Thank you. Good morning, and thank you all for joining us for Booz Allen's fourth quarter fiscal year 2026 earnings call.

We hope you've had an opportunity to read the press release we issued earlier this morning. We also have provided presentation slides on our website and are now on slide two.

With me today to talk about our business and financial results are Horacio Rozanski, our Chairman and Chief Executive Officer; Kristine Martin Anderson, President and Chief Operating Officer; and Troy Lahr, Executive Vice President and Chief Financial Officer. As shown in the disclaimer on slide three, please keep in mind that some of the items we will discuss this morning are forward-looking and may relate to future events or our future financial performance, and may involve known and unknown risk, uncertainties, and other factors that may cause actual results to differ materially from forecasted results discussed in our SEC filings and on this call.

All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements and speak only as of the date made. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

During today's call, we will also discuss some non-GAAP financial measures and other metrics, which we believe provide useful information for investors. We include an explanation of adjustments and other reconciliations of our non-GAAP measures to the most comparable GAAP measures in our fourth quarter fiscal year 2026 earnings release and slides.

Numbers presented may be rounded, and as such, may vary slightly from those in our public disclosure. It is now my pleasure to turn the call over to our Chairman and CEO, Horacio Rozanski.

We are now on slide four.

Thank you, Dustin. Good morning, everyone.

Thank you for joining the call. Before diving into our results, I would like to begin by acknowledging two leadership updates we announced last month.

First, I am very pleased to have our new CFO, Troy Lahr, with us on today's call. Troy joined Booz Allen earlier this month.

He brings more than 25 years of financial leadership experience across the defense industry. Most recently, Troy served as CFO of Sierra Space, a defense tech space company.

Prior to that, he was CFO of Boeing's Defense, Space & Security business. I am excited to have him on our team.

Troy, welcome. Second, our Chief Operating Officer, Kristine Martin Anderson, has assumed the additional position of President.

Kristine has been a growth leader at Booz Allen for over two decades. Today, Kristine and I work together to drive Booz Allen's strategic positioning, business direction, and performance.

Naming her President recognizes the extraordinary impact and success she is having across the company. I am grateful for Kristine's leadership and look forward to continuing our partnership as we lead Booz Allen into the future.

Congrats, Kristine. Today, Kristine, Troy, and I will share Booz Allen's results for fiscal year 2026 and our outlook for the year ahead.

I will start by framing our performance in the context of the environment and our strategy. Kristine will then discuss our business trajectory and operational priorities, and Troy will then cover our financial results and fiscal year 2027 guidance.

Let's start with our performance. Fiscal year 2026 was the most challenging year we've faced as a public company.

We navigated unprecedented headwinds in our civil business as well as significant market changes across the board. Our team responded with outstanding execution of all controllable levers, and we went pedal to the metal in our strategic transformation.

Our numbers for the year reflect those efforts as well as exceptional cost discipline. Despite declining revenue, profitability exceeded our revised expectations.

What's particularly notable is that we delivered this bottom-line performance while continuing to invest for future growth. On the strategic front, the moves are simply too many to detail.

Here are some examples. We drove significant growth in outcome-based opportunities and contracts.

This includes an nearly 90% increase in Other Transaction Authority, or OTA, proposal submissions, and about a 50% increase in OTA awards compared to the prior year. We accelerated the creation of differentiated offerings and products across our cyber and defense tech vectors, including our Velox suite and our EdgeXtend product lines.

We built a pipeline of opportunities based on unique partnerships, including with Nvidia, AWS, a16z companies, and our own Booz Allen Ventures. I am extremely proud of how our entire team performed throughout the year.

Our people stayed focused on what they could control, built tech for the nation, and delivered with utmost excellence. Put simply, we are a stronger company than we were a year ago.

Let me now turn to fiscal year 2027 in terms of the current environment, our outlook, and our strategy. Today's macro environment is being shaped by multiple forces.

Geopolitical competition is intensifying. The global security environment is becoming more contested.

As technology advances and converges at breakneck speed, technological superiority is becoming even more central to national and economic security. For the administration and across our customers, these dynamics translate into a clear set of priorities, including defending the homeland, increasing warfighter readiness and lethality, ensuring American leadership in AI and cyber, and making government more efficient.

Increasingly, achieving those priorities requires departments and agencies to buy differently, putting greater emphasis on speed, commercial solutions, and accountability for outcomes. We do expect these procurement changes to cause continued uncertainty in the near term.

Why? Because change this big is difficult, even when it's necessary.

Importantly, we view these changes as both overdue and as significant sources of opportunity for Booz Allen in the medium and long term. This is the market we have been preparing for.

The decisive actions we took in fiscal year 2026 have made Booz Allen more agile and preserve our ability to invest in fast-growing, highly profitable aspects of our business. Thus, we enter fiscal year 2027 with both momentum and focus.

