Good morning. Thank you for standing by, and welcome to Booze Allen Hamilton's Earnings Call covering Fourth Quarter Fiscal Year 2024 Results. At this time, all participants are in listen-only mode. Later, there'll be an opportunity for questions. I'd now like to turn the call over to Mr. Nathan Rutledge.

Thank you. Good morning, and thank you for joining us for Booz Allen's fourth quarter fiscal year 2024 earnings call. We hope you've had an opportunity to read the press release we issued earlier this morning. We have also 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 President and Chief Executive Officer; and Matt Calderone, 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 involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from forecasted results disclosed 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 2024 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 CEO and President, Horacio Rozanski. We are now on slide four.

Thank you, Nathan, and good morning, everyone. Thank you for joining the call. Before diving into the content of this earnings call, I would like to share some news regarding our Board of Directors. On May 21, Dr. Ralph Schrader, our Board Chair, informed the Board of his intention to not stand for re-election and to retire effective July 24, which is our Annual Stockholders Meeting. It is impossible to fully account for Ralph's contributions to Booz Allen, to our investors and our people, to the country and to so many of us personally. Earlier this spring, Ralph celebrated 50 years with Booz Allen. In a career that spanned many roles, including CEO and now Chair, his impact and legacy will forever be ingrained in the fabric of our company, guiding us and inspiring us as we chart the course for continued success. Thank you, Ralph, for all you have done for Booz Allen. And on a personal note, for all you have taught me. Thank you. I am deeply honored and humbled to have been chosen by our Board of Directors to serve as Chair of our Board after Ralph's retirement. I look forward to serving our company as Chair and CEO, working closely with our newly appointed lead Independent Director, Mark Gaumond. In our new roles, Mark and I will continue Booz Allen's commitment to excellence and values that have been the hallmark of our company for the past 11 decades. Now, Matt and I are proud to share exceptional financial results for fiscal year 2024. The year that ended March 31 marks our best performance since Booz Allen went public. Revenue and earnings both increased more than 15%, nearly all organic. This outstanding performance builds on double-digit revenue growth in the prior fiscal year and solidifies our standing as an organic growth leader in the industry. Year after year, Booz Allen consistently delivers. This speaks to the relevance of our work, the soundness of our strategy, and the trust our clients place in us. Most importantly, our results are a testament to Booz Allen's amazing team of more than 34,000 purpose-driven professionals. This morning, I will describe how our VoLT strategy is fueling our performance and positioning us for the future. I will also address potential market volatility in the near-term and share our operational priorities for the fiscal year. Matt will then give an in-depth look at our full fiscal year 2024 results and our guidance for fiscal year 2025. Let's begin with our strategy. Our team's consistent execution of VoLT has brought us to where we are today. Booz Allen is 110 years young. We are operating at peak performance and are as vibrant as ever entering our 12th decade. Since our founding, this company has anticipated and led change for ourselves and our clients. Today's change vector is embodied in VoLT, which stands for Velocity, Leadership, and Technology. VoLT has put us at the center of the technology transformation taking place across the federal government. VoLT powers our long-term growth in two key ways. First, we have positioned ourselves at the center of missions of national importance; and second, we have become a leader in injecting cutting-edge technologies into these missions. Allow me to take the next few minutes to describe what it looks like for Booz Allen and for our clients. One example of these dynamics is our increasing role in the Indo-Pacific region. As I have discussed previously, Booz Allen is deeply committed to the Pacific and has supported U.S. national security priorities there for decades. We continue to support INDOPACOM's most pressing requirements, from accelerated readiness to mission systems. We do so by leveraging technologies such as cyber, 5G, and artificial intelligence to deliver scaled solutions at mission speed. In the past six weeks, I have spent time in Japan and Hawaii, meeting with many senior U.S. and allied military and government leaders to reinforce our commitment to helping maintain peace and stability in the region. Booz Allen's presence in this vital area continues to grow as we invest in new capabilities, partnerships, and talent to support a broadening set of missions. A second example of the power of VoLT is our support of the digital transformation of the Department of Veterans Affairs. At the VA, we work closely with our clients to leverage technologies already proven in the private sector to enhance the care and service of our nation's veterans, from reducing endemic homelessness to optimizing virtual care and clinical triage services. It has also allowed us to effectively scale our team and technology solutions to meet the unprecedented growth of PACT Act claims associated with veterans exposed to toxic substances. Within the 16 months following the passage of the PACT Act, the VA has processed over 1.5 million claims and awarded over $3.8 billion in payments to veterans. We helped the VA automate important review steps for a portion of these claims, shortening the process and overcoming what would have been a largely manual and manpower-intensive process. These examples, along with similar efforts across multiple Federal health agencies, have helped double the size of our health business in the last five years to roughly $2 billion in fiscal year 2024. A third example of VoLT in action is artificial intelligence. Before AI came into the public consciousness, Booz Allen anticipated and prepared for the moment we are in now. We invested ahead of the market in talent and capabilities to win early-stage work and build a leading position. Today, as AI becomes ubiquitous across the U.S. government, we are recognized as the leading provider of AI services to the federal government by Deltek's 2024 report. In fiscal year 2024, our AI revenue grew to nearly $600 million, and we aspire to grow this business to over $1 billion in the next couple of years. As AI is increasingly integrated into more and more contracts, we will continue to invest in our AI talent base through VoLT hiring and upskilling. We are also partnering with a range of other technology firms to bring commercial dual-use tech to our clients faster. Without a doubt, Booz Allen is a team on the move, and VoLT is working as our accelerator. Beyond all the specific examples, the ultimate proof point of our VoLT strategy is our performance against the goals we set out in our investment thesis 2.5 years ago. As we begin the final year of our three-year trajectory, we are issuing guidance at the top end of our original EBITDA target of $1.2 billion to $1.3 billion in fiscal year 2025. Over the three-year period of the investment thesis, we will have grown our EBITDA by more than a third, virtually all organic. Our organic outperformance gives us greater momentum, balance sheet strength, and operational resiliency as we look to capture new opportunities in an increasingly challenging market. Looking at the coming months, we recognize the potential disruption a contentious election and other societal and geopolitical factors may cause this fall. Collections can bring about uncertainty, particularly to the budget process. Despite this, there are two things of which we are certain. The clients we serve are focused on fulfilling their missions in service to our nation, and we are poised to support them every step of the way. As in prior years, our operating philosophy for fiscal year 2025 is to build momentum in the first half of the fiscal year to mitigate any increasing volatility in the second half. To do this, our operational priorities include the following: First, we must take full advantage of our record proposal pipeline, which includes a number of large new programs and recompetes. Second, we will continue to transform how we execute our existing business. We seek to increase the speed and precision with which we deliver key technologies into programs and to drive efficiency and effectiveness across all of our support functions. Third, we will continue to implement VoLT at full speed, maximizing the value of our increased investments in people, market positions, and new technologies. Our overarching goal for fiscal year 2025 is to further differentiate Booz Allen by demonstrating our unique ability to drive technology into mission outcomes faster and better than anyone else. In summary, while respectful of the inherent volatility in our environment, we remain very optimistic about our growth prospects. The Booz Allen team is market-tested and exceptional. I am in awe of the incredible people I have the privilege to work with, of the impact they have on our clients, and of the outstanding performance they create year after year. Their skill and passion are at the center of who we are as a company, and they are the reason for our continued success. Now, Matt, over to you to take us through our financial results and fiscal year 2025 guidance.

