Booz Allen Hamilton Holding Corp

1. Business Overview

Our Business

Booz Allen Hamilton Holding Corporation, including its wholly owned subsidiaries, or the Company, we, us, and our, was incorporated in Delaware in May 2008. As an advanced technology company, the Company builds technology solutions using artificial intelligence (“AI”), cyber, and other cutting-edge technologies to advance and protect the nation and its citizens. The Company supports critical missions for a diverse base of federal government customers, including nearly all of the U.S. government’s cabinet-level departments, as well as for commercial customers, both domestically and in select international locations. The Company is headquartered in McLean, Virginia, with approximately 35,800 employees as of March 31, 2025, and reports operating results and financial data inone reportable segment.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries that are majority-owned or otherwise controlled by the Company and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). All intercompany balances and transactions have been eliminated in consolidation.

The consolidated financial statements and notes of the Company also include other entities where the Company is a primary beneficiary. The Company uses the equity method to account for investments in entities that it does not control if it is otherwise able to exert significant influence over the entities' operating and financial policies. Equity investments in entities over which the Company does not have the ability to exercise significant influence and whose securities do not have a readily determinable fair value are carried at cost and are subject to fair value adjustments in certain circumstances (e.g., observable price changes or impairment).

The Company’s fiscal year ends on March 31 and unless otherwise noted, references to fiscal year or fiscal are for fiscal years ended March 31. The accompanying consolidated financial statements present the financial position of the Company as of March 31, 2025 and 2024 and the Company’s results of operations for fiscal 2025, 2024, and 2023.

Certain amounts reported in the Company's prior year consolidated financial statements have been reclassified to conform to the current year presentation, including the reclassification of $26 million and $10 million, respectively, of interest income for fiscal 2024 and 2023 from “Other income (loss), net” into “Interest expense, net” on the consolidated statement of operations. There are no changes to the Company’s financial position or results of operations as a result of this reclassification.

Accounting Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as the disclosure of contingent assets and liabilities at the date of the financial statements or during the relevant reporting periods (as applicable). The Company bases its estimates on assumptions that it believes are reasonable and appropriate. Actual results may differ materially from those estimates. Estimates are used for, but not limited to, revenue recognition including the profitability of long-term contracts and cost accruals, the provision for claimed costs, fair value measurements, the valuation and expected lives of acquired intangible assets, incentive compensation, income taxes including reserves for uncertain tax positions, postretirement obligations and contingencies.

Revenue Recognition

The Company performs and generates revenue under three basic types of contracts, as described below:

•Cost-Reimbursable Contracts: Cost-reimbursable contracts provide for the payment of allowable costs incurred during performance of the contract, up to a ceiling based on the amount that has been funded, plus a fixed fee or award fee.

•Time-and-Materials Contracts: Under contracts in this category, we are paid a fixed hourly rate for each direct labor hour expended, and we are reimbursed for billable material costs and billable out-of-pocket expenses inclusive of allocable indirect costs. We assume the financial risk on time-and-materials contracts because the Company’s costs of performance may exceed negotiated hourly rates.

•Fixed-Price Contracts: Under a fixed-price contract, we agree to perform the specified work for a predetermined price. To the extent the Company’s actual direct and allocated indirect costs decrease or increase from the estimates upon which the price was negotiated, we will generate more or less profit, respectively, or could incur a loss.

The Company considers a contract with a customer to exist under Accounting Standards Codification (“ASC”) No. 606, Revenue from Contracts with Customers (“Topic 606”), when there is approval and commitment from both the Company and the customer, the rights of the parties and payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. The Company also will consider whether two or more contracts entered into with the same customer should be combined and accounted for as a single contract. Furthermore, in certain transactions, the Company may commence providing services prior to receiving a formal approval from the customer. In these situations, the Company will consider the factors noted above, the risks associated with commencing the work and legal enforceability in determining whether a contract with the customer exists under Topic 606.

Customer contracts are often modified to change the scope, price, specifications or other terms within the existing arrangement. Contract modifications are evaluated by management to determine whether the modification should be accounted for as part of the original performance obligation(s) or as a separate contract. If the modification adds distinct goods or services and increases the contract value proportionate to the stand-alone selling price of the additional goods or services, it will be accounted for as a separate contract. Generally, the Company’s contract modifications do not include goods or services which are distinct, and therefore are accounted for as part of the original performance obligation(s) with any impact on transaction price or estimated costs at completion being recorded as through a cumulative catch-up adjustment to revenue.

The Company evaluates each service deliverable contracted with the customer to determine whether it represents promises to transfer distinct goods or services. Under Topic 606, these are referred to as performance obligations. One or more service deliverables often represent a single performance obligation. The Company’s contracts generally provide a set of integrated or highly interrelated tasks or services and are therefore accounted for as a single performance obligation. In the limited number of situations where our contracts with customers contain more than one performance obligation, we allocate the transaction price of a contract between the performance obligations in the proportion to their respective stand-alone selling prices. We generally estimate the stand-alone selling price of performance obligations based on an expected cost-plus margin approach as allowed under Topic 606. However, in cases where we provide more than one distinct good or service within a customer contract, the contract is separated into individual performance obligations which are accounted for discretely.

Billing timetables and payment terms on our contracts vary based on a number of factors, including whether the contract type is cost-reimbursable, time-and-materials, or fixed-price. Fixed-price contracts are typically billed to the customer using milestone or fixed monthly payments, while cost-reimbursable-plus-fee and time-and-materials contracts are typically billed to the customer at periodic intervals (e.g. monthly or weekly) as indicated by the terms of the contract. Disparities between the timing of revenue recognition and customer billings and cash collections result in changes to net contract assets or liabilities being recognized at the end of each reporting period.

Contract assets primarily consist of unbilled receivables typically resulting from revenue recognized exceeding the amount billed to the customer and right to payment is not just subject to the passage of time. Unbilled amounts represent revenues for which billings have not yet been presented to customers. These amounts are generally billed and collected within one year subject to various conditions including, without limitation, appropriated and available funding. Our customers generally pay our invoices within 30 days of the invoice date, although we experience a longer billing and collection cycle with our global commercial customers. Long-term unbilled receivables not anticipated to be billed and collected within one year, which are primarily related to retainage, holdbacks, and certain years’ long-term rate settlements to be billed at contract closeout, are included in other long-term assets in the accompanying consolidated balance sheets. Contract liabilities primarily consist of billings in excess of costs incurred and deferred revenue. Contract assets and liabilities are reported on a net contract basis at the end of each reporting period. The Company maintains an allowance for credit losses to provide for an estimate of uncollectible receivables.

Contracts with the U.S. government are generally subject to the Federal Acquisition Regulation (the “FAR”) and are priced based on estimated or actual costs of providing the goods or services. The Company derives a majority of its revenue from contracts awarded through a competitive bidding process. Pricing for non-U.S. government agencies and commercial customers is based on discrete negotiations with each customer. Certain of the Company’s contracts contain award fees, incentive fees or other provisions that may increase or decrease the transaction price. These variable amounts generally are awarded upon achievement of certain performance metrics, program milestones or cost targets and may be based upon customer discretion. Management estimates variable consideration as the most likely amount that we expect to achieve based on the Company’s assessment of the variable fee provisions within the contract, prior experience with similar contracts or customers, and management’s evaluation of the performance on such contracts. The Company may perform work under a contract that has not been fully funded if the work has been authorized by management and the customer to proceed. The Company evaluates unfunded amounts as variable consideration in estimating the transaction price. The Company includes the estimated variable consideration in its transaction price to the extent that it is probable that a significant reversal of revenue will not occur upon the ultimate settlement of the variable fee provision. The Company’s U.S. government contracts generally contain FAR provisions that enable the customer to terminate a contract for default or for the convenience of the U.S. government.

