- Total Revenue: $2.9 billion, up 11% year-over-year.
- Organic Revenue Growth: 10.6% year-over-year.
- Revenue Excluding Billable Expenses: Increased 8.4% year-over-year.
- Defense Business Revenue: Up 16% from the prior-year quarter.
- Civil Business Revenue: Grew 12% year-over-year.
- Intelligence Business Revenue: Declined about 3% year-over-year.
- Net Bookings: $5 billion for the first quarter.
- Quarterly Book-to-Bill Ratio: 1.72 times.
- Total Backlog: $36 billion, up 16% year-over-year.
- Qualified Pipeline: $55 billion for the remainder of fiscal year 2025, up 32% from a year ago.
- Client Staff Headcount: More than 35,000, with 7.7% growth year-over-year.
- Adjusted EBITDA: $302 million, down 1.6% from the prior-year period.
- Adjusted EBITDA Margin: 10.3%, down 130 basis points year-over-year.
- Net Income: $165 million, up 2.4% year-over-year.
- Adjusted Net Income: $180 million, down 7% year-over-year.
- Diluted Earnings Per Share (EPS): $1.27, up 4% year-over-year.
- Adjusted Diluted EPS: $1.38, down 6% year-over-year.
- Cash on Hand: $298 million.
- Net Debt: $3 billion.
- Net Leverage Ratio: 2.7 times adjusted EBITDA for the trailing 12 months.
- Free Cash Flow: $20 million for the quarter.
- Cash from Operating Activities: $52 million.
- Capital Expenditures (CapEx): $32 million.
- Capital Deployed: $251 million in the first quarter.
- Share Repurchases: $90 million at an average price of $149.74 per share.
- Quarterly Cash Dividends: $66 million.
- Acquisition of PAR Government Systems Corporation: $93 million.
- Fiscal Year 2025 Revenue Growth Guidance: 8% to 11%.
- Adjusted EBITDA Guidance: $1.26 billion to $1.3 billion.
- Adjusted EBITDA Margin Guidance: About 11% for the full year.
- Adjusted Diluted EPS Guidance: $5.80 to $6.05 per share.
- Operating Cash Flow Guidance: $825 million to $925 million.
- Free Cash Flow Guidance: $725 million to $825 million.
Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Booz Allen Hamilton Holding Corp (BAH, Financial) delivered double-digit organic revenue growth in the first quarter of fiscal year 2025.
- The company's book-to-bill ratio was an impressive 1.72 times, indicating strong demand and future revenue potential.
- Booz Allen Hamilton Holding Corp (BAH) reported a record backlog of $36 billion, up 16% year-over-year.
- The company successfully acquired PAR Government Systems Corporation, which is expected to be mildly accretive to earnings and add $80 million to $90 million in revenue for the fiscal year.
- Headcount growth was robust, with more than 35,000 employees, including 200 skilled professionals from the PAR acquisition, translating to 7.7% client staff growth year-over-year.
Negative Points
- Bottom-line performance was softer than anticipated due to a combination of operational and non-operational factors.
- Adjusted EBITDA margin decreased by 130 basis points year-over-year to 10.3%.
- Adjusted diluted earnings per share decreased 6% year-over-year to $1.38.
- The company's intelligence business saw a revenue decline of about 3% year-over-year.
- Higher interest expenses from the inaugural investment-grade bond offering and a higher tax rate impacted net income.
Q & A Highlights
Q: Could you describe the potential you can unlock from the PAR acquisition, especially with WinTAK and TAK, and the synergies we could expect?
A: We're very happy with the PAR acquisition. It focuses on innovative edge-type work for the warfighter, fitting well into our digital battlespace platform. This acquisition is about revenue synergies, not cost reduction, and it will help us integrate information and bring it together from multiple sources using AI, enhancing our VoLT strategy.
Q: What makes you confident that you can achieve the EBITDA margin for the year? What efforts are you putting in place to achieve the 11% target?
A: While our bottom-line results this quarter were softer due to timing and one-offs, the underlying profitability remains strong. We have strong momentum, as seen in our book-to-bill and hiring. We manage the business for EBITDA dollars, not margin, and have the operating levers to meet our fiscal year objectives.
Q: How are you thinking about the runway of your defense and civil customer segments for the remainder of the year?
A: Our defense business has strong momentum with key recompetes and new work in the Pacific. Our civil business has had ten consecutive quarters of double-digit growth, with key recompetes ahead. Our intelligence business, despite a decline this quarter, has strong underlying momentum and is transitioning to deliver extraordinary technology.
Q: The bookings in the quarter were unusually strong. Was there some pull forward, or do you think that momentum just keeps building?
A: There is strong underlying demand and momentum, with a good budget environment. Our tactical sales engine is second to none, and we have ample demand and headcount to deliver against our commitments for the year. There was no pull forward; if anything, some stuff from the prior year took longer to realize.
Q: Can you give us a sense of where you stand with recompetes? Are you through some of the larger ones, or are those still ahead?
A: We've been through some recompetes successfully, and there are a few left for the year. Our overall pipeline is very healthy, with a $55 billion pipeline up 32% year-over-year. The demand condition is strong, and we intend to continue winning as much as we can.
Q: Why did you lose the 1.5% in revenue due to timing and utilization? And how should we think about the next quarter?
A: The timing of when we added staff and their billing, along with lower client staff utilization, cost us about 1.5% in revenue growth. We also had higher expenses in M&A, legal, and regulatory areas. Utilization metrics improved over the quarter, and we have the headcount needed to meet our growth aspirations.
Q: How do you want Booz Allen to position itself in the digital and connected battle space, especially with trends like the commoditization of hardware and the value in software?
A: We view ourselves as a primary digital player that can bring information together at speed and scale to the warfighter. Our leadership in AI, cyber, and investments in technologies like quantum and space positions us uniquely. The work we're doing in Ukraine informs our efforts in other regions, enhancing our ability to deter conflict.
Q: Can you discuss medium- to long-term margins and where profitability can go beyond this year?
A: Our focus is on EBITDA dollar growth. While we have delivered margins higher than anticipated, the long-term trends in outcome-based contracting and other areas give us optimism for above-market profitability growth rates. The exact timing of these trends is uncertain, but we are optimistic about our long-term prospects.
Q: What are the risk factors that could take you to the low end of your revenue growth range for the year?
A: The primary risk is the political and budgetary environment, especially in an election year. We are also working on several recompetes and prosecuting a healthy pipeline. While we are mindful of these risks, we remain optimistic about our momentum and growth prospects.
Q: Can you quantify Booz Allen's exposure to Ukraine if funding for that conflict were to dry up?
A: We have about 800 people working across European Command, with around 100-150 professionals affected by funding interruptions. This exposure is relatively small compared to our overall footprint. The work in Ukraine is crucial for our broader missions and informs our efforts in other regions, making it highly valuable.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