Thank you, Horacio, and good morning, everyone. I've spent a good deal of time recently thinking about Booz Allen's 110-year legacy of foresight, innovation, execution, and transformation. Booz Allen is the ultimate compounder. Quarter after quarter, year after year, we set goals and we deliver, always driving forward each step, building on the one before. This creates exceptional value for our clients, our people, and our shareholders. In this spirit, we continued to build in the fourth quarter, delivering excellent results to complete an extraordinary fiscal year 2024. By almost any financial metric, this was the best fiscal year in our history. Our VoLT strategy is working. We enter fiscal year 2025 with significant strategic, operational, and financial momentum. Once again, we are positioned to deliver robust organic growth, strong earnings, free cash flow, and exceptional shareholder value. This morning, I will start by briefly touching on our fourth quarter highlights, then delve deeper into our fiscal 2024 performance, and finally cover our fiscal 2025 guidance. Please turn now to slide six. I am proud to say that we met or exceeded all of our objectives for the fourth quarter. We continue to build on many of the trends that Horacio and I have highlighted on recent calls. Positioning the company in areas of enduring national importance at the intersection of mission and technology, delivering remarkably consistent performance, operating efficiently, while investing in the future, and building momentum and resilience. To cover a few of the financial highlights for our fourth quarter, total revenue was approximately $2.8 billion, up 14% year-over-year. All of this growth was organic. Adjusted EBITDA grew to $287 million, 24% over the prior year quarter. This translated to an adjusted EBITDA margin of 10.3%. We generated $1.33 in adjusted diluted earnings per share, up 32% year-over-year. We added 364 net client staff and recorded a book-to-bill of 0.82 times, in line with our expectations. Finally, we returned $194 million of capital to investors through dividends and share repurchases in the fourth quarter. Thanks to the hard work of people across our company, we closed the fiscal year stronger than expected. For the full fiscal year, total revenue grew 15% year-over-year to $10.7 billion. This exceeded the top end of our guidance, driven by strong demand, healthy hiring across our portfolio, and higher than anticipated billable expenses in the fourth quarter. Organic revenue was up 14.5% year-over-year. Revenue excluding billable expenses increased 14.4%. Our revenue growth was broad-based. Our defense business continued to accelerate. Revenue grew about 20% year-over-year with double-digit growth across most portions of the defense portfolio. Performance in our civil business was also excellent, up roughly 18% from last fiscal year. Our civil sector has now reported nine consecutive quarters of double-digit organic growth. Our intelligence business is on a strong vector for the future. Revenue grew 5% year-over-year, exceeding our expectations. We are pleased with both the supply side and demand-side momentum in this business. Lastly, our global commercial business, which represented 2% of revenue in the fiscal year, was down 25% year-over-year, reflecting previously disclosed divestitures. Given its small relative size, going forward, we will not report our commercial results separately. Moving to the demand picture on slide seven, we ended fiscal year 2024 with net bookings of $13.3 billion and a trailing 12-month book-to-bill of 1.25 times. Total backlog as of March 31 was $33.8 billion, up 8.4% year-over-year. Looking ahead, our fiscal year 2025 qualified pipeline is robust, standing at $63.8 billion or 38% higher than a year ago. This includes a number of exciting opportunities across the portfolio as well as some accelerated recompetes in our civil and defense businesses. With federal funding in place through September, we are working to aggressively capture and start as much work as possible in advance of the upcoming election and the new government fiscal year. In short, we have the backlog, pipeline, and market momentum necessary to drive future growth. Turning now to the supply side, as Horacio noted, we closed the fiscal year with more than 34,000 employees. Our client staff headcount increased 7.4% year-over-year, setting us up well for fiscal year 2025. Total headcount was up 7.2%. Our relentless focus on culture and the employee experience at Booz Allen continues to pay dividends, not just in our consistent headcount growth but also in our low attrition and strong referral and application numbers. Moving now to the bottom line, we earned $1.175 billion in adjusted EBITDA for the fiscal year. This is 16% higher than in fiscal year 2023 and at the top end of our updated guidance range. Our adjusted EBITDA margin of 11% was flat year-over-year, in line with our expectations. This profit growth was generated by our excellent top line growth, strong contract level performance, and a disciplined approach to operations and investment. Our leaders continue to manage the business very