Our strategic agenda can be summarized as follows. First, investing organically and inorganically to accelerate our cyber and defense tech growth vectors, with particular focus on fully monetizing our sizable intellectual property portfolio.

Second, injecting AI and agentic into all we do, from our existing work to our newest opportunities to our own infrastructure. Third, accelerating the next wave of tech investments into the market, including physical AI, quantum, 6G, and AI RAN.

Fourth, maximizing the value of our unique network of tech partnerships and VC investments. When I put it all together, I am incredibly optimistic about the opportunities ahead.

We're moving faster. We're investing with focus.

We're building the technologies that make America safer and stronger. With that, Kristine, over to you to discuss the trajectory of our business.

Thank you, Horacio. I'll begin by describing what we are seeing across our business and how that informs our outlook for the year ahead.

We expect our civil and national security markets to remain bifurcated, with different near-term dynamics and different paths to growth. In our civil portfolio, while demand remains below historical levels, we are continuing to see acceleration.

Civil's fourth quarter book-to-bill was 1.2 times, led by our health business. Demand is broad-based and leading to new opportunities.

While the volume of awards is high, many recompetes have shorter periods of performance and smaller scope. These dynamics mean it will take time for the uptick in demand to translate into growth.

We are also facing challenging comps, particularly in the first and second quarter, due to the timing of last year's contract cuts and reductions in our work at Treasury. As a result, we expect our civil portfolio to continue declining this year, particularly in the first half.

Conversely, we expect our national security portfolio to drive our overall growth in the coming quarters. In the fourth quarter alone, we won $1.7 billion of work.

We are well positioned against national security priorities, especially in cyber and defense tech. As these growth areas outperform, we also expect to see margin expansion across the portfolio.

I'd like to take a few moments to specifically describe how we are leaning forward to accelerate growth in cyber. You may remember that we first talked about the intersection of cyber and AI at our Investor Event in 2023.

Today, demand for AI-enabled cyber solutions is increasing and will be a major driver in fiscal year 2027 and beyond. Booz Allen is already a significant player across the entire cyber landscape.

We support the most important cyber missions in national security and help defend federal agencies from cyber attacks. We also serve an impressive set of Fortune 500 companies across all 16 critical infrastructure areas, and we respond to over a thousand cyber incidents a year.

We are not stopping there. As AI-driven cyber attacks grow in speed and scale, we are fusing our deep AI expertise into our cyber offerings and accelerating their path to market.

Here are a few examples. We emulated the advanced adversary by using agentic AI to automate the cyber kill chain.

This helped us better understand the threat and build next-generation defensive solutions to defeat it. We are using AI to strengthen our zero-trust capabilities, which help to contain the adversary's movement when compromise does occur.

We are fast-tracking the development of our Velox suite of agentic cyber products for both federal and commercial customers. Within commercial, our recently announced acquisition of Defy Security strengthens our ability to scale cyber product sales and expands our reach across the market.

We are bringing our decades of cyber expertise, our AI prowess, and our investment capacity to drive substantial growth and transformation in this new era of agentic cyber. Stepping back, cyber is just one area of opportunity ahead of us in national security.

Here are two additional examples across the broader portfolio. First, we are proud to have been awarded an OTA on Golden Dome for America's space-based interceptor program.

Our work focuses on a critical element of a prototype system for space-based missile defense. In the fourth quarter, Booz Allen was awarded Breakthrough Engineering and Advanced Technology Solutions, or BEATS.

BEATS is a $937 million, single-award, engineering and technology contract. It supports the Army's modernization priorities.

We will build tech to meet the warfighter's immediate and future needs. This work adds to our portfolio of flagship engineering programs where we are injecting our advanced technologies into national security missions.

As we move into fiscal year 2027, we will focus on the following operational priorities to drive our return to growth. First, maximize the significant opportunities we see in cyber and defense tech this year.

Second, drive profit growth by building scale and go-to-market capacity for our product offerings. Third, lean into and become a leader in new outcome-based procurement methods and opportunities.

Fourth, accelerate momentum in civil by capturing the existing pipeline and continuing to inject new tech into critical missions. In closing, Booz Allen has momentum.

We are focused on growth, and we are optimistic about the year ahead. I'll now turn the call over to Troy to take us through the numbers.

Welcome to your first Booz Allen earnings call, Troy.

Thanks, Kristine, and good morning, everyone. Before discussing the quarter in more detail, let's turn to slide five to recap our fiscal year 2026 results.

For the year, gross revenue was $11.2 billion, with the year-over-year decline driven by our civil business. Despite the headwinds this year, we exceeded our profit expectations, delivering $1.2 billion of adjusted EBITDA and an adjusted margin of 11%.

