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    BAH
    Earnings call· Mar 2026(Q4 FY26)

    Booz Allen Hamilton Holding Q4 FY26 earnings call BAH

    May 22, 2026 Source

    Executive summary

    Booz Allen Hamilton Q4 FY26 — Navigating Headwinds with Strategic Transformation and Profitability Exceeding Expectations

    Booz Allen Hamilton navigated a challenging fiscal year 2026, marked by declining revenue in its Civil business and significant market changes, yet exceeded profit expectations through strong execution and cost discipline. The company is strategically transforming, focusing on cyber and defense tech growth vectors, AI integration, and unique partnerships, positioning itself for reacceleration despite anticipated near-term market volatility and continued civil portfolio declines in the first half of fiscal year 2027.

    Highlights

    5

    • Profitability exceeded revised expectations for FY26, delivering $1.2 billion of adjusted EBITDA and an 11% adjusted margin.

    • Significant growth in out-based opportunities, including a nearly 90% increase in OTA proposal submissions and about a 50% increase in OTA awards compared to the prior year.

    • Generated robust free cash flow of $951 million for FY26.

    • Backlog ended FY26 at over $38 billion, up about 3% year-over-year.

    • Civil's fourth quarter book-to-bill was 1.2x, led by the Health business.

    Concerns

    5

    • Gross revenue declined for FY26, driven by the Civil business.

    • Q4 revenue declined 6.4% year-over-year to $2.8 billion.

    • Civil business declined 23% year-over-year in the fourth quarter.

    • FY27 Civil portfolio is anticipated to decline high single digits.

    • FY27 adjusted EPS guidance of $6.00-$6.35 is lower than FY26 actual of $6.51.

    Guidance & targets

    7
    CategoryTargetConfidence
    Revenue
    $11.2B-$11.7B
    high materiality
    Medium
    National Security portfolio growth
    mid-single digits
    medium materiality
    Medium
    Civil portfolio decline
    high single digits
    medium materiality
    Medium
    Adjusted EBITDA
    $1.24B-$1.29B
    high materiality
    Medium
    Adjusted EBITDA margin
    about 11%
    medium materiality
    Medium
    Adjusted EPS
    $6.00-$6.35
    high materiality
    Medium
    Free Cash Flow
    $825M-$925M
    high materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    National Security
    Q4 growth primarily driven by strong demand for Intel work, partially offset by lower billable expenses for defense customers. Expected to drive overall growth in coming quarters, with margin expansion.
    		—1.6%——
    Civil
    Q4 decline driven by comp headwinds from PTM contract roll-off and run rate reductions on other contracts. Expected to continue declining in FY27, particularly in H1, due to challenging comps and shorter/smaller recompetes. Q4 book-to-bill led by Health business.
    Book-to-bill: 1.2x (Q4)
    		—-23%——

    Operational metrics

    24
    Gross Revenue
    $11.2Bdeclined YoY
    FY26

    Year-over-year decline driven by Civil business.

    Adjusted EBITDA
    $1.2Bexceeded expectations
    FY26

    Despite headwinds, profitability exceeded revised expectations.

    Adjusted Diluted EPS
    $6.51
    FY26
    Capital deployed
    $1.1B
    FY26

    Deployed through strategic investments, dividends, and share repurchases.

    Trailing 12-month Book-to-bill ratio
    1.1x
    FY26

    Including the MC TP award currently under protest, would have been nearly 1.2x.

    Revenue
    $2.8B-6.4% YoY
    Q4 FY26
    Revenue ex billable expenses
    ~7%down YoY
    Q4 FY26
    Adjusted EBITDA
    $309Mup 50 bps YoY
    Q4 FY26

    Delivered above expectations, driven by continued strong contract execution and disciplined cost management.

    Adjusted Diluted EPS
    $1.78up ~11% YoY
    Q4 FY26

    Increase driven by strong profitability, lower tax rate, reduced share count, and $12 million pretax unrealized gains related to ventures portfolio.

    Net Bookings
    $2.5B
    Q4 FY26
    Book-to-bill ratio
    0.9x
    Q4 FY26

    Including the MC TP award currently under protest, would have been nearly 1.2x.

    Funded Backlog
    $4.3Bsequentially increased
    end of FY26
    Capital deployed
    $366M
    Q4 FY26
    Cash on hand
    $728M
    end of Q4 FY26
    Total liquidity
    $2.2B
    end of Q4 FY26
    Net leverage ratio
    2.6x
    end of Q4 FY26
    OTA proposal submissions growth
    nearly 90%increase YoY
    FY26
    OTA awards growth
    about 50%increase YoY
    FY26
    Cost reduction program
    $150M
    annualized

    Targeted annualized savings.

    Cost reduction realized
    ~1/3
    FY26

    Realized portion of the total cost reduction program.

    Cost reduction retained
    ~40%
    ongoing

    Portion of cost reductions generally kept, given the nature of contracts.

    Unrealized gains from ventures portfolio
    $12M
    Q4 FY26

    Contributed to adjusted diluted EPS increase.

    Unrealized gains from ventures portfolio impact on EPS
    $0.11
    FY26

    Impact to adjusted diluted EPS.

    IRS refund
    $170M
    FY28

    Previously disclosed, now anticipated in fiscal year 2028.

    Orderbook & backlog

    2
    Total backlog$38Bend of FY26

    up ~3% YoY

    Funded backlog$4.3Bend of FY26

    sequentially increased

    Deals & partnerships

    1
    DeFi SecurityStrengthens ability to scale cyber product sales and expand market reach.

    Recently announced acquisition of DeFi Security strengthens the company's ability to scale cyber product sales and expand its reach across the market, particularly for AgenticCyber products for federal and commercial customers.