well. This has allowed us to do three things simultaneously: increase investment in the talent, technologies, and partnerships needed to solve emerging mission challenges, transform key corporate functions, and continue to scale our operations. Working down the P&L, our net income was $606 million, 123% higher year-over-year. Adjusted net income increased 19% year-over-year to $719 million. Diluted earnings per share grew to $4.59 per share, up 126% year-over-year. Adjusted diluted earnings per share grew 21% year-over-year to $5.50. These results include significantly higher interest expense for the fiscal year, which was offset in part by a lower than anticipated tax rate in the fourth quarter. Moving now to the balance sheet, we ended the fiscal year with $554 million of cash on hand, net debt of $2.86 billion, and a net leverage ratio of 2.4 times adjusted EBITDA for the trailing 12 months. We have ample capacity to continue executing our disciplined capital deployment strategy. Free cash flow for the fiscal year was $192 million, the result of $259 million of cash from operating activities, less $67 million of CapEx. Note that this CapEx excludes $16 million of accrued expenditures that were paid in early fiscal year 2025. From a free cash flow perspective, this was offset by an unanticipated $13 million cash tax outlay, related to contested tax assessments, which is further described in our filings. Collections were strong for the fiscal year and cash outflows remained consistent with our outsized growth and ongoing investments in our business. Excluding one-time events, cash performance improved in fiscal year 2024, and this will remain an area of focus going forward. Turning to capital deployment on slide eight, in fiscal year 2024, we returned $668 million of capital to shareholders, including $415 million in share repurchases at an average price of $116.81 per share, as well as $253 million in quarterly cash dividends. Additionally, we made $23 million of strategic investments through our Corporate Venture Capital program. While we completed no acquisitions last fiscal year, strategic acquisitions are still an important part of our capital deployment strategy, as we focus on bringing technology to mission at speed and scale. We are pursuing a healthy pipeline of small to mid-sized tuck-ins. As a firm, we remain committed to maximizing long-term shareholder value through efficient capital allocation. Finally, I'll note that our board has approved a quarterly dividend of $0.51 per share, which will be payable on June 28, to stockholders of record as of June 13. The Board also approved an increase of $525 million to our share repurchase authorization, bringing our available capacity to $1 billion as of March 31. I will now take you through our fiscal year 2025 guidance. Please turn to slide nine. Given how our fiscal year aligns with government funding cycles, we typically plan for a strong first half and a more uncertain second half. We are doing the same this fiscal year. We entered this fiscal year with significant momentum but anticipate continued uncertainty from societal and geopolitical conflicts, the upcoming election and possible disagreements about the next budget cycle. In this environment, we are focused on controlling what we can control. We are positioning our business for continued growth to keep driving forward and to keep compounding. Let's now walk through our fiscal year 2025 guidance. At the top line, we expect organic revenue growth of 8% to 11%. This range takes into account several variables, including the extent to which we win and start work, the potential for drawn-out federal budget negotiations, and the timing and pace of headcount gains. We are again targeting mid-single-digit headcount growth for the fiscal year. We expect to deliver adjusted EBITDA dollars in the range of $1.26 billion to $1.3 billion. As Horacio noted, this is the high-end of our investment thesis range. We expect to achieve this almost entirely through organic performance, creating significant balance sheet capacity for the future. The implied full fiscal year adjusted EBITDA margin is about 11%, on par with fiscal year 2024. We expect adjusted diluted earnings per share of between $5.80 and $6.05. This assumes an adjusted effective tax rate of between 23% and 25%, an increase from the prior fiscal year, as well as a marginally higher interest expense in the range of $180 million to $190 million. Lastly, we expect operating cash flow of between $825 million and $925 million and free cash flow of between $725 million and $825 million. This assumes CapEx spend of around $100 million, including the previously mentioned accrued expenditure that shifted from the fiscal fourth quarter and was paid in early fiscal year 2025. In closing, I want to reiterate how proud I am of the outstanding year we just delivered. The momentum we built translates into a strong guide for fiscal year 2025, and a great finish to our three-year investment thesis. Our VoLT strategy is working, and we continue to deliver value to all of our stakeholders. This is a real testament to our people and the enduring power of Booz Allen.