Adjusted diluted earnings per share for the year was $6.51. We generated robust free cash flow of $951 million and deployed $1.1 billion of capital through strategic investments, dividends, and share repurchases.

Finally, from a demand perspective, we ended the year with backlog of over $38 billion and a trailing 12-month book-to-bill of 1.1 times. Despite the macro environment challenges this year, we remain focused on driving strong operational execution and accelerating investments across our key growth vectors while also returning capital to shareholders.

Now let me walk you through our fourth quarter performance in more detail. In the quarter, revenue declined 6.4% year-over-year to $2.8 billion.

Revenue ex billable expenses was down approximately 7% versus the prior-year period. Our national security portfolio grew 1.6% year-over-year in the fourth quarter.

This was primarily driven by strong demand for our Intel work, partially offset by lower billable expenses for defense customers. As expected, our civil business declined 23% year-over-year, driven by comp headwinds from the PTEMS contract roll-off and run-rate reductions on other contracts.

Turning to profitability, we delivered above expectations in the fourth quarter, driven by continued strong contract execution and disciplined cost management. Adjusted EBITDA for the quarter was $309 million and an adjusted EBITDA margin of 11.1%, up 50 basis points year-over-year.

Adjusted diluted earnings per share increased roughly 11% year-over-year to $1.78. This increase was driven by strong profitability, a lower tax rate, a reduced share count, and $12 million of pretax unrealized gains related to our ventures portfolio.

Our tax rate in the quarter benefited from higher R&D tax credits. Regarding cash flows, collections were strong in the quarter, driven by efficiencies in billing and payment processing improvements.

Free cash flow in the fourth quarter was strong, at $212 million. Moving to demand and leading indicators, net bookings for the quarter totaled $2.5 billion.

Our book-to-bill was 0.9 times for the quarter, with a trailing 12-month book-to-bill of 1.1 times. Including the MCTP award that is currently under protest, both the quarterly and trailing 12-month book-to-bills would have been nearly 1.2 times.

Backlog at the end of fiscal year totaled $38 billion, up about 3% year-over-year. We also saw funding improve in the fourth quarter, with our funded backlog increasing sequentially to $4.3 billion.

Finally, on capital deployment and the balance sheet, we deployed a total of $366 million in the fourth quarter, which consisted of $219 million in strategic investments made through Booz Allen Ventures and venture partnerships and $147 million in shareholder returns via quarterly dividends and share repurchases. From a balance sheet perspective, we ended the quarter with $728 million of cash on hand and total liquidity of $2.2 billion.

Our net leverage ratio at the end of the quarter was 2.6 times adjusted EBITDA for a trailing 12 months. Our strong balance sheet provides us both operational and strategic flexibility to drive growth through both organic and inorganic investments.

I'll now walk you through our outlook on slide eight. For fiscal year 2027, we expect to deliver revenue between $11.2 and $11.7 billion, with the impact of recent divestitures and acquisitions roughly netting out.

We expect performance to be bifurcated across our national security and civil markets, but we see improving trends across both markets. We expect the national security portfolio to grow mid-single digits.

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.

We expect to generate adjusted EBITDA in the range of $1.24 billion and $1.29 billion. This implies a full-year adjusted EBITDA margin of about 11%.

We expect adjusted EPS to be in the range of $6 to $6.35. Our ADEPS guidance does not assume any impact from strategic venture investments.

For comparison purposes, we had unrealized gains on these investments of 11 cents per share to ADEPS in fiscal year 2026. Lastly, we expect to generate free cash flow between $825 million and $925 million, which includes the estimated impact of expenditures in fiscal year 2027 for the new Reston headquarters.

This range does not include the previously disclosed $170 million IRS refund, which we now anticipate to receive in fiscal year 2028. In closing, it's a privilege to be a part of a company that is building technology for the nation's most important missions.

I look forward to working alongside Horacio and Kristine as we continue to drive growth through building differentiated products and technology solutions, as well as generate significant value for our shareholders. With that, operator, let's open the line for questions.

Thank you. Good morning.

Morning, Gavin.

Troy, congrats on the new role.

Thanks, Gavin.

Two questions. Horacio, first, I appreciate the update on outcome-based solutions.

If you could update us on your transition to drive revenue growth independent of head count, that'd be great. Second, how should we think about the relationship of funding awards to revenue given the funded backlog was down last year?

Thank you.

Sure. Let me try and frame the the conversation as follows.

Obviously last year was extremely challenging, but I'm really proud of the execution and the acceleration against our strategy, which sets us up for the conversion that that you're talking about, and I feel like we're entering FY27 with focus and with momentum in what's still a market that will experience volatility and some choppiness as as some of the changes that are necessary and important, like the procurement changes, begin to take hold and and and will continue to see that, and so our expectations and our guide are tempered by all of that. I would think about this the following way.