The Company recognizes revenue for each performance obligation identified within its customer contracts when, or as, the performance obligation is satisfied by transferring the promised goods or services. Revenue may either be recognized over time or at a point in time. The Company generally recognizes revenue over time as its contracts typically involve a continuous transfer of control to the customer. A continuous transfer of control under contracts with the U.S. government and its agencies is evidenced by clauses which require the Company to be paid for costs incurred plus a reasonable margin in the event that the customer unilaterally terminates the contract for convenience. For fixed-price contracts where the Company recognizes revenue over time, a contract cost-based input method is generally used to measure progress towards satisfaction of the underlying performance obligation(s). Contract costs include direct costs such as materials, labor and subcontract costs, as well as indirect costs identifiable with, or allocable to, a specific contract that are expensed as incurred. The Company does not incur material incremental costs to acquire or fulfill contracts. Under a contract cost-based input method, revenue is recognized based on the proportion of contract costs incurred to the total estimated costs expected to be incurred upon completion of the underlying performance obligation. The Company generally includes both funded and unfunded portions of customer contracts in this estimation process.

For interim financial reporting periods, contract revenue attributable to indirect costs is recognized based upon agreed-upon annual rates established with the U.S. government at the start of each fiscal year. These rates are estimated and agreed upon between the Company and the U.S. government and represent indirect contract costs required to execute and administer contract obligations. The impact of any overall changes or changes in the rates are recorded in the interim financial reporting period when such changes are identified. At the end of each fiscal year, estimated annual rates are adjusted to reported actual rates, with contract revenue attributable to indirect costs adjusted accordingly. These preliminary actual rates and their impact on contract revenue are subject to final audit and negotiation with the U.S. government, which may take place several years in the future.

On certain contracts, principally time-and-materials and cost-reimbursable-plus-fee contracts, revenue is recognized using the right-to-invoice practical expedient as the Company is contractually able to invoice the customer based on the control transferred. However, we did not elect to use the practical expedient for remaining performance obligations, discussed below, which would allow the Company to exclude contracts using the right-to-invoice from remaining performance obligations. For stand-ready performance obligations under fixed-price contracts, revenue is recognized over time using a straight-line measure of progress as the control of the services is provided to the customer ratably over the term of the contract. If a contract does not meet the criteria for recognition of revenue over time, we recognize revenue at the point in time when control of the good or service is transferred to the customer. Determining a measure of progress towards the satisfaction of performance obligations requires management to make judgments that may affect the timing of revenue recognition.

Many of the Company’s fixed price contracts recognize revenue under a contract cost-based input method and require an Estimate-at-Completion (“EAC”), which management uses to review and monitor the progress towards the completion of its performance obligations. Management considers various inputs and assumptions related to the EAC, including, but not limited to, progress towards completion, labor costs and productivity, material and subcontractor costs, and identified risks. Estimating the total cost at completion of performance obligations is subjective and requires management to make assumptions about future activity and cost drivers under the contract. Changes in these estimates can occur for a variety of reasons and, if significant, may impact the profitability of the Company’s contracts. Changes in estimates related to contracts accounted for under EACs are recognized in the period when such changes are made on a cumulative catch-up basis. If the estimate of contract profitability indicates an anticipated loss on a contract, the Company recognizes the total loss at the time it is identified. For fiscal 2025, 2024 and 2023, the aggregate impact of adjustments in contract estimates was not material.

Remaining performance obligations represent the transaction price of exercised contracts for which work has not yet been performed, irrespective of whether funding has or has not been authorized and appropriated as of the date of exercise. Remaining performance obligations exclude negotiated but unexercised options and certain variable consideration which the Company does not expect to recognize as revenue.

Provision for Claimed Costs

U.S. government contracts and subcontracts are subject to extensive legal and regulatory requirements. In the ordinary course of business, agencies of the U.S. government, including the Defense Contract Audit Agency (“DCAA”), audit the Company’s claimed costs and conduct inquiries and investigations of our business practices with respect to government contracts to determine whether the Company's operations are conducted in accordance with these requirements and the terms of the relevant contracts.

The Company recognizes a reserve for estimated adjustments to historical claimed costs in respect of the years subsequent to fiscal 2011, based primarily on historical audit results. As audits of the periods subsequent to 2011 are completed, our estimates of adjustment to claimed costs for these periods could change.

Cash and Cash Equivalents

Cash and cash equivalents include unrestricted cash accounts and highly liquid investments that have a maturity of three months or less at the date of purchase. The Company’s cash equivalents consist primarily of government money market funds and money market deposit accounts. The Company maintains its cash and cash equivalents in bank accounts that, at times, exceed the federally insured FDIC limits. The Company has not experienced any losses in such accounts.

Accounts Receivable

Accounts receivable includes amounts billed and currently due from customers, and amounts billable where the right to consideration is unconditional. We also include in accounts receivable amounts related to revenue accrued in excess of amounts billed, primarily on our fixed-price and cost-reimbursable-plus-award-fee contracts. Amounts billable and unbilled receivables are recognized at estimated realizable value and consist of costs and fees, most of which are expected to be billed and collected generally within one year. When events or conditions indicate that amounts outstanding from customers may become uncollectible, an allowance for expected credit losses is estimated and recorded. This estimate is based on the age of outstanding receivables and/or specific identification of the balances at risk of becoming uncollectible. Upon final determination that a receivable is uncollectible, the receivable is written off against the allowance for expected credit losses.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents and accounts receivable. The Company’s cash equivalents are generally invested in U.S. government money market funds and money market deposit accounts. The Company believes that credit risk for accounts receivable is limited as the receivables are primarily with the U.S. government.

Property and Equipment

Property and equipment are recorded at cost, and the balances are presented net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Furniture and equipment is depreciated over five toten years, and computer equipment, including laptops and tablets, is depreciated overtwo tofour years. Leasehold improvements are amortized over the shorter of the useful life of the asset or lease term. Maintenance and repairs are charged to expense as incurred.

Business Combinations

The accounting for the Company’s business combinations consists of allocating the purchase price to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values, with the excess recorded as goodwill. Certain fair value measurements may include inputs that are unobservable, requiring management to make judgments and estimates that can be affected by contract performance, and other factors that may cause final amounts to differ materially from original estimates. The Company has up to one year from the acquisition date to use information as of each acquisition date to adjust the fair value of the acquired assets and liabilities which may result in material changes to their recorded values with an offsetting adjustment to goodwill.

Intangible Assets

Intangible assets primarily consist of programs and contracts assets, channel relationships, the Company's trade name, customer relationships, software and other amortizable intangible assets. The Company capitalizes costs associated with developing internal-use computer software pertaining to upgrades in its business and financial systems. Programs and contract assets, channel relationships, and other amortizable intangible assets are generally amortized on an accelerated basis over the expected life based on projected future cash flows of approximately five tofourteen years. Software purchased or developed for internal use is amortized overone toten years. Intangible assets with finite lives are assessed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company's trade name intangible asset is not amortized, but is tested for impairment on at least an annual basis as of January 1 and more frequently if interim indicators of impairment exist. The trade name is considered to be impaired if the carrying value exceeds its estimated fair value. The Company uses the relief from royalty method to estimate the fair value. The fair value of the asset is the present value of the license fees avoided by owning the asset, or the royalty savings. During the fiscal years ended March 31, 2025, 2024, and 2023, the Company didnot record any impairment of intangible assets.

Goodwill

The Company assesses goodwill for impairment on at least an annual basis on January 1 unless interim indicators of impairment exist. Goodwill is considered to be impaired when the net book value of a reporting unit exceeds its estimated fair value. The Company operates as a single operating segment and as a single reporting unit for the purpose of evaluating goodwill. As of January 1, 2025, the Company performed its annual impairment test of goodwill by comparing the fair value of the Company (based on market capitalization) to the carrying value of the Company's net equity, and concluded that the fair value of the reporting unit was significantly greater than the carrying amount. During the fiscal years ended March 31, 2025, 2024, and 2023, the Company didnot record any impairment of goodwill.

