BAH 10-K & 10-Q changes, risk factors and insider trading

•changes in U.S. government spending and mission priorities, including due to uncertainty relating to the new presidential administration, funding of the U.S. government,government and increasing the debt ceiling;

•our ability to compete effectively in the competitive bidding and re-competing processesprocesses, including increasing competition from non-traditional contractors and changes in government procurement practices, and delays or losses of contract awards caused by competitors’ protests of major contract awards received by us;

•risks related to the deterioration of economic conditions or weakening in the credit or capital marketsmarkets, including financial institution instability that could impair access to our funds and adversely affect our liquidity;

•internal system or service failures and security breaches, including, but not limited to, those resulting from external or internal threats, including cyber attackscyber-attacks on our network and internal systems, or on our customers’ network or internal systemssystems, including more frequent and sophisticated threats such as those by bad actors looking to augment traditional cyber tools and tradecraft with artificial intelligence capabilities;

•misconduct or other improper activities from our employees, subcontractors, or suppliers, including the improper access, use, or release of our or our customers’ sensitivesensitive, classified, or classifiedexport-controlled information;

•risks related to completed and future acquisitions, joint ventures or investments, including our ability to realize the expected benefits from such acquisitions.transactions.

•risks related to our internationalforeign operations;

•the adoption by the U.S. government of new laws, rules, and regulations, suchnew asinterpretations thoseor enforcement priorities relating to organizationalexisting conflictslaws, ofand interestchanges issuesin orprocurement limitspractices;

The U.S. government is our primary customer,customer. withWe revenueexpect fromto contractscontinue andto taskderive orders,the eithervast as a prime or a subcontractor, with U.S. government agencies accounting for 98%majority of our revenue for fiscal year 2025. Our belief is that the successful future growth of our business will continue to depend primarily on our ability to be awardedfrom work performed under U.S. government contracts, as we expect this will continue to be the primary source of substantially all of our revenue.contracts. For this reason, any issue that compromises our relationship with the U.S. government generally or any U.S. government agency that we serve would cause our revenue to decline. Among the key factors in maintaining our relationship with U.S. government agencies is our performance on contracts and task orders, the strength of our professional reputation, compliance with applicable laws and regulations, and the strength of our relationships with customer personnel.

Our relationship with U.S. government agencies could be harmed by the mishandling or the perception of mishandling of sensitive information, such as our failure to maintain the confidentiality of the existence of our business relationships with certain of our customers, including as a result of misconduct or other improper activities by our employees, subcontractors, or suppliers, or a failure to maintain adequate protection against security breaches, including those resulting from cyber attacks. See “—Our employees or subcontractors may engage in misconduct or other improper activities, which could harm our ability to conduct business with the U.S. government.”cyber-attacks. Our relationship with the U.S. government could also be damaged as a result of an agency’s dissatisfaction with work performed by us, a subcontractor, or other third parties who provide services or products for a specific project for any reason, including due to perceived or actual deficiencies in the performance or quality of our work, and we may incur additional costs to address any such situation and the profitability of that work might be impaired. In addition, to the extent our performance under a contract does not meet a U.S. government agency’s expectations, the customer might seek to terminate the contract prior to its scheduled expiration date, provide a negative assessment of our performance to government-maintained contractor past-performance data repositories, fail to award us additional business under existing contracts or otherwise, and direct future business to our competitors.

Further, negative publicity concerning government contractors in general, or us, our business practices, or our products and services, regardless of accuracy,accuracy or completeness, may harm our reputation among federal agencies and federal government contractors, and the credibility of our brand, and adversely affect our ability to attract or retain customers or talent. There has been increased publicity regarding government contractors in general, and including the Company, in connection with the U.S. government’s efforts to improve efficiency and reduce costs, which could harm our reputation and could have a material impact on our business, results of operations and financial condition. Due to the sensitive nature of our work and our confidentiality obligations to our customers, we may be unable or limited in our ability to respond to such negative publicity, which could also harm our reputation and business. To the extent our reputation or relationships with U.S. government agencies is impaired, our revenue and operating profits could materially decline.