    Risks & headwinds

    5
    Civil business declineFY27, particularly H1

    Expected high single digits decline for FY27; declined 23% YoY in Q4 FY26.

    Mitigation: Focus on capturing existing pipeline, injecting new technology, and leading in outcomes-based procurement methods.

    Procurement changes uncertaintyNear term

    Unquantified, but described as causing continued uncertainty.

    Mitigation: Viewing changes as opportunities in the medium and long term, preparing through decisive actions and strategic transformation.

    Choppy funding environmentOngoing, especially in election year

    Unquantified, but noted as incremental funding and potential for volatility.

    Mitigation: Guidance incorporates more likely cases, but acknowledges fluidity; focus on strong execution and value to customers.

    DHS budget challengesOngoing

    Unquantified, but noted as a significant part of the pipeline.

    Mitigation: Focus on capturing existing pipeline and bringing innovation to missions.

    Impact of strategic venture investments on EPSFY27

    FY27 adjusted EPS guidance does not assume any impact; contributed $0.11 per share in FY26.

    Mitigation: Explicitly stating the exclusion from guidance and prior year impact for transparency.

    What to watch in Q1 FY27

    5

    Civil revenue growth trajectory

    H2 FY27
    CurrentDeclined 23% YoY in Q4 FY26; expected high single digits decline for FY27.
    TargetSequential improvement, return to growth in H2 FY27.

    Why it matters

    Indicates stabilization and potential recovery of a challenged segment, crucial for overall company growth.

    For Civil, we anticipate a decline of high single digits for the year as the Civil business continues to work through challenging comps, particularly in the first half of the year. From a quarterly cadence perspective, we see the first quarter as the low point for growth, with sequential improvement throughout the year.

    Q&A highlights

    10

    How should we think about the transition to drive revenue growth independent of headcount, and the relationship of funding awards to revenue, given funded backlog was down last year?

    Management expects productivity gains from delayering, outcome-based/fixed-price contracts, and IP monetization to diverge headcount and revenue growth over time, leading to higher profit growth than revenue growth, and higher revenue growth than headcount growth. Noted a 50% increase in OTA wins and 90% increase in pipeline. Funding dynamics improved in recent months.

    “Over time, not only in FY '27, but over time, we expect to see productivity gains from some of the work that we've done, for example, around [ delayering ], identifying our business, both on the infrastructure, but importantly, in the way we prosecute the market the move to outcome-based and fixed price and the monetization of our IP. And so that is what's going to diverge the curves between headcount growth and revenue growth.”

    asked by Gavin Parsons · answered by Horacio Rozanski

    2 min read7 chapters

    Detailed Narrative

    01

    Leadership Updates and Strategic Positioning

    Horacio Rozanski highlighted the appointment of Troy Lahr as CFO and Kristine Martin Anderson as President and COO, emphasizing their roles in driving the company's strategic positioning and performance. The company views current market changes, including procurement shifts, as significant opportunities for the medium and long term, having prepared for this market through decisive actions in FY26. This strategic alignment aims to leverage technological superiority and address national security priorities.

    02

    FY26 Performance and Cost Discipline

    Despite declining revenue, particularly in the Civil business, FY26 profitability exceeded revised expectations, delivering $1.2 billion of adjusted EBITDA and an 11% margin. This strong bottom-line performance was achieved through outstanding execution of controllable levers and exceptional cost📎 discipline, while continuing to invest for future growth. The company's ability to maintain profitability amidst headwinds underscores its operational resilience.

    03

    Strategic Transformation and Growth Vectors

    Booz Allen accelerated its strategic transformation, driving significant growth in out-based opportunities, including a nearly 90% increase in Other Transaction Authority (OTA) proposal submissions and about a 50% increase in OTA awards compared to the prior year. Key focus areas for FY27 include accelerating cyber and defense tech growth, injecting AI and Agentic capabilities across existing work and new opportunities, and leveraging unique partnerships with companies like NVIDIA and AWS.

    04

    Civil and National Security Market Dynamics

    The company expects its civil and national security markets to remain bifurcated. The Civil portfolio, despite a Q4 book-to-bill of 1.2x, is expected to continue declining in FY27, especially in the first half, due to challenging comps and shorter contract durations. Conversely, the national security portfolio is anticipated to drive overall growth in the coming quarters⏳, particularly in cyber and defense tech, leading to expected margin expansion across the portfolio.

    05

    Cyber Acceleration and AI Integration

    Booz Allen is accelerating growth in cyber by fusing deep AI expertise into its offerings, developing Agentic AI-enabled cyber solutions like the VLX suite, and strengthening Zero Trust capabilities. The recently announced acquisition of DeFi Security further enhances its ability to scale cyber product sales and expand market reach for both federal and commercial customers, addressing the increasing demand for AI-enabled cyber solutions.

    06

    Operational Priorities for FY27

    Key operational priorities for FY27 include maximizing significant opportunities in cyber and defense tech, driving profit growth by building scale and go-to-market capacity for product offerings, and becoming a leader in new outcomes-based procurement methods. Additionally, the company aims to accelerate momentum in Civil by capturing the existing pipeline and continuing to inject new technology into critical missions, focusing on a return to growth.

    07

    Capital Deployment and Financial Flexibility

    The company generated robust free cash flow of $951 million in FY26 and deployed $1.1 billion of capital through strategic investments, dividends, and share repurchases. It ended Q4 with $728 million cash on hand and $2.2 billion total liquidity, maintaining a net leverage ratio of 2.6x adjusted EBITDA. This strong balance sheet provides both operational and strategic flexibility to drive growth through organic and inorganic investments.

    AI-generated summary of the company’s earnings call. Not investment advice.