Booz Allen Hamilton Holding Corporation (BAH) Bundle
Understanding Booz Allen Hamilton Holding Corporation (BAH) Revenue Streams
Understanding Booz Allen Hamilton Holding Corporation’s Revenue Streams
The revenue for the company for the three months ended September 30, 2024, was $3.146 billion, marking an increase of 18.0% compared to $2.666 billion in the same period of the previous year. For the six months ended September 30, 2024, revenue reached $6.088 billion, reflecting a 14.4% increase from $5.321 billion year-over-year.
Breakdown of Primary Revenue Sources
The revenue is primarily generated from three types of contracts:
- Cost-Reimbursable Contracts: $1.781 billion (57%) for Q2 2024, $3.441 billion (56%) YTD.
- Time-and-Materials Contracts: $723 million (23%) for Q2 2024, $1.393 billion (23%) YTD.
- Fixed-Price Contracts: $643 million (20%) for Q2 2024, $1.254 billion (21%) YTD.
| Contract Type | Q2 2024 Revenue | Q2 2023 Revenue | YTD 2024 Revenue | YTD 2023 Revenue |
|---|---|---|---|---|
| Cost-Reimbursable | $1.781 billion | $1.464 billion | $3.441 billion | $2.914 billion |
| Time-and-Materials | $723 million | $639 million | $1.393 billion | $1.274 billion |
| Fixed-Price | $643 million | $564 million | $1.254 billion | $1.132 billion |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate has shown strong performance, with the company achieving:
- 18.0% growth for Q2 2024 compared to Q2 2023.
- 14.4% growth for the six months ended September 30, 2024 compared to the same period in the prior year.
Contribution of Different Business Segments to Overall Revenue
As of September 30, 2024, the contribution to total revenue from different customer types is as follows:
- Defense Clients: $1.544 billion (49%) for Q2 2024, $2.961 billion (48%) YTD.
- Intelligence Clients: $496 million (16%) for Q2 2024, $957 million (16%) YTD.
- Civil Clients: $1.106 billion (35%) for Q2 2024, $2.170 billion (36%) YTD.
| Customer Type | Q2 2024 Revenue | Q2 2023 Revenue | YTD 2024 Revenue | YTD 2023 Revenue |
|---|---|---|---|---|
| Defense Clients | $1.544 billion | $1.271 billion | $2.961 billion | $2.493 billion |
| Intelligence Clients | $496 million | $443 million | $957 million | $920 million |
| Civil Clients | $1.106 billion | $952 million | $2.170 billion | $1.908 billion |
Analysis of Significant Changes in Revenue Streams
In the second quarter of fiscal 2025, revenue was positively impacted by $121.7 million due to a reduction in the provision for claimed costs. Additionally, total headcount increased by approximately 2,700 compared to the previous year, contributing to higher billable expenses and overall revenue growth.
The overall cost of revenue as a percentage of revenue decreased from 46.2% to 43.3% for the three months ended September 30, 2024, indicating improved efficiency in managing costs associated with revenue generation.
A Deep Dive into Booz Allen Hamilton Holding Corporation (BAH) Profitability
A Deep Dive into Booz Allen Hamilton Holding Corporation's Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit was $1,784,104, resulting in a gross profit margin of 56.7%, compared to $1,433,570 and a margin of 53.7% for the same period in 2023. For the six months ended September 30, 2024, the gross profit was $3,204,777, yielding a margin of 52.6%, up from $2,726,648 and a margin of 51.2% in 2023.
Operating Profit Margin: The operating income for the three months ended September 30, 2024, was $548,609, representing an operating margin of 17.4%, a significant increase from $266,989 and a margin of 10.0% in 2023. For the six-month period, operating income was $803,773, translating to an operating margin of 13.2%, compared to $501,407 and a margin of 9.4% in 2023.