Long-Lived Assets

The Company reviews its long-lived assets, including property and equipment, amortizable intangible assets, and right-of-use (“ROU”) assets, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for any excess of the carrying amount over the fair value of the asset. During the fiscal years ended March 31, 2025, 2024, and 2023, the Company didnot record any material impairment charges.

Leases

At contract inception, the Company determines whether the contract is, or contains, a lease, which exists when the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration. Operating lease balances are included in operating lease ROU assets, operating lease liabilities, and operating lease liabilities, net of current portion in the Company’s consolidated balance sheet. Cash payments arising from operating leases are classified within operating activities in the consolidated statement of cash flows. As of March 31, 2025, the Company had no finance leases.

The Company's leases are generally for facilities and office space and the Company recognizes ROU assets and lease liabilities at the lease commencement date for those arrangements. The initial lease liability is equal to the present value of the future lease payments over the lease term. The initial measurement of the ROU asset is equal to the initial lease liability plus any initial direct costs and prepaid lease payments, less any lease incentives. At the lease commencement date, the Company estimates its collateralized incremental borrowing rate based on publicly available yields adjusted for Company-specific considerations and the Company's varying lease terms in determining the present value of future payments. Certain of the Company’s leases contain options to renew or to terminate the lease which are included in the determination of the ROU assets and lease liabilities when it is reasonably certain that the Company will exercise the option. The Company's leases may also include variable lease payments, such as an escalation clause based on consumer price index rates, maintenance costs, and utilities. Variable lease payments that depend on an index or a rate are included in the determination of ROU assets and lease liabilities using the index or rate at the lease commencement date, whereas variable lease-related payments that do not depend on an index or rate are recorded as lease expense in the period incurred. ROU assets are evaluated for impairment in a manner consistent with the treatment of other long-lived assets.

The Company elected the short-term lease policy election not to recognize ROU assets and lease liabilities for leases with an initial term of 12 months or less; lease expense from these leases is recognized on a straight-line basis over the lease term. For all material classes of leased assets, the Company elected to apply the practical expedient to not separate lease components from non-lease components, and instead account for both components as a single lease component. As of March 31, 2025, the Company did not have any lease agreements with residual value guarantees or material restrictions or covenants.

Income Taxes

The Company provides for income taxes as a “C” corporation on income earned from operations. The Company is subject to federal, state, and foreign taxation in various jurisdictions.

Deferred tax assets and liabilities are recorded to recognize the expected future tax benefits or costs of events that have been, or will be, reported in different years for financial statement purposes than for tax purposes. Deferred tax assets and liabilities are computed based on the difference between the consolidated financial statement carrying amount and tax basis of assets and liabilities using enacted tax rates and laws for the years in which these items are expected to reverse. If management determines that some portion or all of a deferred tax asset is not “more likely than not” to be realized, a valuation allowance is recorded as a component of the income tax provision to reduce the deferred tax asset to an appropriate level in that period. In determining the need for a valuation allowance, management considers all positive and negative evidence, including historical earnings, projected future taxable income, future reversals of existing taxable temporary differences, taxable income in prior carryback periods, and prudent, feasible tax-planning strategies.

The Company periodically assesses its tax positions for all periods open to examination by tax authorities based on the latest available information. Those positions are evaluated to determine whether they will more likely than not be sustained upon examination by the Internal Revenue Service (“IRS”) or other taxing authorities. The Company reserves for these uncertain tax positions related to unrecognized income tax benefits where it is not more likely than not that the Company’s tax position will be sustained on examination and settlement with the various taxing authorities. Liabilities for unrecognized tax benefits are measured based on the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. These unrecognized tax benefits are recorded as a component of income tax expense. As uncertain tax positions in periods open to examination are closed out, or as new information becomes available, the resulting change is reflected in the recorded liability and income tax expense. Penalties and interest recognized related to the reserves for uncertain tax positions are recorded as a component of income tax expense.

Comprehensive Income

Comprehensive income is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, and is presented in the consolidated statements of comprehensive income. Accumulated other comprehensive income as of March 31, 2025 and 2024 consisted of net unrealized gains or losses on the Company’s defined and postretirement benefit plans and unrealized gains or losses on interest rate swaps designated as cash flow hedges.

Stock-Based Compensation

The Company’s stock-based compensation to employees are classified as equity plans. Compensation expense for all stock-based awards is measured at the grant date fair value and is recognized ratably over the vesting period, net of estimated forfeitures. The Company estimates forfeitures anticipated to occur during the vesting period, and the number of performance awards expected to vest based on service and performance conditions is adjusted at each reporting date.

Defined Contribution Plan and Other Post-Retirement Benefits

The Company recognizes the underfunded status of defined contribution plans and other post-retirement benefits on the consolidated balance sheets within other long-term liabilities. Gains and losses, and prior service costs and credits that have not yet been recognized through net periodic benefit cost are recognized in accumulated other comprehensive loss, net of tax effects, and will be amortized as a component of net periodic cost in future periods. The measurement date, the date at which the benefit obligations are measured, is the Company’s fiscal year-end.

Self-Funded Medical Plans

The Company maintains self-funded medical insurance. Self-funded plans include Consumer Driven Health Plans with a Health Savings Account option and traditional choice plans. Further, self-funded plans also include prescription drug and dental benefits. The Company records an incurred but unreported claim liability in the accrued compensation and benefits line of the consolidated balance sheets for self-funded plans based on an actuarial valuation. The estimate of the incurred but unreported claim liability was provided by a third-party valuation firm, primarily based on claims and participant data for the medical, dental, and pharmacy related costs.

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company considers the principal or most advantageous market in which the asset or liability would transact, and if necessary, considers assumptions that market participants would use when pricing the asset or liability.

The accounting standard for fair value measurements establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: observable inputs such as quoted prices in active markets (“Level 1”); inputs other than quoted prices in active markets that are observable either directly or indirectly (“Level 2”); and unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions (“Level 3”). A financial instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

Investments in Variable Interest Entities and Other Investments

The Company invests in certain companies that advance or develop new technologies applicable to its business. Each investment is evaluated for consolidation under the variable interest entities model and/or the voting interest model. The Company uses the equity method to account for investments in entities that it does not control if it is otherwise able to exert significant influence over the entities' operating and financial policies. Equity investments in entities over which the Company does not have the ability to exercise significant influence and whose securities do not have a readily determinable fair value are accounted for under the measurement alternative, where they are subject to fair value adjustments in certain circumstances (e.g. observable price changes or impairment).

The results of our investments are not material to the consolidated financial statements for the periods presented. As of March 31, 2025 and March 31, 2024, respectively, the total of equity and other investments related to unconsolidated entities included in other long term assets of the Company’s consolidated balance sheet were $90 million and $42 million.

Recently Issued Accounting Pronouncements Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Improvements to Reportable Segment Disclosures, which enhances reportable segment disclosure requirements, including significant segment expenses and interim disclosures (“Topic 280”). The guidance allows for disclosure of multiple measures of a reportable segment’s profit or loss, and it requires that public entities with a single reportable segment provide all disclosures required by the ASU and all existing disclosures in Topic 280. The Company adopted the new standard effective March 31, 2025 on a retrospective basis. The adoption of this ASU affects only the Company’s disclosures, with no impacts to its financial condition or results of operations.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires disclosure of disaggregated information about an entity’s effective tax rate reconciliation as well as information on income taxes paid by jurisdiction. The standard is effective for fiscal periods beginning after December 15, 2024. The Company plans to adopt this standard prospectively in fiscal 2026 and the expected impacts will be on its disclosures only with no impact to its financial condition and results of operations.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which is intended to enhance transparency into the nature and function of certain expenses as specified by the ASU. The guidance does not change the expense captions an entity presents on the face of the income statement; rather, it requires public business entities to provide disaggregated disclosures of certain expense captions in the notes to the financial statements. The ASU is effective for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, and can be applied retrospectively or prospectively. The Company is currently assessing the impact of this update, however, its adoption will affect only the Company’s disclosures, with no impacts to its financial condition or results of operations.