•U.S. government budget deficits and budgetary constraints, including mandated automatic spending cuts, affecting U.S. government spending generally, or specific agencies in particular, and changes in available funding;

•reduced U.S. government outsourcing of functions that we are currently contracted to provide, including as a result of increased insourcing by various U.S. government agencies due to changes in the definition of “inherently governmental” work, including proposals to limit contractor access to sensitive or classified information and work assignments;

•delays in the U.S. government contract procurement process or in the payment of our invoices by government payment offices; and

•an inability by the U.S. government to fund its operations as a result of a failure to increase the U.S. government’s debt ceiling, the exhaustion of “extraordinary measures” to borrow additional funds without breaching the government’s debt ceiling, a credit downgrade of U.S. government obligations or for any other reason; andreason.

In addition, any disruption in the functioning of U.S. government agencies, including as a result of U.S. government closures and shutdowns, terrorism, war, internationalforeign conflicts (including the ongoing conflict between Russia and Ukraine, ongoing conflicts in the Middle East, and increased tensions in Asia),conflicts, trade tensions related to recent shifts in international trade policies, under-staffing or layoffs within the government, natural disasters, public health crises, destruction of U.S. government facilities, and other potential calamities could have a negative impact on our operations and cause us to lose revenue or incur additional costs due to, among other things, our inability to deploy our staff to customer locations or facilities as a result of such disruptions.

If government funding relating to our contracts with the U.S. government or Department of Defense becomes unavailable, or is reduced or delayed, or planned orders are reduced, our contractcontracts or subcontractsubcontracts under such programs may be terminated or adjusted by the U.S. government or the prime contractor, if applicable. Our operating results could also be adversely affected by spending caps or changes in the budgetary priorities of the U.S. government or Department of Defense,War, as well as delays in program starts or the award of contracts or task orders under contracts.

In circumstances where contracts are held by other companies and are scheduled to expire, we still may not be provided the opportunity to bid or otherwise compete on those contracts if the U.S. government determines to extend the existing contract. If we are unable to win particular contracts that are awarded through the competitive bidding and re-competing processes, we may not be able to operateenter, operate, or expand in the marketmarkets for the services that are provided under those contracts for the duration of those contracts to the extent that there is no additional demand for such services. An inability to consistently win new contract awards over any extended period would have a material adverse effect on our business and results of operations.

WeIn the current environment, we have seen our current competitive environment result in delays in procurements generally as well as an increaseoverall decline in the number of bid protests from unsuccessful bidders on our new program awards. It can take many months for the relevant U.S. government agency to resolve protests by one or more of our competitors of contract awards we receive. Bid protests may result in significant expense to us, contract modification, or loss of an awarded contract as a result of the award being overturned. Even where we do not lose the awarded contract, the resulting delay in the startup and funding of the work under these contracts may cause our actual results to differ materially and adversely from those anticipated. There can be no assurance that these delays will not ultimately have a material adverse impact on our business and financial performance. While the National Defense Authorization Act (NDAA) for fiscal year 2026 contained provisions intended to curb protests by incumbent contractors, it remains too early to predict the impact such provisions will have upon protest rates.

Under fixed-price contracts, we perform specific tasks or deliver a specific outcome for a predetermined price. Compared to time-and-materials and cost-reimbursable contracts, fixed-price contracts generally offer higher margin opportunities because we receive the benefits of any cost savings, but involve greater financial risk because we bear the impact of any cost overruns. The U.S. governmentgovernment, hasthrough generallythe indicatedrecent thatexecutive itorder intends“Promoting Efficiency, Accountability, and Performance in Federal Contracting,” directs federal agencies, subject to certain exceptions, to increase its use of fixed price contract procurements. We have seen a recent preference for the use of fixedfirm-fixed price contracts withfor new awards to the newmaximum presidentialextent administration,consistent whichwith law. Additionally, agencies are directed, to the maximum extent practicable and consistent with law, to seek to modify, restructure, or renegotiate, their top ten highest-dollar-value contracts issued on an other-than-fixed price basis. This executive order may result in future contract modifications and conversions of existing contracts to fixed-price contracts. Because we assume the risk for cost overruns and contingent losses on fixed-price contracts, an increase in the percentage of fixed-price contracts in our contract mix wouldmay increase our risk of sufferingincurring losses.

