Booz Allen Hamilton Holding Corporation

Good morning, and thank you for standing by. Welcome to Booz Allen Hamilton's earnings call covering second quarter fiscal year 2026 results. At this time, all participants are in a listen-only mode. Later, there will be an opportunity for questions. I'd now like to turn the call over to the head of investor relations, Dustin Dernsborg.

Thank you. Good morning, and thank you for joining us for Booz Allen's second quarter fiscal year 2026 earnings call. We hope you've had an opportunity to read the press release we issued earlier this morning. We've 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 Chairman, Chief Executive Officer and President, Matt Calderon, Executive Vice President and Chief Financial Officer, and Christine Martin-Anderson, Executive Vice President and Chief Operating Officer. As shown in the disclaimer on slide three, please note that we may make forward-looking statements on today's call, which involve known and unknown risk, uncertainties, and other factors that may cause our actual results to differ materially from forecasted results discussed in our FCC 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. 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 second 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, CEO, and President, Horacio Rosansky. We are now on slide four.

Thank you, Dustin. Welcome, everyone, and thank you for joining today's call. This morning, Christine, Matt, and I will share our financial results for the second quarter of fiscal year 2026. The headline for our call today is that the re-acceleration of our business will take longer than we expected when we spoke last quarter. As a result, we are lowering top and bottom line guidance for the year. As I will describe in a moment, this is based on continuing friction in the overall procurement environment and fundamentally different dynamics within our civil and national security portfolios. By national security, I mean the combination of our increasingly integrated defense and intel businesses. At the same time, and despite these near-term headwinds, we continue to see strong performance in our most exciting growth vectors. This success fuels our optimism for the medium term. In a few moments, Matt will take you through our quarterly results in depth and cover how they differ from our original expectations. Before that, I would like to describe the market and how it impacts our business differentially, where we see growth coming from in the near and medium term, and the actions we are taking to compete and win in the current environment and to set us up for long-term strategic and financial success. Beginning with the market, this is the most bifurcated environment I have seen in my decades with Booz Allen. Our civil and national security portfolios are experiencing completely different dynamics. and we believe both face different prospects over the coming quarters. Our civil business is operating in the most challenging market in a generation. Over the past nine months, the pace of change in civil agencies' focus on funding has moved at extraordinary speed. As we shared in May, this resulted in run rate cuts in some of our large technology contracts. Since then, The business base has stabilized, and we have seen some growth in pockets. However, the procurement environment and our near-term pipeline in civil have not recovered. Our second quarter is typically the most active as it coincides with the end of the government fiscal year. This year, we saw no major procurement actions, nor plus-ups or cuts on any existing contracts. And we also did not see nearly the typical pace of tactical selling. Given this environment, we expect our return to growth in civil to be delayed by several quarters. When exactly that happens will depend on how funding and contract activity evolve. For our part, across all levels of government, we're discussing potential opportunities that align to the administration's highest priorities, from critical minerals to border security. These are excellent and very promising conversations. There are also several large RFPs in our growing medium-term business pipeline, including new work and re-competes. Looking ahead, our focus in the civil business is to maximize our AI capabilities and commercial technology partnerships to revolutionize delivery and reignite growth. The dynamics across our defense and intelligence markets Broadly speaking, our national security portfolio are fundamentally different from civil and are much stronger. There remains some friction in the funding process, characterized by shorter funding increments and slower ramp-ups in new contract wins. Despite this friction, the pace of awards in our national security portfolio has been encouraging. Of our $7.2 billion of gross bookings in the quarter, about 90% were in national security. This includes the almost $1.2 billion Shadow Raptor Task Order, where Booz Allen will help the Air Force Research Laboratory to increase warfighting lethality through adoption of advanced technologies. We also won three other notable awards valued at over $800 million each, including a competitive takeaway win with the United States Army National Guard Intelligence and Security Directorate and two wins at the Defense Intelligence