Booz Allen Hamilton (BAH) - 2024 Q4 - Annual Report

PART I Business Booz Allen Hamilton is a 110-year-old management and technology consulting firm primarily serving the U.S. government with solutions in AI, cybersecurity, and engineering Overview Booz Allen Hamilton leverages 110 years of strategic consulting, AI, cybersecurity, and engineering expertise to solve complex problems for federal and commercial clients - The company combines 110 years of strategic consulting with expertise in artificial intelligence, cybersecurity, technology, and engineering to deliver solutions[11] - Booz Allen supports critical missions for nearly all U.S. cabinet-level departments and commercial clients across various sectors[12] Human Capital Management The company employs 34,200 people and emphasizes a culture of belonging, diversity, equity, and inclusion (DEI), with a significant portion of its workforce identifying as female or a person of color - As of March 31, 2024, the company has 34,200 employees, focusing on creating an inclusive environment for thriving talent[16] Workforce Diversity Statistics (as of March 31, 2024) | Metric | Percentage | | :--- | :--- | | Global workforce identifying as female | 36% | | Senior management identifying as female | 37% | | U.S. workforce identifying as a person of color | 35% | | Senior management identifying as a person of color | 21% | | Employees identifying as a veteran | ~28% | | Employees holding security clearances | ~65% | - The company's annual Employee Experience Survey shows 83% of employees report a favorable experience, exceeding competitor benchmarks[17] Our Long-Term Growth Strategy Fiscal year 2024 marked the second year of the company's VoLT (Velocity, Leadership, Technology) strategy, designed to accelerate growth by operating with increased speed, agility, and scale - The VoLT strategy serves as the company's blueprint for accelerated growth, emphasizing Velocity, Leadership, and Technology[27] - Key pillars of the VoLT strategy include doubling down on innovation, strategic M&A, scaling mission-technology businesses, and developing solutions from mission insights[27] Our Clients Booz Allen serves a diverse client base, with 98% of fiscal 2024 revenue from U.S. government contracts, maintaining long-standing relationships across defense, intelligence, and civil agencies Fiscal 2024 Client Revenue Breakdown | Client Segment | Revenue (billions) | % of Total Revenue | | :--- | :--- | :--- | | Defense Clients | $5.1 | 47.1% | | Intelligence Clients | $1.8 | 16.6% | | Civil Clients | $3.7 | 34.3% | | Global Commercial Clients | $0.173 | 1.6% | - In fiscal 2024, 98% of revenue was derived from U.S. government contracts, with the Department of Veterans Affairs as the single largest client at 13% of revenue[29] - The company maintains long-term relationships with key clients, including over 80 years with the U.S. Navy and over 75 years with the U.S. Army[31] Contracts The company's revenue is primarily generated through Indefinite Delivery/Indefinite Quantity (IDIQ) contract vehicles, accounting for over 85% of fiscal 2024 revenue across 2,650 active task orders - Over 85% of fiscal 2024 revenue was derived from 2,650 active task orders under IDIQ contract vehicles, demonstrating a diverse contract base[37] Top 5 IDIQ Contracts by Fiscal 2024 Revenue | IDIQ Contract Vehicle | FY2024 Revenue (millions) | % of Total Revenue | | :--- | :--- | :--- | | GSA Alliant 2 | $1,625.5 | 15.2% | | OASIS | $1,225.2 | 11.5% | | VA T4NG IDIQ | $765.9 | 7.2% | | Liberty IT - VA T4NG IDIQ | $585.9 | 5.5% | | DTIC IAC MAC IDIQ | $571.8 | 5.4% | Backlog As of March 31, 2024, the company's total contract backlog increased to $33.8 billion, composed of funded, unfunded, and priced options Contract Backlog Comparison (in millions) | Backlog Component | As of March 31, 2024 | As of March 31, 2023 | | :--- | :--- | :--- | | Funded | $4,822 | $4,619 | | Unfunded | $9,463 | $9,519 | | Priced options | $19,533 | $17,064 | | Total backlog | $33,818 | $31,202 | - Total backlog grew from $31.2 billion in fiscal 2023 to $33.8 billion in fiscal 2024, primarily driven by an increase in priced options[44] Risk Factors The company faces significant risks primarily related to its heavy dependence on U.S. government contracts, intense competition, cybersecurity threats, and the ability to retain skilled personnel - The company's primary risk is its dependence on U.S. government contracts, which accounted for 98% of revenue in fiscal 2024, making it vulnerable to changes in government spending or reputation[58] - A significant majority of revenue comes from task orders under IDIQ contract vehicles, where failure to win or loss of prime position could materially impact operating results[63] - Internal system failures or cybersecurity breaches pose a material risk, potentially leading to loss of client data, reputational damage, and financial