Thank you. Our first question comes from Mariana Perez Mora with Bank of America. Your line is open.

Good morning, everyone. Thank you.

Good morning, Mariana.

So my first question is about this recent memo on AI that the White administration put forward, and the memo mandates that each agency will have to appoint a Chief AI Officer. Have you seen any of those increased demands come through? Or how are you thinking about opportunities as these new officers think about their AI strategy and use cases?

Well, Mariana, thank you for the question. Here's how I think about it. AI is becoming an integral part of how the federal government operates. We are seeing it more and more over the last couple of years. You've heard me talk about things moving from demonstration projects to prototypes, and we are now entering the scaling phase. It makes sense that governing AI, and correcting these agencies that manage the resources and the investments against it is important, and it makes sense that in some of these agencies, there are already Chief Data and AI Officers who are making a difference, and Booz Allen has been poised to take advantage of this growth in AI for several years. I think we've been talking about this from before it became popular, and our business is growing. As I mentioned in the prepared remarks, we are looking at a roughly $600 million business now, and we believe that business alone will reach $1 billion in a couple of years. More importantly, we are seeing AI become a differentiator across a lot of our procurements. The fact that we have a leading position, recognized externally, and that we are doing work that our clients see as nobody else being able to do opens doors for opportunities for Booz Allen that we are very excited about. As we look forward, we really believe that AI is pivotal—it's AI with cyber, where we also have a leading position, AI with space, where we're making significant inroads, AI with zero trust, and AI with communications. Booz Allen's ability to continue to expand and grow, as a result of that, and to be differentiated is only going to increase in the years to come.