Other recent accounting pronouncements issued during fiscal 2025 and through the filing date that have not yet been adopted are not expected to have a material impact on the Company's present or historical consolidated financial statements.

3. Revenue

For each of the fiscal years 2025, 2024, and 2023, approximately 98%,98%, and 97%, respectively, of the Company’s revenue was generated from contracts with an agency or department of the U.S. government, including contracts where the Company performed either as a prime contractor or subcontractor, and regardless of the geographic location in which the work was performed.

Disaggregation of Revenue

We disaggregate our revenue from contracts with customers by contract type and by customer type, as well as by whether the Company acts as prime contractor or subcontractor, as we believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. The following series of tables presents our revenue disaggregated by these categories.

(1) Customer type is based on public market as defined by government agency hierarchy mapping. Certain contracts were reassigned between the various verticals of our U.S. government business shown in the table above to better align our operations to the customers we serve within each market. Comparative periods revenue by customer type has been reclassified to reflect the changes.

(2) Beginning in fiscal 2025, Civil Customers includes revenue from Global Commercial Customers, which was previously separately reported. Prior periods’ revenues have been reclassified to reflect this change.

Performance Obligations

As of March 31, 2025 and 2024, the Company had $9.5 billion and $8.7 billion of remaining performance obligations, respectively. We expect to recognize approximately 65% of the remaining performance obligations as of March 31, 2025 as revenue over the next 12 months, and approximately 70% over the next 24 months. The remainder is expected to be recognized thereafter.

Contract Balances

The following table summarizes the contract assets and liabilities, and accounts receivable, net of allowance recognized on the Company’s consolidated balance sheets:

To determine revenue recognized from contract liabilities during the reporting periods, the Company allocates revenue recognized during the period to the beginning balances of individual contract liabilities first, until the revenue exceeds the liability balances. For fiscal 2025, 2024 and 2023, we recognized revenue of $12 million, $17 million and $24 million, respectively, related to our contract liabilities on April 1, 2024, 2023 and 2022, respectively.

4. Earnings Per Share

The Company computes basic and diluted earnings per share amounts based on net income attributable to common stockholders for the periods presented. The Company uses the weighted average number of shares of common stock outstanding during the period to calculate basic earnings per share (“EPS”). Diluted EPS adjusts the weighted average number of shares outstanding to include the dilutive effect of outstanding common stock options and other stock-based awards.

The Company currently has outstanding shares of Class A Common Stock. Holders of unvested Class A Restricted Common Stock are entitled to participate in non-forfeitable dividends or other distributions (“participating securities”). These unvested restricted shares participated in the Company's dividends declared and paid in each quarter of fiscal 2025, 2024, and 2023. As such, EPS is calculated using the two-class method whereby earnings are reduced by distributed earnings as well as any available undistributed earnings allocable to holders of these unvested restricted shares. A reconciliation of the income used to compute basic and diluted EPS for the periods presented are as follows:

(1)The difference between earnings for basic and diluted computations and net income presented on the consolidated statements of operations is due to undistributed earnings and dividends allocated to the participating securities. During fiscal 2025, 2024, and 2023, respectively, approximately 0.7 million,1.1 million, and 1.1 million shares of participating securities were paid dividends totaling $1 million, $2 million, and $2 million, respectively. There were undistributed earnings of $4 million, $3 million, and less than a million allocated to the participating class of securities in both basic and diluted earnings per share of common stock for fiscal 2025, 2024, and 2023, respectively.

(2) The impact of anti-dilutive options excluded from the calculation of diluted EPS was not material during the periods presented.

5. Acquisitions and Divestitures

Acquisitions

Everwatch Corp.

On October 14, 2022, the Company completed the acquisition of EverWatch Corp. (“EverWatch”), a leading provider of advanced solutions to the defense and intelligence communities for approximately $445 million, net of post-closing adjustments and also incurred transaction costs as part of the acquisition. The acquisition was funded with cash on hand and was accounted for under the acquisition method of accounting. As a result of the transaction, EverWatch became a wholly owned subsidiary of Booz Allen Hamilton Inc.

The Company recognized $109 million of intangible assets which consists primarily of contract assets and were valued using the excess earnings method discounted cash flow approach, incorporating Level 3 inputs as described under the fair value hierarchy of Topic 820. These unobservable inputs reflect the Company's own judgment about which assumptions market participants would use in pricing an asset on a non-recurring basis. The intangible assets will be amortized over the estimated useful life offourteen years. The goodwill of $331 million is primarily attributable to EverWatch's specialized workforce and the expected synergies between the Company and EverWatch, and is non-deductible for tax purposes.

PAR Government Systems Corporation

On June 7, 2024, the Company completed the acquisition of PAR Government Systems Corporation (“PGSC”), previously a wholly owned subsidiary of PAR Technology Corporation, for approximately$99 million, net of post-closing adjustments and incurred transaction costs as part of the acquisition. PGSC was founded in 1985 and headquartered in Rome, New York, and delivers differentiated services and solutions in strategic mission areas, including the provision of real-time communications and mobile situational awareness to maintain battlespace dominance for a range of government customers. The acquisition was funded with cash on hand. As a result of the transaction, PGSC became a wholly owned subsidiary of Booz Allen Hamilton Inc.

The acquisition was accounted for under the acquisition method of accounting. The Company completed the determination of fair values of the acquired assets and liabilities assumed during the fourth quarter of fiscal 2025.

The goodwill recognized of $61 million is primarily attributable to PGSC’s specialized workforce and the expected synergies between the Company and PGSC, and is deductible for tax purposes. The intangible assets recognized of$27 million consist primarily of contract assets and are being amortized over the estimated useful life oftwelve years.

Divestitures

Middle East and North Africa Management Consulting Business

On September 1, 2022, the Company completed the divestiture of its management consulting business serving the Middle East and North Africa (“MENA”) region to Oliver Wyman, a global management consulting firm and a business of Marsh McLennan. The divestiture was substantially comprised of the contracts associated with the MENA business, the assets and liabilities associated with those contracts, and the workforce that provides services under those contracts.

As a result of this transaction, the Company de-recognized the assets and liabilities associated with the MENA business and recognized a pre-tax gain of $31 million in the second quarter of fiscal 2023, which is reflected in other income (expense), net, on the consolidated statement of operations.

6. Goodwill and Intangible Assets

Goodwill

Goodwill was $2,405 million and $2,344 million as of March 31, 2025 and March 31, 2024, respectively. The $61 million increase in the carrying amount of goodwill was attributable to the Company's finalization of the accounting for the acquisition of PGSC.

Intangible Assets

Intangible assets consisted of the following:

The $27 million increase in the gross carrying value of amortizable intangible assets (excluding software) was primarily attributable to the Company’s acquisition of PGSC.

Amortization expense for fiscal 2025, 2024, and 2023 was $95 million, $93 million, and $94 million, respectively.

The following table summarizes the estimated annual amortization expense for future periods:

7. Property and Equipment, Net

The components of property and equipment, net were as follows:

Depreciation expense relating to property and equipment for fiscal 2025, 2024, and 2023 was $41 million, $41 million, and $43 million, respectively. Amortization expense related to leasehold improvements for fiscal 2025, 2024, and 2023 was $29 million, $30 million, and $28 million, respectively. During fiscal 2025 and 2024, the Company reduced the gross cost and accumulated depreciation and amortization by$90 million and $36 million, respectively, for zero net book value assets deemed no longer in service.

8. Accounts Payable and Other Accrued Expenses

Accounts payable and other accrued expenses consisted of the following:

See Note 19, “Commitments and Contingencies,” to the consolidated financial statements for information on the Company’s provision for claimed costs.

9. Accrued Compensation and Benefits

Accrued compensation and benefits consisted of the following:

(1)The balance in accrued payroll includes salary, bonuses and related payroll tax liabilities. Fiscal 2025 includes the effect of the shift in the Company’s payroll cadence during fiscal 2025.