liability amidst evolving cyber threats[69] - The business depends on attracting and retaining highly qualified employees with security clearances, where intense competition and lengthy processes could limit growth and client service[79] Cybersecurity Booz Allen's cybersecurity risk management is a core component of its enterprise risk management program, overseen by the Board and guided by NIST standards, with no material incidents reported - The cybersecurity risk management program is integrated into the overall Enterprise Risk Management (ERM) Program, with regular oversight from the Board of Directors and its committees[125] - The program, led by the CIO and CISO, is guided by the NIST Cybersecurity Framework and complies with extensive government regulations including DFARS and CMMC 2.0[128] - The company has not experienced any cybersecurity incidents during the reporting period that materially affected its business strategy, results of operations, or financial condition[131] Properties The company leases all its facilities, totaling approximately 2.24 million square feet, with its corporate headquarters in McLean, Virginia, and many employees working at government-provided sites - The company leases all its facilities, totaling approximately 2.24 million square feet of office and facility space[132] - Corporate headquarters is located at 8283 Greensboro Drive, McLean, Virginia 22102[132] Legal Proceedings The company is involved in ordinary course legal proceedings, with previously disclosed stockholder class action and derivative lawsuits dismissed, and no material adverse effects expected from ongoing matters - The stockholder class action lawsuit, Langley v. Booz Allen, was dismissed, and the appeal was voluntarily dismissed with prejudice on April 23, 2024[133] - The shareholder derivative complaint, Thum v. Rozanski, related to the same DOJ investigation, was voluntarily dismissed without prejudice on May 20, 2024[135] Information about our Executive Officers This section provides biographical information for the company's executive officers, including President and CEO Horacio D. Rozanski, CFO Matthew A. Calderone, and COO Kristine Martin Anderson - Horacio D. Rozanski serves as the President and Chief Executive Officer, having joined the company in 1992 and becoming CEO in 2015[137] - The executive team includes key leaders such as Matthew A. Calderone (CFO), Kristine Martin Anderson (COO), and sector heads for Civil, Global Defense, and National Security[137][138] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Booz Allen's Class A Common Stock trades on the NYSE under "BAH", with the company paying recurring quarterly dividends and repurchasing shares, significantly outperforming market indices - The Board declared a quarterly cash dividend of $0.51 per share on May 24, 2024, payable on June 28, 2024[142] Share Repurchases for Quarter Ended March 31, 2024 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2024 | 197,225 | $126.76 | | February 2024 | 348,126 | $143.63 | | March 2024 | 169,454 | $147.45 | | Total | 714,805 | N/A | - As of March 31, 2024, approximately $483.2 million remained available for repurchases under the company's share repurchase program[144] Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal 2024, Booz Allen's revenue grew 15.2% to $10.7 billion, with operating income surging 126.8% to $1.0 billion, driven by strong demand and the absence of a prior-year legal reserve Results of Operations For fiscal 2024, revenue increased by 15.2% to $10.7 billion, and operating income rose significantly by 126.8% to $1.0 billion, primarily due to the absence of a large legal reserve from fiscal 2023 Fiscal 2024 vs. Fiscal 2023 Performance (in millions) | Metric | Fiscal 2024 | Fiscal 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $10,661.9 | $9,258.9 | 15.2% | | Operating income | $1,013.4 | $446.8 | 126.8% | | Net income attributable to common stockholders | $605.7 | $271.8 | 122.9% | - The significant increase in operating income was primarily due to a $350.0 million legal reserve in fiscal 2023 compared to a $27.5 million reserve in fiscal 2024[195] Liquidity and Capital Resources As of March 31, 2024, the company had $1.6 billion in total liquidity, with net cash from operations at $258.8 million, impacted by a $377.5 million legal settlement payment Key Liquidity and Cash Flow Metrics (in millions) | Metric | As of/For Fiscal Year 2024 | As of/For Fiscal Year 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $554.3 | $404.9 | | Total debt | $3,411.8 | $2,812.1 | | Net cash provided by operating activities | $258.8 | $602.8 | | Net cash used in investing activities | $(90.6) | $(468.0) | | Net cash used in financing activities | $(18.8) | $(425.9) | - The decrease in operating cash flow was primarily impacted by a $377.5 million outflow related to the settlement of a U.S. Department of Justice