Booz Allen Hamilton Holding Corp. - Q2 2025 (Ended Sept 30, 2024) Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2024 (Q2 of Fiscal Year 2025). Booz Allen Hamilton provides management and technology consulting, analytics, engineering, digital solutions, mission operations, cyber services, and artificial intelligence primarily to U.S. government agencies. The company operates as a single reportable segment with approximately 35,800 employees as of the period end.
Key Financial Metrics
| Metric | Q2 2025 (3 Months) | Q2 2024 (3 Months) | YTD 2025 (6 Months) | YTD 2024 (6 Months) |
|---|---|---|---|---|
| Revenue | $3,146.4 million | $2,666.3 million | $6,088.2 million | $5,320.8 million |
| Operating Income | $548.6 million | $267.0 million | $803.8 million | $501.4 million |
| Operating Margin | 17.4% | 10.0% | 13.2% | 9.4% |
| Net Income | $390.1 million | $170.7 million | $555.3 million | $332.1 million |
| Diluted EPS | $3.01 | $1.29 | $4.27 | $2.51 |
| Free Cash Flow (YTD) | $583.0 million | |||
| Total Debt | $3,393.3 million | |||
| Cash & Equivalents | $558.7 million | |||
| Total Liquidity | $1.6 billion (includes $998.6M revolver availability) |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 18.0% year-over-year (YoY) for the quarter and 14.4% YoY for the six months. Growth was driven by strong demand, headcount growth (up ~2,700 employees), and higher billable expenses.
- Profitability Surge: Operating income increased 105.5% YoY for the quarter. This significant jump was primarily due to a $121.7 million reduction in the provision for claimed costs (a favorable accounting adjustment) and $115.3 million in insurance recoveries related to a prior fiscal year settlement.
- Expense Management: General and administrative expenses decreased 25.1% YoY for the quarter, largely offset by the aforementioned insurance recoveries.
- Acquisition: The company completed the acquisition of PAR Government Systems Corporation (PGSC) for approximately $98.7 million in June 2024, adding $230.5 million to the backlog.
Guidance, Outlook, and Risks
- Backlog: Total backlog increased 17.7% to $41.3 billion as of September 30, 2024. Funded backlog stands at $6.6 billion. Management expects to recognize approximately 70% of remaining performance obligations ($11.0 billion) as revenue over the next 12 months.
- Capital Allocation: The company continues to return capital to shareholders. A quarterly dividend of $0.51 per share was declared. As of September 30, 2024, approximately $699.7 million remained under the share repurchase program.
- Risks: Key risks include U.S. government budget constraints, potential government shutdowns, delays in appropriations, and the outcome of ongoing government audits regarding claimed costs. The company notes that final cost rates for audited years remain subject to negotiation.
- Outlook: Management anticipates that cash from operations, existing cash, and revolver capacity will be sufficient to meet requirements for the next 12 months.
Investor Verification Checklist
- Non-GAAP Adjustments: Verify the sustainability of the $121.7 million revenue increase and $115.3 million insurance recovery, as these are non-recurring items significantly boosting current margins.
- Claimed Costs Provision: Monitor the status of the Defense Contract Audit Agency (DCAA) audits and the final resolution of cost rates, as future adjustments could materially impact revenue and income.
- Backlog Conversion: Assess the ability to convert the $10.3 billion unfunded backlog into funded orders given potential federal budget uncertainties.
- Debt Structure: Review the impact of variable interest rates on the $1.57 billion Term Loan A, noting the company has hedged $550 million via interest rate swaps.
- Headcount vs. Revenue: Confirm that the 2,700 increase in headcount continues to translate into billable hours and revenue growth in subsequent quarters.