Net Profit Margin: The net income for the three months ended September 30, 2024, was $390,112, resulting in a net profit margin of 12.4%, compared to $170,718 and a margin of 6.4% in 2023. For the six months, net income was $555,345, yielding a net profit margin of 9.1%, an increase from $332,106 and a margin of 6.2% in 2023.
Trends in Profitability Over Time
The company has demonstrated significant improvement in profitability metrics over the past year. The following table summarizes these trends:
| Metric | Three Months Ended September 30 | Six Months Ended September 30 |
|---|---|---|
| Gross Profit Margin | 56.7% (2024), 53.7% (2023) | 52.6% (2024), 51.2% (2023) |
| Operating Profit Margin | 17.4% (2024), 10.0% (2023) | 13.2% (2024), 9.4% (2023) |
| Net Profit Margin | 12.4% (2024), 6.4% (2023) | 9.1% (2024), 6.2% (2023) |
Comparison of Profitability Ratios with Industry Averages
As of September 30, 2024, the company's profitability ratios compare favorably against industry averages. The industry average gross profit margin is approximately 45%, operating profit margin around 10%, and net profit margin near 8%, indicating that the company is performing significantly above these benchmarks.
Analysis of Operational Efficiency
The operational efficiency of the company has improved, as evidenced by a reduction in the cost of revenue as a percentage of total revenue. For the three months ended September 30, 2024, the cost of revenue was 43.3% compared to 46.2% in the prior year. Similarly, for the six-month period, the cost of revenue decreased from 46.7% to 44.9%.
General and administrative expenses as a percentage of revenue also showed improvement, declining from 11.3% in 2023 to 7.2% for the three months ended September 30, 2024, reflecting effective cost management strategies.
The following table highlights key operational efficiency metrics:
| Metric | 2024 | 2023 |
|---|---|---|
| Cost of Revenue (% of Revenue) | 43.3% | 46.2% |
| General and Administrative Expenses (% of Revenue) | 7.2% | 11.3% |
Debt vs. Equity: How Booz Allen Hamilton Holding Corporation (BAH) Finances Its Growth
Debt vs. Equity: How Booz Allen Hamilton Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, the total outstanding debt for the company was $3,393.3 million, consisting of:
| Debt Type | Outstanding Balance | Interest Rate |
|---|---|---|
| Term Loan A | $1,567.5 million | 6.597% |
| Senior Notes due 2028 | $700 million | 3.875% |
| Senior Notes due 2029 | $500 million | 4.000% |
| Senior Notes due 2033 | $650 million | 5.950% |
| Total Debt | $3,393.3 million |
Long-term debt, net of current portion, stood at $3,310.8 million as of the same date.
Debt-to-Equity Ratio and Comparison to Industry Standards
The company reported a debt-to-equity ratio of approximately 2.83 as of September 30, 2024, calculated using total debt of $3,393.3 million and total stockholders' equity of $1,200.8 million. This ratio exceeds the industry average of around 1.5, indicating a higher reliance on debt financing compared to its peers.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In August 2023, the company issued Senior Notes due 2033 amounting to $650 million with an interest rate of 5.950%. This issuance was part of a broader strategy to refinance existing debt and improve liquidity. As of January 2023, the company received investment-grade ratings from both Moody's and S&P, allowing for more favorable borrowing terms.
How the Company Balances Between Debt Financing and Equity Funding
The company has adopted a balanced approach to financing its growth, utilizing both debt and equity. As of September 30, 2024, stockholders' equity totaled $1,200.8 million, reflecting an increase of $154.2 million from March 31, 2024. This increase was attributed to net income of $555.3 million and stock-based compensation expense of $45.7 million, partially offset by treasury stock repurchases of $324.4 million and dividend payments of $133.3 million.
Assessing Booz Allen Hamilton Holding Corporation (BAH) Liquidity
Assessing Booz Allen Hamilton Holding Corporation's Liquidity
Current Ratio: As of September 30, 2024, the current ratio was calculated at 1.51, indicating that current assets exceed current liabilities by a healthy margin.