Over time, not all in FY27, but over time, we we expect to see productivity gains from some of the work that we've done, for example around delayering, agentifying our business both on the infrastructure, but importantly in the way we prosecute the market, the move to outcome-based and and fixed price, and the monetization of our IP, and so that is what's going to diverge the curves between head count growth and and revenue growth, and as I've said, I I would expect that that over time, you will see higher profit growth than revenue growth, and higher revenue growth than head count growth. FY27 has some unique dynamics because the even the head count conversation typically was a a conversation where head count grew evenly during the year every year, and so you you could take points in time.

The average head count to average head count fiscal year to fiscal year, that math is much more complicated given the year we had last year. What we're what we're seeing the pick up is in the areas that Kristine talked about, that I talked about, in both cyber and defense tech, our businesses are moving faster towards fixed price, towards outcome-based, towards productizing many of our offerings, and in those cases, what what you see is, again, customers us when they pay for an outcome give us a lot more flexibility in terms of how we bring technology and structure technology inside a program, and so that's where you begin to see this divergence.

As I mentioned in the prepared remarks, for example on the OTA front, we've seen a a 50% increase in wins year-over-year, but a 90% increase in the pipeline, which means that that trend is accelerating. We're optimistic about what we're seeing, and we believe we're well positioned to deliver more value to the government and to capture more profitability out of that.

Then on the funding side, they again, you have to take temper the dynamics. What we because it's what we have seen over the last few months is an improvement in in the funding dynamic.

The the last quarter was much better than what we would have seen a year ago. This quarter is better than what we have seen a year ago.

That gives us some level of confidence that that things are accelerating, that demand is is and that the wins are going to translate into actual revenue, perhaps not quite at historical rates, but certainly at much better rates than we saw last year.

Thank you very much.

Horacio, Kristine, Troy, and Dustin, good morning and happy Friday. I was wondering has Anthropic's Mythos limited release, has that impacted any of your major cybersecurity programs such as Thunderdome and CDM DEFEND, and has it created incremental positive opportunities, or what have you been seeing with Mythos?

Thanks.

Hey, Louie. I don't think we could trace a direct line from Mythos to a program, but I will say this, and I think, I've been out in public talking about this quite a bit.

We believe strongly that 2026 is a year where cyber demand is going to accelerate across all of our markets, national security, civil, and commercial, because this is a year in which the offensive cyber tools, which are agentifying faster than defensive cyber tools, are going to create a gap, and into that gap need to have companies like us with our tools, with the products that we're creating in the Velox suite and the like. We are beginning to see a huge pickup in those conversations, and that's why we're so optimistic, and that's why we're investing in our cyber business right now.

We took the decision of taking what was going to be a release over the next 18 months of four different aspects of our Velox suite and to try and compress it all into the first half of this year because the demand is now, and so things that were not going to be out in the market for another year and a half are in beta with some customers already. Every conversation that we have may begin with Mythos, but doesn't end with Mythos.

I would point you, and I'm sure you've already seen it, but if you go to our website and you look at Velox Striker and you see what we've done in terms of mimicking what an agentic attack tool is for automated red teaming and to be able to train the agentic defense, it'll give you a sense for how much cyber is changing and how much opportunity that creates for us.

Louie, I'd also add that this new agentic AI era is really pushing forward the need for zero trust. Zero trust is critical for defense against any kind of attack, and so we're getting the impact there as well.

Great. On this topic of zero trust, you recently announced or the Department of War recently announced that you were awarded an OTA for the space-based interceptor.

Are you allowed to elaborate on the potential role that you may play with Golden Dome in the space-based interceptor, and is it cyber-related?

Unfortunately, we are not allowed to talk about our role, Louie. I will say this: we are very proud to be one of the few companies to be able to participate in this program, to have won a seat in this program, and we are definitely bringing our A-game, cyber, AI, and everything we do.

Great. Thanks, everyone.

Thank you.

I just wanted to ask you to elaborate on the procurement environment and just the pace of contract adjudications broadly across the end markets. Then maybe if you could just address one of the concerns that many have asked us about, which is reputational issues that came up last year with the IRS and what have you, just if there's been any impact that's prevented you guys from pursuing bids in specific agencies or disadvantaged Booz.

Just if you could clear that up for us. Thank you.

Sure. Thank you.

We have definitely seen an improvement in both the funding environment and the pace of awards. We do expect that funding can be choppy, but since January, I would say it has been markedly better than it had been pre-shutdown.

Also for awards, that's also true. Starting to move at pace again.

We are also seeing the pace of new procurements picking up quite a bit. I think you might remember that especially in civil, there were several months where there was almost nothing happening.

It's quite busy now in terms of bidding, the award environment is strong. Demand is picking up across the entire business.