Additionally, our profits could be adversely affected if our costs under any such contract exceed the assumptions we used in bidding for the contract. For example, we may miscalculate the costs, resources, or time needed to complete projects or meet contractual milestones as a result of delays on a particular project, including delays in designs, engineering information, or materials provided by the customer or a third party, delays or difficulties in equipment and material delivery, schedule changes, and other factors, some of which are beyond our control. Additionally, as more contracts with the U.S. government transition to fixed-price, we face greater risk of cost overruns due to ambiguities in the contract itself regarding delineation of responsibilities between us and the U.S. government and uncertainty with how the government may manage the contract in practice. We record provisions in our consolidated financial statements for losses on our contracts when necessary, as required under accounting principles generally accepted in the United States, or GAAP, but our contract loss provisions may not be adequate to cover all actual losses that we may incur in the future.

We create, implement, integrate, and maintain information technology (“IT”) systems that (a) are often mission critical, (b) regularly involve sensitive information, (c) may be deployed within war zones or other hazardous environments, and/or (d) can include information whose confidentiality is protected by law or contract. Additionally, we maintain internal systems housing sensitive employee and confidential company data. As a result, our systems and IT work products are susceptible to systems or service failures resulting from technical complexity, failures of third-party service providers, natural disasters, power shortages, insider threats (including improper access to the Company’s, customers’ or third parties’ information or resources, employee error, or malfeasance), terrorist attacks, physical or electronic security breaches, cyber attacks,cyber-attacks, computer viruses, or similar events or disruptions. Our systems and IT work product are the target of constantly evolving cyber attackcyber-attack vectors, including malware, social engineering, denial-of-service attacks, malicious software programs, phishing, smishing, vishing, identity spoofing (including through the use of emerging technologies such as “deep fakes”), account takeovers, and other cyber attackscyber-attacks fueled by emerging technologies, suchincluding ascyber-attacks enhanced or facilitated by artificial intelligence. Additionally, future technological advances, including quantum computing, could potentially compromise the cryptographic foundations of our systems, posing additional risk to the security of those systems. We have observed an increase in the frequency and sophistication of the cyber and security threats these systems face, with attacks that are more advanced and persistent, targeting us because we hold classified, controlled unclassified, and other sensitive information. As a result, we and our vendors face a heightened risk of a security breach or disruption resulting from an attack by computer hackers, persons with access to systems inside our organization, foreign governments, and cyber terrorists. We also may from time to time modernize, upgrade, replace, or consolidate certain of our internal systems and related processes, and delays in implementing such changes or failures of such systems to operate as intended could disrupt our operations, require significant time, effort, and costs to implement changes or corrections, and adversely affect our business and results of operations.