Thank you. So you mentioned AI as a differentiator. Could you please also give us some details or color around the contracts that you have for recompete? What is the recompete risk and how do you think these skills position you towards having a stronger win probability?

Sure. Let me frame this conversation in a couple of ways. We're coming off our best year ever, right? We're entering our fiscal year 2025 year with a lot of momentum. The VoLT strategy is working, and the 'V' stands for velocity, and we are faster than ever before. We're strategically well-positioned. As we said earlier, while we recognize the uncertainties that an election year can bring, we are guiding to the top end of our investment thesis. We're entering this year with momentum and resiliency in our balance sheet, in our portfolio, and everything else. Recompetes are part of our business. The reality is if you look at the last five or ten years, we've gone from almost no $1 billion contracts to now a significant portfolio of $1 billion-plus contracts. These are five-year contracts, and 20% of those on average will get recompeted every year. This year, there's a concentration of that in our health business and a little bit in our defense business. We are really well positioned by the quality of our delivery, by the uniqueness of our offerings, and by the work that we do. This is surrounded by a pipeline that is a record pipeline of close to $64 billion of opportunity. We're looking at the year with optimism and we are focused—laser-focused—on winning our recompetes, while also capturing new work and taking advantage of the fact that a number of these recompetes come with increased scope and increased ceilings, which also presents new opportunities.

Thank you so much, and congratulations on the appointment and congratulations to Ralph on his retirement.

Thank you so much.

Thank you. Our next question comes from Robert Spingarn with Melius Research. Your line is open.

Well, good morning.

Good morning.

Hi, Rob.

I had a couple of questions for you, but wanted to start, Matt, with you on the growth. You've talked about hitting high single-digit organic growth and about 3% to 5% headcount growth for the full year and a book-to-bill around 1.2% to 1.3% in order to hit that high single-digit organic growth. Now you're guiding perhaps a little bit above that. You've already said that you anticipate mid-single-digit headcount growth this year. So what should we anticipate for book-to-bill? And then as a follow-up to that, are there any significant recompetes that you have coming up this year that we should be thinking about?

Yes. Thanks, Rob. I'll take them in turn. Look, as Horacio said, we're entering the year with a lot of momentum, both on the supply side and the demand side. Starting the year on the supply side with headcount growth of about 7.4%, so above the mid-single-digit headcount target that we've talked about historically, which is part of the reason we're guiding to robust 8% to 11% organic growth. Then on the demand side, 1.25 times, which is sort of right inline with where we want to be. To give you a feel for how we anticipate the year is going to play out, we do expect our quarterly growth profile on a year-over-year basis to be strong, but maybe even a little more even than last year, primarily driven by some quarterly comps. You recall last year, we grew 16% in the first half, and I think we'll see a similar pattern for margins where they're more stable than our historical patterns, similar to what we saw last year. We had a solid start to the year. I'm not going to call where we're going to end up on book-to-bill, but we've had a really good start, particularly on the demand side. Recompetes are part of that. As Horacio said, we've got a really robust pipeline. It's up 38% from where we were at this point last year. The fact that we're targeting mid-single-digit headcount growth for this year, which typically sets us up for next year, coupled with the robustness of our backlog, our book-to-bill, and obviously our pipeline, I think gives you a feel for how we're thinking about growth over the medium term.

Okay. And then, Horacio, just for you, at a high level, and you did talk a bit about AI in the prior question and throughout the call, but you've been at the forefront of things like AI, 5G, cyber all along. When we think forward the next five to 10 years, I'm curious in terms of the major growth trends where you want to be a leader. How should we think about things like quantum computing and post-quantum encryption?