matter[203] - In August 2023, the company issued $650.0 million of 5.950% Senior Notes due 2033[327] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate changes affecting its variable-rate debt, mitigated by interest rate swaps with a notional amount of $550.0 million as of March 31, 2024 - The company's main market risk is interest rate volatility, primarily related to its variable-rate Senior Credit Facility[220] - A hypothetical 25 basis point interest rate increase would have increased interest expense by approximately $2.6 million in fiscal 2024[220] - As of March 31, 2024, the company had interest rate swaps with an aggregate notional amount of $550.0 million to hedge against interest rate movements[220] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for fiscal year 2024, including balance sheets, income statements, and cash flow statements, with an unqualified audit opinion Consolidated Balance Sheets As of March 31, 2024, total assets were $6.56 billion, total liabilities $5.52 billion, and total stockholders' equity $1.05 billion, reflecting changes in accounts receivable and long-term debt Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $2,738,909 | $2,288,058 | | Goodwill | $2,343,789 | $2,338,399 | | Total Assets | $6,563,688 | $6,550,652 | | Total Current Liabilities | $1,692,190 | $1,897,054 | | Long-term debt, net | $3,349,941 | $2,770,895 | | Total Liabilities | $5,517,126 | $5,558,650 | | Total Stockholders' Equity | $1,046,562 | $992,002 | Consolidated Statements of Operations For fiscal 2024, revenue increased 15.2% to $10.66 billion, operating income rose to $1.01 billion, and net income attributable to common stockholders was $605.7 million, or $4.59 per diluted share Consolidated Statement of Operations Summary (in thousands, except per share data) | Metric | Fiscal Year 2024 | Fiscal Year 2023 | Fiscal Year 2022 | | :--- | :--- | :--- | :--- | | Revenue | $10,661,896 | $9,258,911 | $8,363,700 | | Operating income | $1,013,403 | $446,848 | $685,181 | | Net income attributable to common stockholders | $605,706 | $271,791 | $466,740 | | Diluted EPS | $4.59 | $2.03 | $3.44 | Consolidated Statements of Cash Flows For fiscal 2024, net cash from operating activities was $258.8 million, impacted by a legal settlement, while cash used in investing and financing activities decreased, leading to a $149.4 million cash increase Consolidated Cash Flow Summary (in thousands) | Cash Flow Category | Fiscal Year 2024 | Fiscal Year 2023 | Fiscal Year 2022 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $258,838 | $602,822 | $736,526 | | Net cash used in investing activities | $(90,640) | $(468,016) | $(867,725) | | Net cash used in financing activities | $(18,803) | $(425,854) | $(163,846) | | Net increase (decrease) in cash | $149,395 | $(291,048) | $(295,045) | Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and internal control over financial reporting were effective as of March 31, 2024, with an unqualified auditor opinion - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2024[402] - Management concluded that the company's internal control over financial reporting was effective as of March 31, 2024, supported by an unqualified opinion from the independent auditor[404][408] Other Information Dr. Ralph W. Shrader will retire as Board Chair, with CEO Horacio D. Rozanski assuming the role, and the Compensation Committee approved fiscal 2025 compensation increases and special equity grants for executives - Dr. Ralph W. Shrader will retire as Board Chair effective July 24, 2024, with CEO Horacio D. Rozanski becoming Chair and Mark Gaumond appointed Lead Independent Director[413] - The Compensation Committee approved fiscal 2025 compensation increases for the CFO and COO, and awarded special one-time equity grants of $3 million to the CFO, $3 million to the COO, and $1 million to the Chief Legal Officer[414] PART III Directors, Executive Compensation, Security Ownership, and Accountant Fees Information for Items 10 through 14, covering directors, executive compensation, security ownership, related party transactions, and accounting fees, is incorporated by reference from the 2024 Proxy Statement - Information regarding Directors, Executive Officers, Corporate Governance (Item 10), Executive Compensation (Item 11), Security Ownership (Item 12), Certain Relationships and Related Transactions (Item 13), and Principal Accounting Fees and Services (Item 14) is incorporated by reference from the 2024 Proxy Statement[417][420][421][422][423] PART IV Exhibits, Financial Statement Schedules This section lists all documents filed as part of the Annual Report, including financial statements and a comprehensive index of exhibits such as governance documents and debt agreements - This section provides an index of all exhibits filed with the Form 10-K, including governance documents, debt agreements, and executive compensation plans[426]