10. Debt

Debt consisted of the following on the dates below:

Credit Agreement

Booz Allen Hamilton Inc. (“Booz Allen Hamilton”), Booz Allen Hamilton Investor Corporation, and certain wholly owned subsidiaries of Booz Allen Hamilton are parties to a Credit Agreement dated as of July 31, 2012, as amended (the “Credit Agreement”), with certain institutional lenders and Bank of America, N.A., as Administrative Agent, Collateral Agent and Issuing Lender. As of March 31, 2025, the Credit Agreement provided Booz Allen Hamilton with a $1,526 million Term Loan A (“Term Loan A”) and a $1.0 billion revolving credit facility (the “Revolving Credit Facility”), with a sub-limit for letters of credit of $200 million. As of March 31, 2025, the maturity date of the Term Loan A and the Revolving Commitments is September 7, 2027. Voluntary prepayments of the Term Loan A and the Revolving Loans are permitted at any time, in minimum principal amounts, without premium or penalty.

On July 27, 2023 (the “Tenth Amendment Effective Date”), Booz Allen Hamilton entered into a Tenth Amendment (the “Amendment”) to the Credit Agreement (as amended prior to the Tenth Amendment Effective Date, the “Existing Credit Agreement” and, as amended by the Amendment, the “Amended Credit Agreement”) with Bank of America, N.A., as administrative agent (in such capacity, the “Administrative Agent”), and the lenders and other financial institutions party thereto, in order to make permanent certain changes to the Existing Credit Agreement in connection with Booz Allen Hamilton obtaining investment grade ratings from both Moody's and S&Pand to make certain additional changes in connection therewith, including, among other things, (i) removing the requirements for the obligations under the Amended Credit Agreement to be secured, (ii) removing the requirement for any subsidiary or other affiliate of Booz Allen Hamilton (other than the Company) to provide any guarantee of the obligations under the Amended Credit Agreement, and (iii) removing or modifying certain covenants applicable to Booz Allen Hamilton. Pursuant to the Amendment, all guarantees in respect of the Existing Credit Agreement have been released. The Amendment did not impact any of the terms of the Credit Agreement related to amortization or payments. On the Tenth Amendment Effective Date in connection with the Amendment, the Company entered into a Guarantee Agreement (the “Guarantee Agreement”) in favor of the Administrative Agent, pursuant to which the Company guarantees on an unsecured basis the obligations of Booz Allen Hamilton under the Amended Credit Agreement subject to certain conditions.

Term Loan A amortizes in consecutive quarterly installments in an amount equal to 1.25% of the stated principal amount of Term Loan A. The remaining balance of Term Loan A will be payable upon maturity.

The rate at which Term Loan A and the Revolving Loans bear interest will be based either on Term SOFR (subject to a 0.10% adjustment and a floor ofzero) for the applicable interest period or a base rate (equal to the highest of (i) the administrative agent’s prime corporate rate, (ii) the overnight federal funds rate plus 0.50% and (iii) three-month Term SOFR (subject to a 0.10% adjustment and a floor ofzero) plus 1.00%), in each case plus an applicable margin, payable at the end of the applicable interest period and in any event at least quarterly. The applicable margin for Term Loan A and the Revolving Loans ranges from 1.00% to 2.00% for Term SOFR loans andzero to 1.00% for base rate loans, in each case based on the lower of (i) the applicable rate per annum determined pursuant to a consolidated total net leverage ratio grid and (ii) the applicable rate per annum determined pursuant to a ratings grid. Unused New Revolving Commitments are subject to a quarterly fee ranging from 0.10% to 0.35% based on the lower of (i) the applicable fee rate per annum determined pursuant to a consolidated total net leverage ratio grid and (ii) the applicable fee rate per annum determined pursuant to a ratings grid. Booz Allen Hamilton has also agreed to pay customary letter of credit and agency fees.

The Company occasionally borrows under the Revolving Credit Facility for our working capital needs. During the fourth quarter of fiscal 2025, the Company borrowed $200 million under the Revolving Credit Facility for our working capital needs, which was subsequently repaid with the proceeds from the bond offering in the same quarter. As of March 31, 2025 and March 31, 2024, respectively, there wasno outstanding balance on the Revolving Credit Facility.

Borrowings under Term Loan A, and if used, the Revolving Credit Facility, incur interest at a variable rate. As of March 31, 2025, Booz Allen Hamilton had interest rate swaps with an aggregate notional amount of $550 million. These instruments hedge the variability of cash outflows for interest payments on Term Loan A and the Revolving Credit Facility. The Company's objectives in using cash flow hedges are to reduce volatility due to interest rate movements and to add stability to interest expense (see Note 11, “Derivatives,” to the consolidated financial statements).

The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants. In connection with Booz Allen Hamilton obtaining investment grade ratings from both Moody's and S&P, certain activities previously restricted by certain negative covenants are permitted subject to pro forma compliance with the financial covenants and no events of default having occurred or are continuing. In addition, Booz Allen Hamilton is required to meet certain financial covenants at each quarter end, namely the Consolidated Net Total Leverage Ratio. As of March 31, 2025 and March 31, 2024, Booz Allen Hamilton was in compliance with all financial covenants associated with its debt.

Senior Notes

On March 14, 2025, Booz Allen Hamilton issued $650 million aggregate principal amount of its 5.950% Senior Notes due April 15, 2035 (the “Senior Notes due 2035”) under an Indenture, dated as of August 4, 2023, and Second Supplemental Indenture, dated as of March 14, 2025, among Booz Allen Hamilton, the Company, as parent guarantor, and U.S. Bank Trust Company, National Association, as trustee.

The following table summarizes the material terms of the senior notes issued by Booz Allen Hamilton as of March 31, 2025:

The Senior Notes due 2035 and 2033 are fully and unconditionally guaranteed on an unsecured and unsubordinated basis by Booz Allen Hamilton Holding Corporation and rank equally and ratably in right of payment with all of Booz Allen Hamilton’s and Booz Allen Hamilton Holding Corporation’s other unsecured and unsubordinated indebtedness outstanding from time to time, pursuant to the relevant indenture. The Senior Notes due 2029 and 2028 are unsecured and are guaranteed by certain subsidiaries of Booz Allen Hamilton and rank equally in right of payment with all of Booz Allen Hamilton’s and the respective subsidiary guarantors’ existing and future senior indebtedness and rank senior in right of payment to any of Booz Allen Hamilton’s future subordinated indebtedness, pursuant to the relevant indenture. We refer to the Senior Notes due 2035, Senior Notes due 2033, Senior Notes due 2029 and Senior Notes due 2028, together, as the “Senior Notes”.

Interest is payable on the Senior Notes semi-annually in cash in arrears, with the principal due at maturity. Issuance Costs were recorded as an offset against the carrying value of respective debt and are being amortized to interest expense over the term of the respective debt.

All the Senior Notes’ indentures contain certain covenants, events of default, and other customary provisions. In connection with the Senior Notes obtaining investment grade ratings from Moody’s and S&P, in January 2023, certain negative covenants in the indentures governing the Senior Notes 2028 and Senior Notes 2029 were suspended.

The Senior Notes are generally subject to redemption, in whole or in part, at Booz Allen Hamilton’s option, in whole or in part, at any time and from time to time, at the redemption prices specified in their respective indenture and outlined below:

*plus any unpaid interest

Scheduled Maturities and Interest Expense

The following table summarizes required future debt repayments:

Interest expense consisted of the following:

(1) DIC and OID on the Term Loans and Senior Notes are recorded as a reduction of long-term debt in the consolidated balance sheet and are amortized ratably over the life of the related debt using the effective rate method. DIC on the Company's Revolving Credit Facility is recorded as a long-term asset on the consolidated balance sheet and amortized ratably over the term of the Revolving Credit Facility.

11. Derivatives

The Company utilizes derivative financial instruments to manage interest rate risk related to its variable rate debt. The Company’s objectives in using these interest rate derivatives, which were designated as cash flow hedges, are to manage its exposure to interest rate movements and reduce volatility of interest expense. The Company’s outstanding interest rate swaps have a total notional amount of $550 million as of March 31, 2025 and mature from June 30, 2025 to June 30, 2027. The variable-to-fixed interest rate swaps effectively convert a portion of the variable rate debt into fixed interest rate debt.