On the reputational front, what I would say is we are in close contact with all of our customers. We're having very productive conversations.

I think we are letting our work speak for itself, and as we deliver things that are highly valuable, that work, I think that's ultimately the best calling card for us. I believe we've made significant progress, and even at Treasury, where we already disclosed the expected impact, we are looking for opportunities to turn the page.

Gautam, I would also add, when you look at our guidance, you see the national security business growing mid-single digits, we're feeling good about the outlook. We're adding value to customers, don't see that there's a reputational issue there.

You see it that Kristine talked about in the backlog and on the book-to-bill, we're comfortable with where we stand.

Just as a follow-up, would you mind letting us know about any key recompetes that come up? Are there any individually significant recompetes in the forecast period?

What percentage of sales is up for rebid this year? Thank you.

Yeah.

Thanks. The proportion of our business that recompetes every year is pretty steady, and this year is no different.

The profile is really the same as prior years. They are spread throughout the fiscal year.

We've already won some important ones in Q1, and we have more coming. Our recompete win rate is remaining very high, consistent with the past.

The only dynamic I would call out is that in civil in particular, the recompetes are coming out smaller and shorter duration than the contracts that they are replacing, and so that does put a little bit of pressure. Overall, recompetes look pretty much the same as they have in the past.

Nothing specific.

Thank you.

Hey guys, thanks for taking my question. I wanted to follow up on the revenue guidance.

Just 0 to 4%, that range kind of a very normal range, but if you don't mind discussing what gets us kind of to the high end versus the low end, I just want to kind of imagine those scenarios alongside you.

Yeah. Thanks, John.

I can go ahead and take that. I would just generally say we're seeing strong execution across the company.

Profitability is also strong while we're investing in some of these transformational efforts. We do see the guidance bounded by what we see today.

I would say it doesn't include edge cases. We're not counting on a $1.5 trillion budget, but we are seeing an award environment really start to pick up.

We're seeing strength in the national security business. Civil is also gaining momentum, but the first half is facing some tough comps, but we think that civil will grow into the second half of the year, really just seeing sequential improvements in the growth rate in the second half of the year for civil.

Overall, again, it's bounded by what we see in the marketplace today, but overall, we're confident in the business and the execution.

John, the only thing I would add to that is the recognition that this is still an environment that is fluid. This is an election year, and so, we've seen in election years that what's the second half of our fiscal, the next government fiscal year, the budget dynamics can take multiple paths from early CRs to early budgets to things getting delayed, and we've seen all of it, and we have tried, as Troy said, to incorporate, I would say sort of the more likely cases into the way we built our guidance, but we can't incorporate every case at the tails.

Okay. That's helpful.

You guys provided some very useful color on the shape of the year. I wanted to just kind of drill into that or hopefully you could elaborate a little bit.

It starts out negative and positive. It's a very dynamic year.

Negative can mean a lot of different things, and I just wanted to kind of re-ask the question on shape of the year, and if the upcoming quarter is going to look similar to 4Q, that's very different than if it's sort of slightly negative. If there's any additional color you guys could provide on the shape of the year and just thinking through how we get to the full-year revenue guidance, I think that would just be helpful in setting expectations.

Thanks.

Yeah. Thanks, John.

I appreciate the follow-up and the request for kind of more detail on the quarter. I would say when I look at it, first half is going to be more challenged in the civil business, but gaining momentum throughout the year.

Look, it's a choppy environment, and so I think we'll see variations quarter to quarter, but directionally we see things improving in the second half of the year. I don't want to sit there and bound and provide guidance quarter by quarter, but I think when you take the full-year guidance, you can see that the first half, especially at civil, is going to be challenged, but gaining momentum and improving.

That's kind of how we see first half versus second half, and then the strong demand for national security should be pretty favorable throughout the year, probably picking up more in the second half of the year.

Guys. Thanks a lot.

Thanks, John.

Hey, good morning. This is Alex Preston on for Mariana.

Thanks for taking the question. I just wanted to sort of go back to the commentary on OTAs and the shift to fixed price.

How are you guys thinking about that mix between fixed price and cost-plus going forward, and maybe the impact to or assumptions underlying your margin outlook in '27?

We are actively working with each and every one of our customers about the opportunity to move things to outcome-based and fixed price. It's not always the case that that is what's right for the contract.

This is a more of a a steady increase on fixed price and and outcome-based as opposed to big step changes. The what we have come to realize is that given the level of activity the procurement shops generally have to deal with overall that it they're more likely to entertain that conversation at a contract conversion point, at a time of awarding an option year, and the like, and so but but everything that we see suggests that we are going to see a steady move.

