Booz Allen Hamilton Holding Corp. - 10-Q Summary (Q1 2026)
Business Context and Reporting Period
This filing covers the quarterly period ended June 30, 2025 (First Quarter of Fiscal Year 2026). Booz Allen Hamilton is an advanced technology company providing AI, cyber, and technology solutions primarily to U.S. federal government customers (Defense, Intelligence, and Civil) and select commercial clients. The company operates as a single reportable segment with approximately 33,400 employees.
Key Financial Metrics
| Metric | Q1 2026 (Jun 30, 2025) | Q1 2025 (Jun 30, 2024) |
|---|---|---|
| Revenue | $2,924 million | $2,942 million |
| Operating Income | $257 million | $255 million |
| Net Income | $271 million | $165 million |
| Diluted EPS | $2.16 | $1.27 |
| Operating Margin | 9.0% | 8.7% |
| Effective Tax Rate | (25.5)% | 22.9% |
| Cash from Operations | $119 million | $52 million |
| Total Debt | $3,979 million | $3,998 million |
| Cash & Equivalents | $711 million | $298 million |
| Total Liquidity | $1.7 billion | N/A |
Material Changes vs. Prior Period
- Revenue: Decreased 1% to $2.924 billion, primarily driven by a 7% reduction in billable expenses (subcontractor and travel costs) due to customer demand timing.
- Profitability: Net income surged 64% to $271 million. This was largely driven by a one-time tax benefit of $55 million (vs. $49 million expense prior year) resulting from an $89 million reduction in uncertain tax position reserves following an IRS examination.
- Costs: Cost of revenue increased 4% to $1.423 billion due to higher salaries and benefits, partially offset by lower business expenses. This included $36 million in severance charges related to a Civil business restructure.
- Backlog: Total backlog increased 10.7% to $38.3 billion, with funded backlog at $4.0 billion and unfunded backlog at $10.4 billion.
- Cash Flow: Operating cash flow improved significantly to $119 million, aided by strong collections and lower compensation disbursements.
Guidance, Outlook, and Risks
- Outlook: Management expects to recognize approximately 65% of remaining performance obligations ($10.6 billion) as revenue over the next 12 months.
- Capital Allocation: The company repurchased 1.4 million shares for $154 million and paid $70 million in dividends. Approximately $591 million remains under the share repurchase program.
- Regulatory Environment: The company faces an uncertain U.S. political and budget environment, including potential contract reviews, cost-cutting mandates, and delays in procurement due to government efficiency initiatives.
- Tax Legislation: The "One Big Beautiful Bill Act" (OBBB) was enacted on July 4, 2025, extending certain tax provisions; the company is assessing the impact.
- Risks: Key risks include U.S. government spending reductions, contract cancellations, delays in funding, and ongoing audits/investigations regarding labor time reporting and procurement integrity.
Investor Verification Checklist
- Tax Benefit Sustainability: Verify the permanence of the $89 million tax reserve reduction and the status of the Joint Committee on Taxation (JCT) review regarding the amended federal returns.
- Severance Impact: Monitor the execution of the Civil business restructure and the associated $36 million in severance charges to ensure no further unexpected costs.
- Backlog Conversion: Assess the ability to convert the $10.4 billion unfunded backlog into revenue given the current political climate and potential government spending cuts.
- Billable Expense Trends: Confirm if the decline in billable expenses is a structural shift in contract mix or a temporary timing anomaly.
- Debt Covenants: Review compliance with financial covenants, particularly as interest rates remain elevated and debt service costs increase.