For interest rate swaps designated as cash flow hedges, the changes in the fair value of derivatives is recorded in Accumulated Other Comprehensive Income (Loss) (“AOCI”), net of taxes, and are subsequently reclassified into interest expense, net in the period that the hedged forecasted interest payments are made on the Company's variable-rate debt. See Note 15, “Accumulated Other Comprehensive Income (Loss),” and Note 10, “Debt,” to the consolidated financial statements for additional information on reclassifications from AOCI and interest payments related to the derivatives, and Note 18, “Fair Value Measurements,” to the consolidated financial statements for additional information on the fair values and location of our derivative instruments on the consolidated balance sheets.

Over the next 12 months, the Company estimates that $1 million will be reclassified as a decrease to interest expense. Cash flows associated with periodic settlements of interest rate swaps are classified as operating activities in the consolidated statement of cash flows.

The Company is subject to counterparty risk in connection with its interest rate swap derivative contracts. Credit risk related to a derivative financial instrument represents the possibility that the counterparty will not fulfill the terms of the contract. The Company mitigates this credit risk by entering into agreements with credit-worthy counterparties and regularly reviews its credit exposure and the creditworthiness of the counterparties.

12. Leases

The Company's leases are generally for facilities and office space.

The Company’s total lease cost is recorded primarily within general and administrative expenses on the consolidated statement of operations and consisted of the following:

Future minimum operating lease payments for noncancelable operating leases as of March 31, 2025 are as follows:

Supplemental cash flow information related to leases was as follows:

(1) Includes all noncash increases and decreases arising from new or remeasured operating lease arrangements

Other information related to leases was as follows:

13. Income Taxes

The components of income tax expense were as follows:

A reconciliation of the provision for income tax to the amount computed by applying the statutory federal income tax rate to income from continuing operations before income taxes for each of the three years ended March 31 is as follows:

Tax Receivables and Payables

The Company has both income tax receivables and income tax payable on its consolidated balance sheet as follows:

Current income tax receivable represents previously made estimated payments that will be applied to the Company’s future U.S. federal and state tax returns. This amount is classified as prepaid expenses and other current assets on the consolidated balance sheet. Current income tax payable represents current liabilities associated with the Company’s current tax returns that the Company intends to file in fiscal 2026. This amount is classified as other current liabilities on the consolidated balance sheet.

The long-term income tax receivable represents the amended U.S. federal return refund claims for research and development tax credits and the carryback claim for the fiscal 2021 net operating loss which is classified as other long-term assets on the consolidated balance sheet. The Company is currently under federal audit by the IRS for fiscal years 2016, 2017 and 2019-2021 and the receipt of our U.S federal return refund claims is contingent upon the completion of the ongoing IRS audit.

Deferred Taxes

The significant components of the Company’s deferred income tax assets and liabilities were as follows:

Deferred tax balances arise from temporary differences between the carrying amount of assets and liabilities and their tax basis and are stated at the enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided against deferred tax assets when it is more likely than not that some or all of the deferred tax asset will not be realized. In determining if the Company's deferred tax assets are realizable, management considers all positive and negative evidence, including the history of generating financial reporting earnings, future reversals of existing taxable temporary differences, projected future taxable income, as well as any tax planning strategies.

As of March 31, 2025 and 2024, the Company had available federal, state, and foreign net operating loss (“NOL carryforwards”) of $10 million and $9 million, respectively, that may be applied against future taxable income. The federal net operating loss of $1 million is attributable to an acquisition and will begin to expire in fiscal 2037. The state net operating loss of $4 million is primarily attributable to losses in jurisdictions in which the Company does not file a consolidated return. The foreign net operating loss of $5 million is primarily attributable to operations in jurisdictions where the Company has not historically been profitable. The Company recorded a partial valuation allowance against those federal, state and foreign net operating losses it believes will expire prior to utilization.

Uncertain Tax Positions

The Company maintains reserves for uncertain tax positions related to unrecognized income tax benefits. These reserves involve considerable judgment and estimation and are evaluated by management based on the best information available including changes in tax laws and other information. As of March 31, 2025, 2024, and 2023, the Company has recorded $142 million, $115 million, and $552 million, respectively, of reserves for uncertain tax positions which include potential tax benefits of $125 million, $104 million, and $91 million, respectively, that, when recognized, impact the effective tax rate. As of March 31, 2025 and 2024, $3 million and $1 million, respectively, of the reserve is reflected as a reduction to deferred taxes and the remaining balance is recorded as a component of other long-term liabilities in the consolidated balance sheet.

A reconciliation of the beginning and ending amount of potential tax benefits for the periods presented is as follows:

The Company recognized accrued interest and penalties of $7 million, $7 million and $3 million for fiscal 2025, 2024, and 2023, respectively, related to the reserves for uncertain tax positions in the income tax provision. The total reserve for uncertain tax positions includes accrued penalties and interest of approximately $20 million, $13 million and $6 million at March 31, 2025, 2024, and 2023, respectively. The Company is subject to taxation in the United States and various state and foreign jurisdictions. As of March 31, 2025, the Company's tax years ended March 31, 2016 and forward are open and subject to examination by the federal tax authorities. The Company is currently under federal audit by the Internal Revenue Service (“IRS”) for fiscal years 2016, 2017 and 2019-2021. The other jurisdictions currently open or under examination are not considered to be material.

It is difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. It is reasonably possible that the amount of unrecognized tax benefits could significantly change within the next twelve months. However, an estimate of the range of reasonably possible outcomes cannot be made. Items that may cause changes to unrecognized tax benefits include the amount of research and development tax credits available in the United States and various state jurisdictions. These changes could result from the completion of the ongoing IRS examination, the expiration of the statutes of limitations, additional regulatory guidance or other unforeseen circumstances.

During fiscal 2023, 2024, and 2025, the Company recognized an increase in reserves for uncertain tax positions related to an increase in research and development tax credits available. In addition, during fiscal 2023, the Company recognized an increase in reserves for uncertain tax positions related to the required capitalization of research and development expenditures, which was reversed in fiscal 2024 as a result of additional guidance provided by the IRS. Furthermore, during fiscal 2024, the Company received an unfavorable ruling from the District of Columbia Court of Appeals related to contested tax assessments from the District of Columbia Office of Tax and Revenue (“DC OTR”) for fiscal years 2013 through 2015.

14. Employee Benefit Plans

Defined Contribution Plan

The Company sponsors the Employees’ Capital Accumulation Plan (the “ECAP”), which is a qualified defined contribution plan that covers eligible U.S. and certain international employees. ECAP provides for distributions to participants by reason of retirement, death, disability, or termination of employment. The Company provides an annual matching contribution of up to 6% of eligible annual compensation. Total expense recognized under ECAP for fiscal 2025, 2024, and 2023 was $249 million, $218 million, and $191 million, respectively, and the Company-paid contributions were $240 million, $213 million, and $186 million, respectively.

Post Retirement Benefits

The Company provides postretirement healthcare benefits to former officers under a medical indemnity insurance plan, with premiums paid by the Company. This plan is referred to as the Officer Medical Plan. The Company recognizes a liability for the defined benefit plans' underfunded status, measures the defined benefit plans' obligations that determine its funded status as of the end of the fiscal year, and recognizes as a component of accumulated other comprehensive income the changes in the defined benefit plans' funded status that are not recognized as components of net periodic benefit cost. See Note 15, “Accumulated Other Comprehensive Income (Loss),” to the consolidated financial statements.

The service cost component of net periodic benefit cost is included in cost of revenue and general and administrative expenses, and the non-service cost components of net periodic benefit cost (interest cost and net actuarial loss) are included as part of other income (expense), net in the accompanying consolidated statements of operations.