Again, if you look at the last year to this year, part of the dynamic is that some of the contracts that were reduced in in civil were fixed-price contracts, and so that mix didn't experience the the dynamic as we expected, but if you could separate that in our national security portfolio we which is, as where the vast majority of our cost-plus work resides, that is a steady move towards towards fixed price and outcome-based, and certainly the recent EO and and upcoming guidance from OMB is going to push us in the push our customers in that direction. Then we've always said that that, margins are stronger on the fixed-price work if we are allowed to deliver it in a way that it can add more value to the customer with more efficiency on our side.

Alex, I can just give you a little more color on the margins as we see it for fiscal year 2027. I think the cost control efforts are taking hold.

We're also seeing strong execution on the business, and we're capturing healthy award fees. Overall, we're really performing well in all areas of our business, definitely when civil and the national security business.

I think that that's illustrated in the 11% margins that we're showing. I think as we get into fiscal year 2027 as a company, we'll see civil declines impacting the margins, and then we'll be investing in some strategic, really R&D efforts that we're making in cyber and in defense tech.

We're also seeing the cost reductions and improving execution and the favorable mix help margins, there's some puts and takes to the margin as we look at it for fiscal year 2027, but overall, we're comfortable with where we stand on the margins, right.

Got it. Thanks.

If I could squeeze another one in on the defense side and budget dynamics. I think it was answered in a previous question that the guide doesn't necessarily assume a $1.5 trillion budget, but it occurs to me that the base budget, even without reconciliation, could be really constructive for you guys.

What are the sort of maybe watch items in reconciliation that could add to that or, I guess, framed another way, what key programs in reconciliation might give a boost to that outlook?

As most of our work does not sit at the line items in the budget, it's really what drives most of our demand signal and the funding and the ramp-up is more driven by the certainty our customers feel about having the money there later in the year to perform the work. Obviously, anything that happens in reconciliation that moves the conversation in that direction is positive for us.

We're doing a fair amount of work in our defense tech portfolio, for example a fair amount of work on C2 at the edge that we expect is going to see significant demand. Our work on autonomy, our partnerships with drone companies, our investment in some of the drone companies and technologies put us in what I believe is a really good position as the department ramps up those efforts.

Anything that has to do with, again, providing stability not just on the defense and the Department of War side, but also across the board in some key agencies like CBP and FEMA and the like would be to the positive.

Got it. Thank you very much.

Appreciate it.

Thanks. Good morning.

Morning. Just to try and put a pin in this first half, second half dynamic, civil did increase sequentially in the quarter.

I know you have seasonality, but would you expect civil to continue to increase from here sequentially or is there still a potential for a first sequential kind of drop-off?

I would say when I look at the first quarter, generally I think that there's pressure continuing into the first quarter, should potentially improve maybe a little bit, but overall, I think, again, first half should be challenged. Again, I think that that's bounded by the guidance that we put out of high single digits.

I think you will see, given the comps that we see, kind of first half will be different than the second half. It'll look a lot different.

Again, gaining momentum throughout the year is probably how I would tee it up at this point.

If I were to summarize kind of headwinds and tailwinds in civil to give you a little more color, the headwinds are last year's reductions in contracts, which extended through the first quarter last year, our previously announced reductions in Treasury, some smaller recompetes, and because there was such an anemic award environment for many of the months last year, means there's fewer new starts that overcome contracts ending. Then I would add in the DHS budget challenges because there's a significant part of pipeline, etc., that's in DHS.

The tailwinds, we've had some good wins, 1.2 book-to-bill in civil for fourth quarter. We have an expanding customer base.

We've got an increased pipeline. We've got more bids, an excellent recompete win rate.

We are seeing a lot of resonance for the much-needed innovation that we're bringing to the mission often in conjunction with some tech partners. We're seeing some clear demand signals, and our AI-assisted software development is pretty incredible, we expect demand for that to go up as well.

It's really the crossover of where the declines were happening, nothing new, right, with the ramp-up of the net new. That's what causes the year to change.

Okay. Thank you.

That's helpful. Maybe, Horacio, could you size space as well as health today and kind of what's going on in those individual businesses?

What did they grow at in '26 and what you're kind of thinking for those two businesses specifically for '27? Thanks.

You said space and then Health.

Then health, yeah.

Oh, okay. It's actually very hard to put a specific number on any aspect of those businesses because as part of what we believe in is in technology convergence, and so even where some of our space business ends, where intel business begins, we're doing cyber in space, we're doing AI in space, and trying to shred that too finely doesn't get us to where we need to be.

I think we are optimistic about the growth in our space business writ large because of our position on AI and cyber in particular, because of the work we're doing on space domain awareness, and because our position on Golden Dome, and this is an area of investment for the administration, and one which we believe is much needed. Again, actually good dynamics last year, and certainly good dynamics growing into this year, some of which shows up in our numbers in Intel, for example.