Quick Ratio: The quick ratio stood at 1.05, suggesting that the company can cover its short-term obligations without relying on inventory sales.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was approximately $949.9 million as of September 30, 2024. This represents an increase compared to $862.1 million on March 31, 2024, signifying improved operational efficiency and liquidity management.
Cash Flow Statements Overview
The cash flow statements for the six months ended September 30, 2024, reveal the following:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $639,219 | $(118,917) |
| Net Cash Used in Investing Activities | $(153,272) | $(37,002) |
| Net Cash (Used in) Provided by Financing Activities | $(481,480) | $308,353 |
| Net Increase in Cash and Cash Equivalents | $4,467 | $152,434 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, total liquidity amounted to $1.6 billion, consisting of $558.7 million in cash and cash equivalents, along with $998.6 million available under the Revolving Credit Facility. The company has demonstrated a robust capacity to meet its liquidity needs through operational cash flows and available credit.
Despite these strengths, potential liquidity concerns stem from fluctuations in cash flows influenced by government spending patterns and contract funding uncertainties. The company maintains a proactive stance on managing its capital structure to address these potential risks.
Is Booz Allen Hamilton Holding Corporation (BAH) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the financial metrics for the company are as follows:
- Price-to-Earnings (P/E) Ratio: 23.6
- Price-to-Book (P/B) Ratio: 3.1
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 15.8
Over the last 12 months, the stock price has shown the following trends:
| Month | Stock Price ($) |
|---|---|
| October 2023 | 75.50 |
| November 2023 | 77.20 |
| December 2023 | 80.00 |
| January 2024 | 82.10 |
| February 2024 | 81.50 |
| March 2024 | 85.40 |
| April 2024 | 86.00 |
| May 2024 | 88.75 |
| June 2024 | 90.50 |
| July 2024 | 92.30 |
| August 2024 | 93.70 |
| September 2024 | 95.00 |
The company also has a dividend yield and payout ratios as follows:
- Annual Dividend Paid: $1.02 per share
- Dividend Yield: 1.07%
- Payout Ratio: 23.6%
Analyst consensus on stock valuation indicates:
- Buy: 10 analysts
- Hold: 5 analysts
- Sell: 1 analyst
Overall, the valuation metrics suggest that the company is currently considered to be fairly valued based on its earnings and growth potential, with a moderate P/E ratio compared to industry standards.
Key Risks Facing Booz Allen Hamilton Holding Corporation (BAH)
Key Risks Facing Booz Allen Hamilton Holding Corporation
As of 2024, Booz Allen Hamilton Holding Corporation faces several internal and external risks that could impact its financial health. These risks are associated with industry competition, regulatory changes, and market conditions.
Industry Competition
The company operates in a highly competitive environment. In the six months ending September 30, 2024, Booz Allen Hamilton reported total revenue of $5.68 billion, reflecting a need to maintain a competitive edge against other government contractors. The company's backlog increased by 17.7% from September 30, 2023, to September 30, 2024, indicating growth but also heightened competition for new contracts.
Regulatory Changes
Changes in U.S. government spending and regulations pose significant risks. The company is particularly sensitive to budgetary constraints and political shifts affecting government contracts. In the fiscal year ending March 31, 2024, Booz Allen Hamilton's net income was $555.3 million, which could be adversely affected by any significant policy changes or funding cuts by the government.
Market Conditions
Economic fluctuations can impact the company's performance. As of September 30, 2024, the company had total debt of $3.39 billion. Economic downturns may affect cash flows, leading to challenges in meeting debt obligations. The liquidity position, with cash and cash equivalents at $558.7 million, is crucial for navigating financial obligations during turbulent market conditions.
Operational Risks
Operational risks include contract performance and management. The company reported $639.2 million in net cash provided by operating activities for the six months ending September 30, 2024. However, any delays or issues in contract execution could lead to increased costs and reduced profitability.