The weighted-average discount rate used to determine the year-end benefit obligation for the Officer Medical Plan were 5.55%,5.20% and 4.90% for fiscal 2025, 2024, and 2023, respectively.

Assumed healthcare cost trend rates for the Officer Medical Plan at March 31 were as follows:

The changes in the benefit obligation of the unfunded Officer Medical Plan were as follows:

(1)The short term and long term portion of the Officer Medical Plan’s benefit obligation is included in accrued compensation and other long-term liabilities, respectively, in the accompanying consolidated balance sheets.

The net actuarial loss related to the benefit obligation in fiscal 2025 was primarily due to unfavorable updates in estimated medical claims and medical inflation, partially offset by an increase in the discount rate. The net actuarial loss related to the benefit obligation in fiscal 2024 was primarily due to unfavorable updates in estimated medical claims, medical inflation, and demographic assumptions, partially offset by increases in discount rates. The net actuarial gain related to the benefit obligation in fiscal 2023 was primarily due to a favorable change from using an amounts-weighted to a headcount-weighted mortality table and increases in discount rates, partially offset by updates to estimated medical costs and the outlook of higher future medical inflation.

The expected future medical benefit payments and related contributions are as follows:

15. Accumulated Other Comprehensive Income (Loss)

All amounts recorded in other comprehensive income (loss) (“OCI”) are related to the Company's post-retirement plans and interest rate swaps designated as cash flow hedges. The following table presents the changes in Accumulated OCI:

(1)The reclassifications from accumulated OCI to net income are included in interest expense, net in the Consolidated Statements of Operations.

16. Stockholders’ Equity

Common Stock

Holders of Class A Common Stock are entitled toone vote for each share. Each share of Class A Common is entitled to participate equally in all dividends and other distributions declared on and payable with respect to the Class A Common Stock, subject to the preferences and rights of any preferred stock and the General Corporation Law of the State of Delaware. The Company’s ability to pay dividends to stockholders is limited as a practical matter by restrictions in the agreements governing the Company's indebtedness.

The authorized and unissued shares of Class A Common Stock are available for future issuance upon stock option exercises and vesting of restricted stock units without additional stockholder approval.

Share Repurchase Program

On December 12, 2011, the Board of Directors initially approved a share repurchase program, which was most recently increased by $500 million to $3,585 million on January 28, 2025. A special committee of the Board evaluates market conditions and other relevant factors and initiates repurchases under the program from time to time. The share repurchase program may be suspended, modified or discontinued at any time at the Company’s discretion without prior notice. During fiscal 2025, the Company purchased 5.6 million shares of Class A Common Stock in a series of open market transactions for $764 million. During fiscal 2024, the Company purchased 3.2 million shares of Class A Common Stock in a series of open market transactions for $373 million. As of March 31, 2025, the Company had $745 million remaining under the share repurchase program.

Dividends

The following table summarizes the cash distributions recognized in the consolidated statement of cash flows:

(1)Amounts represent recurring quarterly dividends that were declared and paid for during each quarter of fiscal 2025, 2024, and 2023.

17. Stock-based Compensation

The following table summarizes stock-based compensation expense recognized in the consolidated statements of operations:

Our stock-based compensation expense, primarily related to stock options, time-based and performance-based restricted stock awards, is measured at the grant date fair value and recognized ratably over the vesting period. The Company uses the Black-Scholes option-pricing model to determine the estimated fair value for stock option awards. The fair value of the Company’s restricted stock awards are generally based on the closing price of its common stock on the New York Stock Exchange on the date of grant. The fair value of performance-based awards that also have market conditions is measured using a Monte Carlo model. Compensation expense for performance-based awards is estimated at each reporting date using management's expectation of the probable achievement of the specified performance criteria of each tranche during the respective performance periods.

As of March 31, 2025 and 2024, there was $68 million and $62 million, respectively, of total unrecognized compensation cost related to unvested stock-based compensation agreements. The unrecognized compensation cost as of March 31, 2025 is expected to be fully amortized over the next five years. As of March 31, 2025 and 2024, absent the effect of forfeiture or acceleration of stock compensation cost for departures of employees, the weighted average period over which the cost is expected to be amortized (excluding any future awards) is 1.7 years.

Equity Incentive Plan

Awards under the Company's Equity Incentive Plan (the “EIP”) may be made in the form of stock options; stock purchase rights; restricted stock; restricted stock units; performance shares; performance units; stock appreciation rights; deferred share units; dividend equivalents; and other stock-based awards. As of March 31, 2025 and 2024, there were 5.1 million and 6.0 million shares, respectively, available for future grants under the EIP.

Stock Options

Stock options under the EIP are granted at the discretion of the Board of Directors or its Compensation, Culture and People Committee and expireten years from the grant date. Stock options generally vest in equal installments over afive-year period subject to the grantee’s continued service on each applicable vesting date. All options under the EIP are exercisable, upon vesting, for shares of Class A Common Stock of the Company.

As of March 31, 2025 and 2024,0.1 million and 0.2 million options were unvested under the EIP, with a weighted average grant date fair value of $20.60 and $18.45, respectively. There were 0.7 million and 0.8 million EIP options outstanding as of March 31, 2025 and 2024, with a weighted average exercise price of $69.88 and $67.98, respectively.

Annual Incentive Plans

On October 1, 2010, the Board of Directors adopted an Annual Incentive Plan, or AIP, in connection with the initial public offering to more appropriately align the Company’s compensation programs with those of similarly situated companies. The amount of the annual incentive payment is determined based on performance targets established by the Board and a portion of the bonus may be paid in the form of equity (including stock and other awards under the EIP).

The Company maintains annual incentive programs for officers and key employees. The equity compensation would be issued in the form of restricted stock units of which a portion would vest based on the passage of time, and the other portion would vest based on specified performance conditions to be achieved over a specified time period. A restricted stock unit represents a contingent right to receiveone share of Class A Common Stock upon vesting. Service-based restricted stock units vest in equal installments over athree-year period subject to the grantee's continued service on each applicable vesting date and are settled for shares of Class A Common Stock. Dividend equivalents are paid in respect of the service-based restricted stock units when dividends are paid on the Company's Class A Common Stock. The related expense is recognized in the accompanying consolidated statements of operations based on the grant date fair value over the vesting period.

Performance-based awards vest at the end of athree-year period, subject to certain specified financial performance criteria, the grantee's continued service through the period, and certification of final performance by the Compensation, Culture and People Committee of the Board of Directors. The performance-based awards granted during fiscal 2025 included additional market conditions related to the Company’s total stockholder return relative to its peer group over thethree-year performance period. The Company recognizes compensation expense for these performance-based awards with market conditions based on the grant-date fair value calculated using a Monte Carlo model. These awards are settled for Class A Common Stock and dividend equivalents. Compensation expense for performance-based awards during the performance period is estimated at each reporting date using management's expectation of the probable achievement of the specified performance criteria.

The Company also issues equity awards under other programs in the form of restricted stock units that would vest immediately after issuance or over an applicable vesting period subject to the employee's continued service for the Company. The associated expenses are recognized in the accompanying consolidated statements of operations based on the grant date fair value.

Grants of Class A Restricted Common Stock and Restricted Stock Units

During fiscal 2025, the Board of Directors granted an aggregate of 0.7 million Restricted Stock Units with service-based and performance-based vesting conditions to officers, vice presidents, and other employees and non-employees of the Company. The awards will vest based on the applicable vesting period for the specific award subject to the employees' continued employment with the Company. The Board also granted Class A Restricted Common Stock to members of the Board during fiscal 2025. These awards generally vest overone year.

The aggregate fair value of all awards issued during fiscal 2025 was $104 million and will be recognized in the accompanying consolidated statements of operations over the applicable vesting period of the awards. The total fair value of restricted stock shares vested during fiscal 2025 and 2024 was $81 million and $86 million, respectively.