On our health business, as was challenged last year by some of the budget cuts, by some of the contract cuts. I think this year we're beginning to see increase in demand, increase in the use of technology inside those contracts, but as Kristine said, the one headwind is we're winning the recompetes, but the recompetes are shorter and they are a little smaller.

Now, inside of that, because those are fixed-price contracts, a lot of them, we have the opportunity to bring technology and to the extent that we remain a market leader in doing that, we believe we're going to be able to expand profitability in those contracts over time while delivering more value to the government.

All right. Great.

Thank you.

Hey, good morning, everyone.

Good morning.

Good morning.

I was wondering if it would be possible to better understand, what's what's really changing and why in the funding environment. I I guess, over the last few years there's maybe been some fits and starts and times where it looks better, but it but it was a head fake, and so the funded bookings in the quarter are up year year-over-year.

That looks better. Hear everything you're saying.

Can can you just give us a little more detail on why things have changed, what is the customer telling you, and and why things would be more stable, just to try to better understand if it is a new trend versus not?

It's a great question because you're right, it has been would we say choppy, but at times in a hurricane and then look really good. I think it's important to remember that last year there was so much of our last fiscal year where the government was focused on contract reviews and trying to readjust budget, moving it from agency to agency or department to department.

There were those requirements where if you added over a certain dollar amount of funding, you needed to go to the top of the agency to get approval or sometimes the secretary to get approval. All of that really did slow down funding.

I think as the new administration was aligning the spend to their priorities. After the shutdown, then we saw that go back not to the levels that we saw in '25, but we saw it go back to a more normalized environment, although we are still seeing that there's incremental funding, right?

They might fund you for a few months at a time and then come back and fund and add funding again. I don't know that I would be the one to call kind of what the future looks like in this, but it has been remarkably better since January.

No, I think if you look at our guidance, I think this is what we've tried to incorporate. Certainly a better funding dynamic that '25, but nowhere near our last fiscal year, fiscal '26, but nowhere near what we would have seen historically.

Okay. That's really helpful.

I appreciate that. Then I also wanted to ask about how you're managing headcount relative to revenue.

I guess if the revenue of a business is declining, you can look to have costs decline more and stabilize margins or have margins even go up. Is it as simple as that with how you handled headcount versus revenue last year, or is it more that the mix of the business is mixing to less headcount-intensive?

Is there any risk that you overdo it on the headcount side for when bookings and revenue inevitably do bottom?

I'll say this, obviously headcount is still important to the business, even though we're in this process where the sort of the traditional algorithm is diverging from where we are going. I'll point you back to the things we said last fiscal year as we were going through the reduction.

Obviously the initial set of reductions were driven by specific contracts being cut very significantly, and a lot of it was in civil, as and we worked through that. Later rounds were more oriented towards delayering, towards becoming more efficient, towards managing the business in a way that it recognized what we expected to be a lower growth rate than we had experienced in years prior, and I believe we have stabilized that part quite well.

We've also given ourselves the opportunity to invest in the business. We are calling for similar margin structure this year to last year, even though we do expect more growth in our fixed price and outcome-based portfolio, and even though we'll get the full run rate of the savings this year, and that is to address some of the things you're talking about.

We want to be in a position where in the areas where the business is growing, we can invest aggressively, and some of that investment will come in the form of people. In the other areas of the business where we don't see the growth or perhaps we see some challenges, we will manage those the right way, and that's why it's so hard in a year like this one to predict precisely, like Kristine was saying, where will each line cross in which month and how it will, but I think the overall trend line is towards trying to get civil stabilized and return to growth over time and accelerating and maximizing the opportunities we see in national security, especially in defense tech, especially in cyber, and even in space.

Okay. Thank you.

Sure.

Morning, Horacio, Kristine, and Troy. Your cash balance is equal to about 8% of your market cap, and your stock is trading at a multiple well below its historical norm.

Your stock repurchases were a little light this quarter compared to prior quarters. Are you reluctant to buy back your own stock following President Trump's executive order aimed at limiting capital returns to shareholders, and how should we be thinking about the appetite for buybacks this year?

Thanks for the question, Scott. I would say we maintain a capital deployment strategy that supports growth and drives shareholder returns.

Our first priority is obviously paying the dividend. We also have a very disciplined and strategic view of inorganic investments, especially around the areas that Kristine and Horacio talked about around cyber, defense tech.

You're also still seeing us we will keep doing share repurchase. You see that in the share guide.

I think we have a very healthy balance sheet that you talked about. We have a lot of financial flexibility.

The cash engine of the company remains strong given the so- solid execution that we have, the strong growth in the national security business. That gives us a lot of flexibility and optionality, but we can do invest in the business and then also still looking to return cash to shareholders.