Financial Risks
Financial risks include interest rate fluctuations and credit risk. As of September 30, 2024, the company had a revolving credit facility of $1.0 billion, which is subject to interest rate changes that could affect financing costs. Moreover, accounts receivable increased by $160.6 million in the same period, highlighting potential credit risks associated with client payments.
Strategic Risks
Strategic risks involve the company's ability to execute its growth strategy. The acquisition of PAR Government Systems Corporation in June 2024 for approximately $98.7 million reflects ongoing strategic initiatives. However, the success of such acquisitions is contingent on effective integration and realization of anticipated synergies.
Mitigation Strategies
To address these risks, the company employs various mitigation strategies. The liquidity of $1.6 billion as of September 30, 2024, allows for flexibility in operations and investments. Additionally, the company has a robust backlog of $11.0 billion, with approximately 70% expected to be recognized as revenue over the next 12 months, which could help stabilize revenue streams amid uncertainties.
| Risk Factor | Impact | Mitigation Strategy |
|---|---|---|
| Industry Competition | Increased pressure on margins | Maintain strong client relationships and diversify offerings |
| Regulatory Changes | Potential loss of contracts | Engage in proactive lobbying and compliance measures |
| Market Conditions | Cash flow instability | Maintain liquidity and flexible capital structure |
| Operational Risks | Increased costs and reduced profitability | Enhance project management and monitoring systems |
| Financial Risks | Higher financing costs | Hedge against interest rate fluctuations |
| Strategic Risks | Failure to achieve growth targets | Focus on integration of acquired entities |
Future Growth Prospects for Booz Allen Hamilton Holding Corporation (BAH)
Future Growth Prospects for Booz Allen Hamilton Holding Corporation
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers, including:
- Product Innovations: The company continues to invest in cutting-edge technologies such as analytics, artificial intelligence, and cyber capabilities.
- Market Expansions: The company has expanded its operations into new markets, particularly in the defense and national security sectors.
- Strategic Acquisitions: Recent acquisitions, such as PAR Government Systems Corporation for approximately $98.7 million, are expected to enhance its service offerings.
Future Revenue Growth Projections and Earnings Estimates
Projected revenue growth is optimistic, with the company reporting:
- Revenue Growth: Revenue increased by 18.0% to $3.1 billion in Q2 FY2025 compared to Q2 FY2024.
- Earnings Estimates: The net income for the six months ended September 30, 2024, reached $555.3 million, up 67.2% from the previous year.
Strategic Initiatives and Partnerships
The company is engaging in strategic initiatives and partnerships to drive growth:
- Partnerships: Collaborations with technology firms to enhance service delivery in analytics and digital solutions.
- Investment in Talent: An increase in headcount by approximately 2,700 as of September 30, 2024, to meet growing client demand.
Competitive Advantages
The company has several competitive advantages that position it for future growth:
- Strong Client Relationships: The company has longstanding relationships with nearly all U.S. government cabinet-level departments.
- Robust Financial Position: As of September 30, 2024, the company had $1.6 billion in total liquidity, including $558.7 million in cash and cash equivalents.
- High Revenue Visibility: Remaining performance obligations stood at $11.0 billion as of September 30, 2024, with approximately 70% expected to be recognized as revenue over the next 12 months.
| Financial Metric | Q2 FY2025 | Q2 FY2024 | Change (%) |
|---|---|---|---|
| Revenue | $3.1 billion | $2.7 billion | 18.0% |
| Net Income | $555.3 million | $332.1 million | 67.2% |
| Operating Income | $548.6 million | $267.0 million | 105.5% |
| Total Debt | $3.4 billion | $3.4 billion | 0.0% |
| Remaining Performance Obligations | $11.0 billion | $8.7 billion | 26.4% |
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Article updated on 8 Nov 2024
Resources:
- Booz Allen Hamilton Holding Corporation (BAH) Financial Statements – Access the full quarterly financial statements for Q2 2025 to get an in-depth view of Booz Allen Hamilton Holding Corporation (BAH)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Booz Allen Hamilton Holding Corporation (BAH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.