Agency, where we will modernize military intelligence and deliver new AI ML capabilities in global no-fail missions. Booz Allen continues to win in national security because we bring our unparalleled technology and our depth of mission expertise to the fight. Looking more broadly across our national security work, Our leading positions in cyber, AI, and warfighting tech are highly relevant to the Trump administration's technology and mission priorities. Our cyber business is increasingly differentiated. Our Thunderdome product is becoming the standard for zero trust. It met all the government's milestones two years ahead of schedule. And just last month, it won the 2025 Cybersecurity Breakthrough Award. We also continue to be the largest provider of AI to the federal government, as Dell Tech recently reaffirmed. And as cyber, AI, and new hardware and software stacks converge, we are building the tech that makes Booz Allen unbeatable at the edge. Some of you actually had the opportunity to see our edge technology at AUSA and our recent investor event. From our modular detachment kit, or MDK, to our TAC SIDEX solution and our exquisite tactical gear. We are combining our own tech with the best commercial products to empower and protect our nation's warfighters. As we look at this year and beyond, we continue to see top-line growth in our national security portfolio and the potential for expanded margins as the transition to fixed price and outcome-based products and solutions takes hold. Now, re-aggregating our portfolio and looking across the entire company, we did not see the normalization of the procurement and funding environment that we originally assumed. I am disappointed in our results this quarter and that we are lowering guidance across all key metrics. Simply put, the strength in our national security portfolio cannot offset the current year decline in our civil business. This has led us to reassess our market assumptions and to take bold and significant action immediately. We are well prepared to operate in a highly fluid and dynamic environment for the foreseeable future. There are significant opportunities ahead. For example, in the funding of priorities from the One Big Beautiful Bill, the prioritization of AI adoption across all aspects of the federal government, and the increased pace of converting contracts towards outcome-based. But there are also headwinds, like the government shutdown, the decrease in the acquisition workforce, and the continued reevaluation of civil agency priorities. Booz Allen's goal is to remain focused and nimble in this environment so we can accelerate into the more clear and proven growth vectors in our portfolio, areas where we have clear technology and mission leadership. And to do so, our strategy is threefold. First, we are reducing costs by accelerating the use of AI in our internal operations and simplifying our operating model. we're also making the difficult decision to reduce layers and numbers in our senior ranks. These actions will allow us to continue to invest in our priority growth areas and accelerate decision making. Matt will describe the impact and timing of this program shortly. Second, we are focusing our investments by doubling down on our strengths. This means flowing investment and talent to a few key areas where we are currently experiencing strong growth and that we believe can be accelerated further. Our primary areas of focus for the near term include cyber, both in the government and commercial markets, artificial intelligence, including growing areas like agentic, physical, and adversarial AI, warfighting tech, especially in edge technologies and mission systems, Critical national security programs, specifically scaling our work in ongoing missions, supporting the warfighter both at home and abroad. Tech ecosystem partnerships, including existing partnerships like NVIDIA, AWS, and Shield AI, our own venture portfolio, and new concepts and ideas with the best companies in Silicon Valley. And of course, continued emphasis on new tech, from quantum to AI-native 6G. Booz Allen will lead in the next waves of technology as well. And third, as the administration accelerates the transition to outcome-based contracting and commercial solutions, Booz Allen is leading the way. We are working with our customers to convert existing contracts and procure new work using these models. we are working diligently to productize more of our IP, including our breakthrough ground systems and fire control solutions proposed for Golden Dome. These approaches will provide greater cost savings and certainty for our customers and provide us with margin expansion opportunities as we gain greater flexibility in how we deliver. I believe that these steps Taken in combination, we'll expand our market leadership in key areas, accelerate the implementation of Vault, and importantly, strengthen our financial performance. In short, we are making bold moves in the areas we can control. Every period of adversity has made us stronger, and this one is no exception. We are transforming ourselves at breakneck speed. And I am deeply committed to ensuring Booz Allen is an essential player in driving America's technological superiority. Thus, I remain very optimistic about the future of our company. And with that, Matt, over to you.