shows a ROIC of 8.62% against a WACC of 6.12%, with a ratio of 1.41, indicating less effective capital utilization compared to BAH [3] - Science Applications International Corporation (SAIC) has a ROIC of 11.27% and a WACC of 4.84%, resulting in a ROIC to WACC ratio of 2.33, still below BAH's efficiency [4] - Huntington Ingalls Industries, Inc. (HII) has the lowest ratio of 0.94, with a ROIC of 4.79% and a WACC of 5.12%, suggesting its returns barely cover its cost of capital [4] - CDW Corporation (CDW) presents a ROIC of 12.25% and a WACC of 7.35%, resulting in a ROIC to WACC ratio of 1.67, which is not as efficient as BAH [5] Competitive Advantage - BAH's superior ROIC to WACC ratio makes it an attractive option for investors seeking strong financial performance compared to its peers [5][6]

Core Insights - Booz Allen Hamilton is a significant player in the consulting services industry, specializing in management and technology consulting for government and commercial clients, with a strong presence in the U.S. and expertise in analytics, digital solutions, and cybersecurity [1] Financial Performance - On January 23, 2026, Truist Financial set a price target of $98 for Booz Allen Hamilton, while the stock was trading at $102.23, indicating a price difference of approximately -4.14% from the target [2] - Booz Allen reported quarterly earnings of $1.77 per share, surpassing the Zacks Consensus Estimate of $1.26 per share, marking an earnings surprise of over 40% compared to $1.55 per share in the same quarter last year [3] - The company's revenues for the quarter ended December 2025 were $2.62 billion, falling short of the Zacks Consensus Estimate by nearly 4% and lower than the $2.92 billion reported in the previous year [4] - Over the past four quarters, Booz Allen has exceeded consensus EPS estimates three times but has consistently missed revenue estimates [4] Strategic Adjustments - Booz Allen Hamilton has increased its profit outlook for the fiscal year due to successful cost-saving measures implemented in response to reductions in government-contract funding for consultants by the Trump administration, leading to improved financial performance [5]

Core Insights - Booz Allen Hamilton reported a strong earnings beat, with shares rising 9.2% following the announcement [1] - The company missed sales forecasts, reporting revenue of $2.6 billion against an expectation of $2.7 billion, but exceeded earnings expectations with $1.77 per share compared to a forecast of $1.27 [2] - The Q3 2026 sales declined by 10%, attributed partly to delays from a previous government shutdown, indicating that revenues were postponed rather than lost [4] Financial Performance - The book-to-bill ratio for the quarter was low at 0.3, suggesting potential challenges for near-term revenue growth, although the trailing-12-month ratio was a healthier 1.1 [5] - Profit margins improved, with earnings growing by 7% in Q3, and free cash flow reached $248 million, an increase of 85% [5] - Management has lowered revenue and free cash flow forecasts but anticipates generating free cash flow between $825 million and $900 million by year-end [6] Investment Considerations - The stock is valued at approximately 14 times free cash flow at the high end of the forecast and just over 15 times at the low end, which is considered a decent price for a government contracting business with a 2.3% dividend yield [6] - Analysts suggest a "hold" rating rather than a "buy" due to the mixed performance in earnings and sales [7] - Booz Allen Hamilton was not included in a list of top stock recommendations by The Motley Fool Stock Advisor, which identified 10 better investment opportunities [8]

Core Insights - The company has implemented cost-reduction actions that are expected to yield a benefit of approximately $150 million in profitability, primarily in the next fiscal year rather than the current quarter [1] - The prolonged government shutdown has caused disruptions, leading to an estimated cumulative impact of about $50 million on revenue and $20 million on profit for the full fiscal year [2] Financial Performance - For the third quarter, the company reported gross revenue of $2.6 billion, a decline of roughly 10% year-over-year, attributed to shutdown impacts [7] - Net income was $200 million, up 7% year-over-year, with adjusted net income at $215 million, reflecting a 9% increase [8] - Adjusted EBITDA for the quarter was $285 million, with a margin of 10.9% [7] Market Dynamics - The company experienced a decline in national security revenue by about 1% year-over-year, but a growth of approximately 4% when adjusting for shutdown-related timing [11] - Civil revenue saw a significant decline of about 28% year-over-year, which was anticipated [11] Backlog and Pipeline - The company ended the calendar year with a record total backlog of over $38 billion, up about 2% from the prior year [12] - The qualified pipeline for fiscal 2027 stood at nearly $53 billion as of December 31, reflecting a 12% increase from the previous year [13] Cash Flow and Capital Deployment - The company ended the quarter with $882 million in cash and a free cash flow of $248 million [14] - Capital deployment totaled $195 million, including $125 million in share repurchases and $67 million in dividends [15] Guidance and Future Outlook - The company is tightening revenue expectations toward the lower end of its range due to shutdown impacts while increasing adjusted EPS guidance [16] - Executives noted improved funding activity in December and early January, with a focus on fixed-price and outcome-based work [16]