I really appreciate that question, Rob. I think part of the reason we are sitting here feeling so good about the business is because over the last decade, we've invested in a number of things and while we might have missed a couple, we hit a few singles but also a few home runs. That's our continued approach; we're trying to be in front of the market. We think a lot about the intersection of AI and cyber; AI and Zero Trust. We also think a lot about Edge, both Edge cloud and Edge computing, and how you bring together AI at the Edge, which is a significant technical challenge. This is why we have made investments through our Venture fund that position us well on that. Additionally, we are building unique technology stacks with some of our partners that position us really well. As you said, I believe we already have a budding leadership position in quantum and post-quantum encryption. I think these are fields that are going to continue to grow; Booz Allen is continuing to build, since our mantra is to focus on missions of national importance, make sure we can bring our technology to these missions, and help our clients create scalable solutions. I think focusing on the prototype as the end-all be-all, shortchanges what our clients ultimately need, and that's why we're focused on scaling.

Thank you.

Sure.

Thank you. Our next question comes from Bert Subin with Stifel. Your line is open.

Yes, thank you, and good morning.

Good morning.

Horacio, I just wanted to follow up to some of your AI comments to Mariana's question and just in your prepared remarks. When you hosted your AI event around AUSA last year, you were looking for fiscal year 2024 sales in the range of $500 million to $700 million. It sounds like you came in around the midpoint of that based on what you noted. You also, however, said in your prepared remarks that you're looking to get to $1 billion in the next couple of years. So I guess my question is, what's changing in AI in fiscal year 2025 and 2026, for you to see that acceleration in growth? Is that a function of awards taking time, or is it a function of shifting internal investment to the contract side? Is that growth more skewed to the DoD, Intel opportunity, or has it been more civil-driven?

That's a really good question. This is where AI is in the cycle in the federal government. There's a cycle of experimentation, trying things out, then starting to get early successes, and then we move into the vertical scaling phase. I think we're at the very beginning of that phase. These missions are becoming increasingly complex; we talk a lot about the Pacific and the pacing threat. The set of missions poses a whole new set of challenges to our nation, just out of sheer scope. Half of the world surface is the INDOPACOM region. When you look at that, it’s important to augment humans through artificial intelligence. Our clients understand that and they’re coming to us for help and support as they scale these capabilities. This has really changed; if you asked me this question 18 months ago, I would have said it was most prominent in Intel. Now DoD is starting to go down that path, and civil agencies are really more focused on cloud migration than AI. That has changed; now everyone is taking advantage of cloud data to drive AI into their missions. We're positioned well to help across the board; AI is integrated with everything we do, from cloud to cyber to space and C2. That's where the power lies; AI is not a standalone technology you buy by itself, it’s an ingredient in accelerating mission needs.

Got it. That makes a lot of sense. Matt, I have a follow-up for you. You're assuming flat margins in fiscal year 2025. As you think longer-term, putting everything into this from your AI growth, cyber growth, potentially faster growth in the civil sector, what would it take for Booz to go from an 11% margin to a 12% margin?

Yes, thanks. It's a broad hypothetical question. First, let me start by saying I'm really pleased with our margin profile over the past couple of years and where we're guiding. We’ve talked about how dynamic the market has changed with AI and other technologies. To be a compounder, generating consistent organic growth; you have to invest ahead of demand. In our original investment thesis, we were guiding to mid-10s margins, so that we've been able to invest at record levels and really transform our business while delivering 11% margins. To answer your question, it's really threefold: can we continue to get scale out of our business? What's necessary in terms of investment to continue compounding? Ultimately, the inflection point may be around selling differently and our clients buying differently. We discussed outcome-based contracting; it's still in early stages, and while we're seeing some experimentation in different sectors, we’re not close to calling that as having a material impact on margins going forward.

Thanks very much, Matt.

Thank you. And our next question comes from Seth Seifman with J.P. Morgan. Your line is open.

Thanks very much and good morning.

Good morning.

I wanted to ask if you could talk a little bit more about capital deployment in the coming years since you probably have a little bit of excess cash on the balance sheet, $750 million to $800 million of cash after CapEx coming this year. How do you see the M&A environment right now? Are there deals and valuations that make sense? If not, should we expect to see a share buyback pickup this year from the $400 million last year?

