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Booz Allen Hamilton Holding Corp (BAH)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 delivered $2.92B revenue (+13.5% YoY), GAAP diluted EPS $1.45 (+30.6% YoY), and adjusted diluted EPS $1.55 (+9.9% YoY); adjusted EBITDA was $331.7M with 11.4% adjusted EBITDA margin on revenue .
  • Guidance tightened and the midpoint raised across all principal FY25 metrics: revenue growth to 12–13%, adjusted EBITDA to $1.31–$1.33B, ADEPS to $6.25–$6.40, operating cash flow to $950–$1,025M, and FCF to $850–$925M .
  • Backlog reached $39.4B (+14.8% YoY) with quarterly book-to-bill of 0.37x and trailing-12-month book-to-bill of 1.41x, reflecting robust demand despite expected procurement slowing in a presidential transition .
  • Capital returns were significant: dividend raised to $0.55/share and ~$149M buybacks in Q3; authorization was expanded by $500M to about $1.0B capacity—potential stock-supportive catalysts .
  • Management emphasized Booz Allen’s positioning as “the advanced technology company” with the largest federal AI business and zero-trust at scale (Thunderdome), plus expanded partnerships (Palantir, AWS) to accelerate mission outcomes—key narrative tailwinds .

What Went Well and What Went Wrong

What Went Well

  • Double-digit growth across markets; defense +19% YoY, intelligence +11%, civil +8%, underpinning 13.5% total revenue growth and margin expansion to 11.4% adjusted EBITDA margin .
  • Strategic momentum and VoLT execution drove strong contract-level performance and cost discipline; net income rose 28.4% YoY, adjusted operating income +15.9% YoY, adjusted EBITDA +14.1% YoY .
  • Management quote: “Our third quarter performance was excellent… Booz Allen is the advanced technology company driving speed to outcomes” (Horacio Rozanski) .

What Went Wrong

  • Procurement slowdown typical of administration transitions began to appear, more pronounced in civilian agencies; quarterly book-to-bill fell to 0.37x, though TTM remained 1.41x .
  • Quarterly operating cash flow fell to $150.8M (vs $233.985M prior-year quarter), and FCF to $133.6M (vs $210.9M), driven by timing of tax payments and other outflows .
  • Client staff headcount was “approximately flat” vs prior quarter as management emphasized near-term productivity; CFO noted “billability in December was the highest… on record,” implying bench clearance that they plan to rebalance via targeted hiring .

Financial Results

MetricQ3 FY24Q1 FY25Q2 FY25Q3 FY25
Revenue ($USD Billions)$2.570 $2.942 $3.146 $2.917
Revenue ex Billable Expenses ($USD Billions)$1.770 $1.997 $2.178 $1.979
Diluted EPS ($)$1.11 $1.27 $3.01 $1.45
Adjusted Diluted EPS ($)$1.41 $1.38 $1.81 $1.55
Adjusted EBITDA ($USD Millions)$290.6 $302.0 $363.95 $331.7
Net Income Margin (%)5.7% 5.6% 12.4% 6.4%
Adjusted EBITDA Margin on Revenue (%)11.3% 10.3% 11.6% 11.4%

Segment growth (Q3 FY25 YoY):

SegmentYoY Growth
Defense+19%
Intelligence+11%
Civil+8%

Key KPIs:

KPIQ1 FY25Q2 FY25Q3 FY25
Total Backlog ($USD Billions)$36.178 $41.254 $39.413
Quarterly Book-to-Bill (x)1.72 2.61 0.37
Trailing-12M Book-to-Bill (x)1.43 1.52 1.41
Total Headcount35,100 35,800 35,900
Client Staff Headcount32,000 32,700 32,700

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue GrowthFY2511.0%–13.0% 12.0%–13.0% Raised midpoint
Adjusted EBITDA ($M)FY25$1,300–$1,330 $1,310–$1,330 Narrowed up; raised low end
Adjusted EBITDA Margin on RevenueFY25~11% ~11% Maintained
Adjusted Diluted EPS ($)FY25$6.10–$6.30 $6.25–$6.40 Raised
Net Cash from Ops ($M)FY25$925–$1,025 $950–$1,025 Raised low end
Free Cash Flow ($M)FY25$825–$925 $850–$925 Raised low end
Adjusted Effective Tax RateFY2523%–25% 23%–24% Narrowed down
Avg Diluted Shares (M)FY25128–129 128–129 Maintained
Interest Expense ($M)FY25$175–$185 $175–$185 Maintained
Depreciation & Amortization ($M)FY25~$160 ~$160 Maintained
Cash Taxes (Sec. 174) ($M)FY25~$100 ~$100 Maintained
Capital Expenditures ($M)FY25~$100 ~$100 Maintained
DividendQ3 FY25$0.51/share (prior quarter) $0.55/share declared Raised