As permitted under the terms of the EIP, the Compensation, Culture and People Committee, as Administrator of the Plan, authorized the withholding of taxes not in excess of such amount as may be necessary to avoid liability award accounting, through the surrender of shares of Class A Common Stock issuable upon the vesting or accelerated vesting of Restricted Stock. As a result of these transactions, the Company repurchased 0.3 million shares and recorded them as treasury shares at a total cost of $33.4 million in fiscal 2025.

The following table summarizes unvested restricted stock activity for the periods presented:

(1)Unvested restricted stock includes 0.2 million shares of performance-based awards that completed thethree-year performance period but remained unsettled at March 31, 2025, subject to the certification of final performance by the Compensation, Culture and People Committee of the Board of Directors.

Employee Stock Purchase Plan

The Company offers a tax qualified Employee Stock Purchase Plan (the “ESPP”) which is designed to enable eligible employees to periodically purchase shares of the Class A Common Stock at afive percent discount from the fair market value of the Class A Common Stock. The ESPP provides for quarterly offering periods. For the year ended March 31, 2025,0.3 million shares of Class A Common Stock were purchased by employees under the ESPP. Since the program's inception,4.0 million shares of the total 10.0 million shares available have been purchased by employees.

18. Fair Value Measurements

Recurring Fair Value Measurements

The financial instruments measured at fair value on a recurring basis in the accompanying consolidated balance sheets consist of the following:

(1) The Company’s interest rate swaps are considered over-the-counter derivatives which are recorded in the consolidated balance sheet on a gross basis at estimated fair value. Fair value is estimated based on the present value of future cash flows using a model-derived valuation that uses Level 2 observable inputs such as interest rate yield curves. See Note 11, “Derivatives,” to the consolidated financial statements for further information on the Company’s derivative instruments designated as cash flow hedges.

(2)Investments in this category consist primarily of mutual funds whose fair values are determined by reference to the quoted market price per unit in active markets multiplied by the number of units held without consideration of transaction costs. These assets are recorded in other long-term assets and represent investments held in a consolidated trust to fund the Company's non-qualified deferred compensation plan, which is recorded in other long-term liabilities on our consolidated balance sheets.

The Company did not have any Level 3 assets or liabilities as of March 31, 2025 or March 31, 2024.

Cash, Cash Equivalents and Marketable Securities

The fair value of the Company's cash and cash equivalents, which are Level 1 inputs, approximated its carrying values at March 31, 2025 and 2024. The Company’s cash and cash equivalent balances presented on the accompanying consolidated balance sheets include $802 million and $193 million of marketable securities in money market funds as of March 31, 2025 and 2024, respectively.

Long-term Debt

The Company's long-term debt is carried at amortized cost and is measured at fair value quarterly for disclosure purposes. The estimated fair values of debt are determined using quoted prices or other market information obtained from recent trading activity of the debt in markets that are not active (Level 2 inputs). The fair value is corroborated by prices derived from the interest rate spreads of recently completed leveraged loan transactions of a similar credit profile, industry, and terms to that of the Company. The fair value of the Senior Notes are determined using quoted prices or other market information obtained from recent trading activity in the high-yield bond market (Level 2 inputs). The carrying amount and estimated fair value of debt consists of the following:

Nonrecurring Fair Value Measurements

As of March 31, 2025 and March 31, 2024, the total of our investments that are accounted for at fair value on a non-recurring basis under the measurement alternative were $85 million and $37 million, respectively. While these assets are not measured at fair value on an ongoing basis, they are subject to fair value adjustments in certain circumstances (e.g., observable price changes or impairment). We didnot have any material measurement adjustments during the year ended March 31, 2025, with the exception of the assets and liabilities acquired through our acquisitions (see Note 5, “Acquisitions and Divestitures,” to the consolidated financial statements).

19. Commitments and Contingencies

Letters of Credit and Third-Party Guarantees

As of both March 31, 2025 and 2024, the Company was contingently liable under open standby letters of credit and bank guarantees issued by our banks in favor of third parties that totaled $4 million. These letters of credit and bank guarantees primarily support insurance and bid and performance obligations. At both March 31, 2025 and 2024, approximately $1 million of these instruments reduce the available borrowings under the Revolving Credit Facility. The remainder is guaranteed under a separate $3 million facility, formerly $8 million, of which less than a million and $4 million were available to the Company at March 31, 2025 and March 31, 2024, respectively.

Government Contracting Matters - Provision for Claimed Costs

U.S. government contracts and subcontracts are subject to extensive legal and regulatory requirements. From time to time and in the ordinary course of business, agencies of the U.S. government, including the Defense Contract Audit Agency (“DCAA”), audit the Company’s claimed costs and conduct inquiries and investigations of our business practices with respect to government contracts to determine whether the Company's operations are conducted in accordance with these requirements and the terms of the relevant contracts.

Based upon information obtained from DCAA’s audit findings over four historical rate years, the Company changed its estimate and reduced a portion of its provision for claimed costs during the second quarters of fiscal 2025 and fiscal 2024, which resulted in increases to revenue of $122 million and $18 million, respectively, to reflect our best estimate of the final cost rates for the outstanding audit years. Operating income for the fiscal years ended March 31, 2025 and 2024 was accordingly increased by $122 million and $18 million, respectively, and net income was increased by $90 million and $14 million, respectively, (or $0.70 and $0.10, respectively, of basic and diluted earnings per common share for the fiscal years ended March 31, 2025 and 2024). Our final cost rates for the recently audited years remain subject to negotiation with the Defense Contract Management Agency (“DCMA”) Administrative Contracting Officer. Management believes it has recorded the appropriate provision for claimed costs for any audit, inquiry, or investigation of which it is aware that may be subject to any reductions and/or penalties. As of March 31, 2025 and 2024, the Company had recorded liabilities (included in accounts payable and other accrued expenses) of approximately $245 million and $364 million, respectively, for estimated adjustments to claimed costs based on its historical DCAA audit results, including the final resolution of such audits with the DCMA, for claimed costs incurred subsequent to fiscal 2011.

Litigation

Our performance under U.S. government contracts and compliance with the terms of those contracts and applicable laws and regulations are subject to continuous audit, review, and investigation by the U.S. government, which may include such investigative techniques as subpoenas or civil investigative demands. Given the nature of our business, these audits, reviews, and investigations may focus, among other areas, on various aspects of procurement integrity, labor time reporting, sensitive and/or classified information access and control, executive compensation, and post government employment restrictions. We are not always aware of our status in such matters, but we are currently aware of certain pending audits and investigations involving labor time reporting, procurement integrity, and classified information access. In addition, from time to time, we are also involved in legal proceedings and investigations arising in the ordinary course of business, including those relating to employment matters, relationships with customers and contractors, intellectual property disputes, and other business matters. These legal proceedings seek various remedies, including claims for monetary damages in varying amounts, none of which are considered material, or are unspecified as to amount. Although the outcome of any such matter is inherently uncertain and may be materially adverse, based on current information, we do not expect any of the currently ongoing audits, reviews, investigations, or litigation to have a material adverse effect on our financial condition and results of operations. As of both March 31, 2025 and 2024, there wereno material amounts accrued in the consolidated financial statements related to these proceedings.

During the second quarter of fiscal 2025, the Company secured insurance recoveries of $115 million from claims related to the Company’s settlement described in Note 20, “Commitments and Contingencies,” to the consolidated financial statements contained within our Annual Report on Form 10-K for the fiscal year ended March 31, 2024. The insurance recoveries offset our general and administrative expenses in our Consolidated Statements of Operations.

20. Business Segment Information

The Company reports operating results and financial data inone operating and reportable segment. The Company manages its business and allocates resources as a single profit center in order to promote collaboration, provide comprehensive functional service offerings across its entire customer base, and provide incentives to employees based on the success of the organization as a whole.

The Company’s chief operating decision maker (“CODM”) is its Chairman and Chief Executive Officer. Consolidated net income is the primary measure of profit used by the CODM to allocate resources and assess performance of the Company. Significant expense categories regularly provided to the CODM to manage operations are those disclosed in the consolidated statements of operations.