Okay. Then you also did cost reductions during the year, and I think the cost takeout target was $150 million on an annualized basis.

How much of that is net that you get to keep and isn't passed back to the customer, and how much of the net benefit did you realize in fiscal '26 versus what we should see in the EBITDA bridge for fiscal '27?

We generally get to keep about 40% of it given the nature of our contracts. Of the cost that we took out, we generally realized about a third of it in fiscal year 2026.

That does give us some of the financial flexibility as we continue to focus on execution and take cost. That does allow us to invest back into the business like Horacio was talking about.

We definitely see good growth areas where we can leverage our heritage technologies and really further grow in cyber and defense tech. I think you're seeing those dynamics that we'll be able to hold on to some of it, and then that'll allow us to invest back into the business.

I I think the word investment is the key word going into this year. This is how we're thinking about it, whether it's organic from the P&L, whether it's inorganic from the balance sheet.

We see certain areas that are poised for significant growth, and we want to make sure that we accelerate into those areas. I'll also point out that the 60% that that Troy talked about as quote unquote not us not keeping makes us more competitive in cost-plus contracts, allows us to expand our our business in that direction as well, and so I think there's a lot of goodness in in what we did last year in terms of positioning us for, reacceleration, partly in '27.

We talked about the dynamics first act second half, but importantly, in '28 and beyond.

All right. Thank you, and enjoy the long weekend.

You as well.

Good morning, guys, Horacio, Kristine, and welcome, Troy. Maybe my first question is around headcount.

It was down 12% in the quarter, but great productivity with revenue per employee up 6%. What were the dynamics that drove this, and I guess, somewhat related to this, how do we think about margins?

They've held in really well despite the civil decline, and Troy, I think you made a comment that there's some mix impact in '27 with civil, it hasn't impacted margins yet. How do we think about that?

Yeah.

I can start with the margin. What you'd see is given where we are with civil declining, that will potentially be a margin headwind.

Offsetting some of that is the stronger work that we're seeing around the execution and the mix shift on margins that we talked about, the cost reductions, the better execution is helping, and then we'll be investing in some of these R&D efforts. Again, I think there's some puts and takes there.

Definitely civil is something that we're able to work through given the execution and the mix in some of the other areas of the business.

Sheila, the only other thing I would say related to headcount is the combination of more work moving to fixed price and outcome-based and our consistent, constant drive to agentify, to drive productivity, and so forth should continue, hopefully, to translate into the dynamic that you're describing, where our people will continue to grow, but it'll be more productive, revenue will grow faster than people.

Okay. Got it.

Thank you. Then if I could ask another one on Intel, great growth in the quarter, up 9%.

How do we think about that continuing into '27, and maybe, Kristine, if you could give your puts and takes like you did for civil, because that was super helpful?

There's a whole lot more tailwind than headwind in the national security business. I think with what we're seeing in geopolitical conflict and this switch to some advanced tech and the way that we play in the advanced tech ecosystem, focus on autonomy, C2, I think we're in all the right places when it comes to defense tech and what we're doing in our Intel business.

We're bullish on our national security business, and that's why you're seeing growth for the whole year despite the continued headwinds in civil.

Got it. Thank you.

I'll close the thought on that question just simply by just saying, look, we've tailored our strategic priorities to the market that we see, which is a market that is a fundamentally challenging market, continuing to have some level of volatility, continue to have some choppiness, and as the changes continue to happen, changes that are positive overall, clearly we're going to see some starts and stops in some areas, but we're focused on organic and inorganic growth in the cyber and defense tech, bringing AI and agentic to everything we do and continuing to grow that portfolio, investing in the next wave of technologies. We're doing a lot of work on physical AI, on quantum, on 6G, on AI RAN.

Those will pay off beginning this year and beyond. The unique set of partnerships, AWS, Nvidia, the a16z companies, are positioning Booz Allen against the key trends in the market.

That would be the other way to think about puts and takes. I think part of the challenges that we are going to experience are macro market, macro environmental challenges, but inside of that, we're executing really, really well.

Thank you.

Thank you all for your questions. This morning was quite a robust discussion, and I hope we gave you a a clear view about how we're accelerating our transformation and how we're positioning Booz Allen FY27 for sure, but but well beyond that.

I I can't tell you how proud I am of the pro- of the progress we are making, and my main source of optimism are the people of Booz Allen. They have shown time and time again that they can rise to any challenge and truly accomplish incredible things.

I I want to close today with a big thank you to the Booz Allen team, hopefully many of them are listening this morning, for your hard work, for your dedication. It's truly an honor to be your colleague, and I also want to thank our investors, especially our long-term investors, who've been part of us of this journey with us, and and we hope to you'll feel rewarded over time as as we return to growth, and again, thank you all and enjoy the long weekend.