Notes: FY25 guidance includes ~$80–$90M inorganic revenue contribution from PGSC .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 FY25)Previous Mentions (Q2 FY25)Current Period (Q3 FY25)Trend
AI leadership & VoLT execution“VoLT continues to fuel growth”; strong hiring; multi-year thesis Insurance recovery, claimed cost provision boosted reported results; momentum intact Largest federal AI business; zero-trust (Thunderdome) at scale; emphasis on speed to outcomes Strengthening narrative
Procurement/transition dynamicsNormal seasonal/market cadence Very strong bookings (2.61x B2B); pipeline solid Short-term slowdown typical of transitions; more pronounced in Civil; TTM B2B 1.41x Temporary headwind acknowledged
Partnerships (AWS, Palantir)Not highlightedNot highlighted in 8-KExpanded partnerships with Palantir (Pacific warfighting prototype) and AWS (cloud/cyber/genAI) Expanding ecosystem
Segment performanceBroad demand and headcount build Markets strong; defense/civil double-digit growth Defense +19%, Intel +11%, Civil +8%; space and cyber as growth vectors Defense/Intel accelerating
Capital deploymentQ1 deployed $250.8M; buybacks $89.5M; div $0.51 Q2 deployed $300.3M; buybacks $232.3M; div $0.51 Q3 deployed ~$227.6M; buybacks ~$148.8M; div lifted to $0.55; repurchase capacity +$500M Aggressive returns maintained
Regulatory/legalDOJ reserve impacted FY24; carried over $115.3M insurance recovery; claimed cost provision change DOJ settlement net of insurance immaterial to FY25; ADEPS includes ~$15M SnapAttack gain in Q4 Non-GAAP items fading

Management Commentary

  • “We now have the largest AI business in the federal government and one of the largest cyber businesses in the world… with Thunderdome, we have also built and deployed the largest integrated zero-trust solution at scale.” — Horacio Rozanski .
  • “We delivered about 14% top line growth… $332 million in adjusted EBITDA at an 11.4% adjusted EBITDA margin… trailing 12-month book-to-bill 1.41x… tightening towards the upper end of our guidance ranges.” — Matt Calderone .
  • “We recently announced an expanded partnership with Palantir… and with Amazon Web Services to jointly invest, create and collaborate… in cloud migration, cybersecurity and generative AI.” — Horacio Rozanski .
  • “We are poised to deliver another year of double-digit growth in revenue and adjusted EBITDA… positioned to exceed our target of $1.2–$1.3B of adjusted EBITDA… almost entirely through organic performance.” — Matt Calderone .

Q&A Highlights

  • Hiring/productivity: December billability “highest on record,” bench cleared; plan to ramp hiring for large wins, using AI to accelerate resume screening and deployment to match dynamic demand .
  • Transition impact: Agencies recalibrating; slowdown more in Civil; minimal direct impact to Booz Allen contracts so far; backlog and pipeline support FY26 outlook .
  • Civil outlook and Thunderdome: Civil growth to continue with outcome-based work and AI-driven efficiency; Thunderdome adoption progressing at expected pace, driving impact for clients .
  • Macro policy comparisons: Current efficiency-driven DoD cost initiatives are “qualitatively different” from 2011 sequestration; contracting model shifting to outcomes/innovation vs. LPTA .
  • Capital deployment: ~$500M buybacks over first nine months; net leverage 2.3x; authorization expanded—flexibility to deploy aggressively given strategic confidence .

Estimates Context

  • Wall Street consensus (S&P Global Capital IQ) for Q3 FY25 EPS, revenue, and EBITDA was not retrievable due to an SPGI daily request limit. As a result, we cannot provide definitive beats/misses vs consensus for Q3 FY25 in this recap. We will update this section when S&P Global access is restored.

Key Takeaways for Investors

  • The raised FY25 guidance midpoint (revenue, ADEPS, CFO, FCF) and tightened ranges signal confidence and operational execution—a likely positive for estimate revisions and sentiment .
  • Backlog at $39.4B and TTM book-to-bill 1.41x provide revenue visibility through a transition-related procurement lull; Q3’s 0.37x quarterly book-to-bill looks transitory per management .
  • Narrative tailwinds from leadership in AI/zero-trust and new AWS/Palantir partnerships could support medium-term growth, particularly in Defense/Intel and cross-pollination into Civil .
  • Capital return cadence is robust (dividend to $0.55; ~$149M Q3 buybacks; +$500M authorization), offering downside support and signaling balance sheet flexibility (net leverage 2.3x) .
  • Non-GAAP noise (insurance recovery, claimed cost provision) in Q2 has normalized; Q3 performance reflects core operations, with FY25 ADEPS guided higher and DOJ settlement impact immaterial .
  • Segment mix is favorable: Defense and Intelligence growth outpacing Civil near term; space, cyber, and AI remain secular drivers per management .
  • Near-term trading: watch for procurement headlines and any Civil award timing impacts; medium-term thesis supported by VoLT-led operating efficiency, backlog conversion, and outcome-based contracting momentum .