Booz Allen Hamilton (BAH) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For fiscal year 2025, the company achieved over 12% revenue growth, nearly all organic, and adjusted EBITDA increased 12% to $1,315 million, yielding an adjusted EBITDA margin of 11$1.52, a 55% increase year over year [38][39] - Free cash flow for the quarter was $194 million, resulting from$218 million of cash from operations, less $24 million of CapEx [39] Business Line Data and Key Metrics Changes - The defense and intelligence businesses saw revenue growth of 145$800 million, indicating strong demand and increasing integration into government operations [19][30] Market Data and Key Metrics Changes - The company ended the fiscal year with a record backlog of $37 billion, up 15$53.4 billion [35][36] - The book-to-bill ratio for the quarter was 0.71 times, in line with historical averages, while the trailing twelve-month book-to-bill ratio was 1.39 times, above the trailing five-year average of 1.28 times [35][36] Company Strategy and Development Direction - The company is focusing on restructuring its civil business to return to growth rapidly after an adjustment period, while also positioning itself to lead in outcome-based opportunities [23][42] - The Vault strategy, which emphasizes velocity, leadership, and technology, aligns with government changes and aims to enhance mission acceleration and efficiency [18][26] - The company is committed to investing in advanced technologies, particularly AI, and strengthening partnerships with technology firms to drive innovation [20][24] Management's Comments on Operating Environment and Future Outlook - Management noted that the federal government is rethinking agency missions and looking for ways to reduce spending and increase efficiency, which has led to a slowdown in civil procurement [10][11] - The defense and national security portfolio is expected to continue growing, driven by the injection of AI and commercial technology into missions [11][12] - Management expressed optimism about future opportunities, particularly in AI and advanced technology, despite the challenges in the civil business [26][45] Other Important Information - The company plans to deploy $700 million to$800 million in free cash flow for fiscal year 2026, with expectations of a meaningful reacceleration in the second half of the year [44][45] - The board of directors approved a quarterly dividend of 55 cents per share, payable on June 27 [41] Q&A Session Summary Question: How does the company manage the impact of unpredictable descoping and cancellations? - Management highlighted the strength in defense and intelligence sectors, while acknowledging a reset in the civil business, which is expected to be a one-time adjustment [50][51] Question: What are the expectations for the multiyear growth environment? - Management indicated that the civil business has undergone most reviews positively, while defense spending is expected to increase, particularly in Indo-Pacific and homeland defense [58][59] Question: How does the company plan to invest in commercial terms in defense? - Management emphasized the importance of partnerships with commercial technology firms and the ability to co-create solutions that meet mission needs [85][86] Question: What is the company's strategy regarding share repurchases and capital deployment? - Management confirmed a commitment to share repurchases and strategic investments, particularly in venture capital to support technology advancements [64][66] Question: How does the company view its branding and public perception? - Management acknowledged the challenges of being a market leader in media coverage but emphasized efforts to improve communication and clarify the company's positioning as an advanced technology firm [90][92]