Yes, you're right. We're in a good spot. We've been able to hit the top end of our investment thesis almost entirely through organic performance, which leaves us a lot of room on the balance sheet to deploy. Our capital deployment priorities haven't changed. Strategic M&A is our preference, but our approach hasn’t either—we're going to remain patient and disciplined. We didn't make any acquisitions last year, but we're observing a healthy pipeline of potential transactions, including some high-quality assets we're seeing, a number of carve-outs this year, which provides some opportunities, but they also present challenges. I am really encouraged by what I see, but we need to stay flexible. I also appreciate that the board has increased our share repurchase authorization, which gives us the flexibility to return value in lots of different ways.

Okay, excellent. As a follow-up, just more of a clarification about the outlook for the year. You talked about planning for a strong start and then maybe a little more uncertainty in the back half around the budget, but that could lead you to think that growth would be faster in the first half. Yet you talked about the way that the comps aligned. Should we expect this kind of 9%, 10% growth throughout the year? Do you see that happening in the back half as well, even with the uncertainty that you're thinking about regarding the budget and the election?

Yes, I think that's roughly in line with what we anticipate— a flatter profile, both in terms of year-over-year growth percentage and margins over the course of the year.

Thank you. Our next question comes from Tobey Sommer with Truist Securities. Your line is open.

Yes, good morning. This is Jack Wilson on for Toby Sommer. I know you've recently spoken about sort of how the workforce has evolved to be far more technical than historically. Can you speak to your hiring trends in terms of the percentage of new hires with technical skills and what percent are upskilled?

I think in general, because we have become a firm that injects technology into missions of national importance, our hiring has shifted to both mission expertise around specific missions, such as in the Pacific, but also a broad-based technical workforce that we both upskill internally and hire externally. I don’t have exact numbers, but every year, we increase the percentage of our technical workforce a little bit. The important trend is that our attrition is down significantly year-over-year. We attribute that not just to a less frothy market compared to a couple of years ago but more importantly to the investments we've made and efforts to bind our people to our culture, giving them internal opportunities, and our training initiatives. We built an AI aware course. So, we’re feeling very good about our ability to retain, train, and upscale our workforce. Our focus on missions of national importance allows us to attract top talent from across the country and industries who want to work on these key national requirements.

Thank you for that color there. As a follow-up, are there any other regions outside the INDOPACOM region that you're seeing especially high levels of activity?

The world is highly active just about everywhere. We have a significant presence in Europe in support of our nations working there around EUCOM and Ukraine. We have a presence in CENTCOM and a significant growing presence in INDOPACOM. Additionally, even outside of DoD, the nation is making significant investments in public health, and Booz Allen is right in the middle of that. There is a lot of modernization of technical infrastructure across the federal government and we are extremely active and differentiated in that regard.

Thank you. Our next question comes from Cai von Rumohr with TD Cowen. Your line is open.

Yes, thanks so much. So, Horacio, one for you. If I think about your industry 10 to 15 years ago, it was kind of focused on ground wars, a threat that really was not as significant as what we're seeing today with China, digital transformation, and AI. It seems like Booz Allen and others are moving toward somewhat higher levels of technology and expertise. I’m curious if you foresee a de-linking of the industry's growth from traditional budget categories like operations and maintenance versus R&D. As Booz Allen takes a bigger share of the total sector's budget, will that lead to a secular shift in your total sector's growth?

I think you're making a strong point, Cai. Looking back to when I started in this business, most of the innovation was funded by the government. Fast forward, and the flow of innovation is now predominantly from the private sector, which outspends the government each year. I think that's an American strength and a fundamentally good thing. In that context, your question makes logical sense. As dual-use technologies continue to grow, Booz Allen is uniquely positioned because we started early, have the right partnerships, and the talent base you described. That said, the overall market has to remain linked to the budget, but not every section of the budget grows at the same speed. Being positioned against the fastest areas of growth is key to our success. While we need to remain cognizant of turbulence, especially in an election year, we're optimistic for the medium and long-term.

Terrific. Thanks a lot.

Thank you.

Thank you. Our last question comes from Sheila Kahyaoglu with Jefferies. Your line is open.

Good morning, Horacio and Matt. And congratulations to Ralph. A really great succession story. In terms of— I wanted to first ask about your health business. You said it doubled to $2 billion and some work with the VA. What type of runway do you see in health going forward given the technology implementation you have? Are there recompete opportunities from other competitors with the VA and PACT Act?