Financial Data and Key Metrics Changes - Gross revenue for the third quarter totaled $2.6 billion, representing a roughly 10% decline year-over-year and a 7% decline on a revenue ex-billable basis [20][21] - Adjusted EBITDA for the third quarter was $285 million, translating to an adjusted EBITDA margin of 10.9% [23] - Net income for the third quarter was $200 million, a 7% increase year-over-year, while adjusted net income was $215 million, an increase of about 9% [24] Business Line Data and Key Metrics Changes - The national security portfolio declined about 1% year-over-year, but grew about 4% when adjusting for the impact of the government shutdown [21] - The civil business experienced a significant decline of about 28% year-over-year, with expectations for stability in the remainder of the fiscal year [21][54] Market Data and Key Metrics Changes - Net bookings for the third quarter totaled $888 million, resulting in a quarterly book-to-bill ratio of 0.3 times and a trailing 12-month book-to-bill of 1.1 times [21] - Funded backlog fell 10% year-over-year, but ended the calendar year with a record backlog of over $38 billion, up about 2% from the prior year [22] Company Strategy and Development Direction - The company is focusing on three priorities: reducing costs, accelerating the transition to outcome-based contracting and product sales, and concentrating investments on growth vectors like cyber, national security, partnerships, and AI [7][12] - A new partnership with Andreessen Horowitz (A16Z) aims to co-create technology solutions for national security and public safety, with Booz Allen committing to deploy up to $400 million in A16Z's late-stage venture fund [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's trajectory, anticipating improved funding in the fourth quarter and a tightening of revenue guidance to between $11.3 billion and $11.4 billion for the fiscal year [29] - The company expects to generate free cash flow between $825 million and $900 million, indicating a strong operational outlook despite challenges [29] Other Important Information - The company recognized a $7 million pre-tax gain from the divestiture of DARPA's Cedar work, which is excluded from non-GAAP adjusted income [24] - The company ended the quarter with $882 million in cash and a net leverage ratio of 2.5x adjusted EBITDA for the trailing 12 months [25] Q&A Session Summary Question: What are the end market expectations for FY27? - Management indicated that defense and intelligence are expected to grow, while civil is anticipated to remain flat, with signs of improvement in the civil sector [34][36] Question: Can you elaborate on the cost reduction plan? - Management confirmed that the cost reduction actions were completed during the quarter, with some impact expected in Q4 but primarily setting up for next fiscal year [44][46] Question: How is the pace of contract award activity? - Management noted that December saw a significant increase in funding activity, with January starting strong, indicating a positive trend in awards [47][49] Question: What is the outlook for funded backlog? - Management expressed optimism about the funded backlog, with strong funding in December and a positive demand environment for the upcoming fiscal year [79][80] Question: How does the company prepare for potential changes in the defense budget? - Management stated that they have been preparing to support key priorities and are positioned to respond to changes in funding, emphasizing agility in operations [71][73]

Financial Data and Key Metrics Changes - Gross revenue for the third quarter totaled $2.6 billion, representing a roughly 10% decline year-over-year and a 7% decline on a revenue ex-billable basis [20][21] - Adjusted EBITDA for the third quarter was $285 million, translating to an Adjusted EBITDA margin of 10.9% [23] - Net income for the third quarter was $200 million, a 7% increase year-over-year, while adjusted net income was $215 million, an increase of about 9% from the prior year [24] Business Line Data and Key Metrics Changes - The national security portfolio declined about 1% year-over-year, but grew about 4% when adjusting for the impact of the government shutdown [21] - The Civil business experienced a significant decline of about 28% year-over-year, with expectations for stability moving forward [21][51] - Net bookings for the third quarter totaled $888 million, resulting in a quarterly book-to-bill ratio of 0.3x [21] Market Data and Key Metrics Changes - Funded backlog fell 10% year-over-year, but ended the calendar year with a record year-end backlog of over $38 billion, up about 2% from the prior year [22] - The qualified pipeline for fiscal year 2027 stands at nearly $53 billion, which is 12% higher than the fiscal year 2026 pipeline at the same point last year [22][29] Company Strategy and Development Direction - The company is focusing on three priorities: reducing costs, accelerating the transition to outcome-based contracting and product sales, and concentrating investments on growth vectors like cyber, national security, partnerships, and AI [7][12] - A new partnership with Andreessen Horowitz aims to co-create unique commercial technology for national security and public safety, with Booz Allen committing to deploy up to $400 million in a16z's late-stage venture fund [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's operational and strategic trajectory, anticipating continued change in a dynamic environment [16] - The demand for national security technology and expertise remains robust, with optimism about the Civil business beginning to reignite [30] Other Important Information - The company is transitioning to fixed-price and outcome-based models, which are expected to create cost savings for the government and support margin expansion over the medium to long term [10] - The company recognized a $7 million pre-tax gain from the divestiture of DARPA's SETA work, which is excluded from non-GAAP adjusted income [24] Q&A Session Summary Question: End market expectations for FY27 - Management indicated that defense and intelligence are expected to grow, while Civil is anticipated to remain flat, with potential for recovery in the future [34][36] Question: Cost reduction plan - The cost reduction actions were completed during the quarter, with some impact expected in Q4, but the full effect will be felt next fiscal year [44][46] Question: Funded backlog and growth in fiscal 2027 - Management noted that awards are starting to accelerate, with strong funding activity observed in December and January, positioning the company for growth [75][76] Question: Competition from new players - The competitive landscape has evolved, with new commercial competitors emerging, but the company is leveraging unique relationships with tech firms to create opportunities [77][78] Question: Changes in selling to the government - The company has become more agile in its approach, focusing on commercial partnerships and outcome-based solutions to drive growth [54][56]