Our health business is an extraordinary business—a true success story that has doubled to $2 billion and demonstrates Booz Allen's proposition of bringing technology to key national missions. We expect that overall work in health will continue to grow, focused on the digital transformation of our entire public health infrastructure. We are supporting the VA with veterans and the outreach needed to ensure preparedness for future health emergencies. The work we're doing is extremely competitive and important; there are many recompete opportunities as the calendar is shifting. A number of these long programs we do are so well executed that we reach the ceilings before the end of their performance period, thus leading to earlier recompetes. The quality of our insights, technology, and our services position us well. We do view recompetes as both recompetes and new work, with the potential for increased scope and ceilings, making them new opportunities.

Okay, thank you for that, Horacio. In terms of the other half of the portfolio in civil, can you talk about some of the drivers of growth there? And should we expect double-digits in fiscal year 2025?

We're excited about the entire portfolio and while we're proud of our health business, our civil business is equally important. There is exciting work in treasury—fraud detection, AI efficiencies, and digital transformation. Our law enforcement work with federal agencies allows us to see good growth, and we expect to see solid growth there as we have been investing in those clients for a while. We should be optimistic across the portfolio.

And Sheila, just to emphasize your point, our growth is as broad-based as it has ever been. In the intelligence sector, the fact that they grew 5% this year despite F2 losses speaks to the underlying strength.

That's right. Our defense business grew 20% this year; last time it grew at that rate, it was maybe a fifth of its size. So, we feel quite good about our position in light of all the momentum. While we recognize this is an election year, we are taking advantage of the momentum.

Congratulations. Thank you.

Thank you.

Thank you. Our last question comes from Louie DiPalma with William Blair. Your line is open.

Horacio, Matt, and Nathan, good morning.

Good morning.

Hi, Louie.

Horacio, in your prepared remarks, when you discussed your outsized role in INDOPACOM, you highlighted your recent trip to Okinawa. Were you alluding to your role with the JADC2 development and your connected battlefield platform? In February, Deputy Secretary of Defense Kathleen Hicks indicated that for the first time, the DoD has attained a minimum viable level for JADC2 to counter China in the INDOPACOM region. Are you playing a major role there?

Yes. Our growth in INDOPACOM is robust. I've spent time in Taiwan, Japan, and Hawaii meeting with many senior clients. The conversations are all about speed—we need to accelerate technology in support of the mission. The JADC2 portfolio is essential; communication across various platforms while navigating a challenged electromagnetic spectrum is critical. These are areas of focus for us, and we are deeply involved, making investments accordingly.

Great. For Matt, what would you attribute your hiring strength to? Have you made tech investments to improve recruiting and onboarding? Are there structural changes allowing you to grow and improve employee utilization?

Yes, it is. The answer is yes. We've made several improvements, including technology to enhance and expedite the recruiting cycle. About one-third of our employees come from referrals, showcasing our employee value proposition. People want to join Booz Allen for the exciting work, pathways, and careers. We're doing a better job of attracting and retaining the talent we need.

We say internally that we're 110 years young; we use that language because it's a vibrant environment at Booz Allen right now. Our people feel it, and job seekers are attracted, along with the work we're doing and the clients we serve.

Thank you, everyone, and Happy Memorial Day weekend.

You as well.

You as well.

Thank you. Thank you all for your questions and for joining us this morning. At Booz Allen, we are proud of our history and equally excited about the future. We are working in our virtuous circle where our strategy drives our performance, which drives investment and opportunity—opportunities that attract great talent, beginning the cycle all over again. Just this week, we held our Booz Allen Excellence Awards, highlighting and celebrating our incredible talent. It was an opportunity to share stories of how we're supporting veterans, assisting local communities, closing national security vulnerabilities, protecting American troops, preventing cyber-attacks, and preparing for future health emergencies. For 110 years, Booz Allen has always supported our clients and our nation, and we highlight that we do this with excellence. It's not just what we do; it's who we are. Every day, the people of this company continue to deliver excellence. We have an amazing team, and I am proud to work with them. Thank you, Booz Allen, for listening to all you do. Thank you all again for joining this morning. Have a great day.

Thank you for your participation. This concludes the program, and you may now disconnect. Everyone, have a great day.