We have put in place policies, controls, and technologies to help detect and protect against such attacks, but we cannot guarantee that future incidents will not occur. If an incident occurs, we may not be able to successfully mitigate the impact. We have been the target of these types of attacks in the past, and attempted attacks are likely to continue. Due to the ongoing geopolitical conflicts in Eastern Europe and the Middle East, and increased tensions in Asia, state-sponsored parties or their supporters may launch retaliatory cyber attacks,cyber-attacks and may attempt to conduct other geopolitically motivated retaliatory actions. Those same parties may also attempt to fraudulently induce employees or authorized third parties, including contractors, to disclose sensitive information in order to gain access to our systems or data, or that of our customers, or service providers. If successful, these types of attacks on our network or other systems or service failures could have a material adverse effect on our business and results of operations, due to, among other things, the loss of customer or proprietary data, interruptions or delays in our customers' businesses, or damage to our reputation. In addition, the failure or disruption of our systems, communications, vendors, or utilities could cause us to interrupt or suspend our operations, which could have a material adverse effect on our business and results of operations. If our employees, contractors, suppliers or other authorized third parties do not adhere (whether inadvertently or intentionally) to appropriate information security protocols, our protocols are inadequate, or our or our customers' sensitive information is released and/or compromised, we may experience significant negative impacts to our reputation and expose us or our customers to liability. We are not immune from the possibility of a malicious insider compromising our information systems and infrastructure, including but not limited to insiders exfiltrating the personal data of employees and customers, stealing corporate trade secrets and key financial metrics, illegally diverting funds, or intentionally disclosing our secrets (e.g., application credentials) to others in order to bypass our security policies and control mechanisms. No series of measures can fully safeguard against every insider threat. Refer to “Item 1C. Cybersecurity” for additional information about our cybersecurity risk management program.

•be unable to successfully market services that are reliant on the creation and maintenance of secure information technology systems to U.S. government, international,foreign, and commercial customers;

•suffer claims by customers, employees, or impacted third parties for substantial damages, particularly as a result of any successful network or systems breach and exfiltration of customer and/or third-party information; or

In addition, we may have insufficient recourse against our vendors or subcontractors for costs, losses or claims we incur as a result of or reliance on their systems, services or other applications having significant defects, errors, or vulnerabilities, or which are successfully attacked by cyber and other security threats, resulting in our inability to meet our customers’ expectations. Further, in addition to any costs resulting from contract performance or required corrective action, these failures may result in increased costs or loss of revenue if they result in customers postponing subsequently scheduled work or canceling or failing to renew contracts.

Any failure by us, our vendors or other business partners to comply with international,foreign, U.S. federal, state or local laws and regulations regarding data privacy, including the protection of personal or confidential information of our customers or employees which we may handle and process, or cybersecurity could result in significant monetary damages, regulatory enforcement actions, fines, penalties, private litigation or claims, and/or criminal prosecution in one or more jurisdictions, including as a result of the perception of our practices, products, and services in relation to violations of individual privacy, data protection rights, or cybersecurity requirements. We may also incur substantial expenses in implementing and maintaining compliance with such laws and regulations, or anticipated laws and regulations, including those that require certain types of data to be retained on servers within these jurisdictions.jurisdictions or otherwise impose data sovereignty, localization, and cross-border transfer restrictions on how and where data is stored, processed, accessed, or transferred. These laws and regulations, and anticipated laws and regulations, are increasing in complexity and number, change frequently, sometimes conflict or create different requirements across jurisdictions, and are subject to interpretation by different regulators and courts, creating the possibility of different compliance measures or enforcement risks across jurisdictions, which may cause additional expenses for compliance with such laws and regulations. Our failure to comply with applicable laws and regulations may result in privacy claims or enforcement actions against us, including liabilities, fines and damage to our reputation, any of which may have a material adverse effect on our results of operations.

ForMore example,than 20 U.S. states have enacted comprehensive privacy laws, and we are also subject to federal, state, local, and foreign privacy and data protection laws and regulations such as the European Union’s (“EU”) General Data Protection Regulation (the “GDPR”), and the United Kingdom’s GDPRGDPR, that impose compliance obligations on companies that process personal datadata. of people in the European Union and United Kingdom, respectively. In the U.S., numerous federal, state, and localThese data privacy laws and regulations govern the collection, use, and processing of personal information, provide rights to residents of those respective states, in some cases including personal information collected from residents in the context of recruitment and employment, as well as business-to-business arrangements. The number and fragmentation of these laws create a complex regulatory landscape. Compliance with these laws, or emergingnew international,and evolving foreign, U.S. federal, state or local privacy laws, requires investments into compliance programs, investments to deploy, operate and maintain technology that enables compliance, potential modifications to business processes, ongoing data protection activities and documentation requirements, and creates the potential for fines, individual claims and other liabilities for noncompliance as well as litigation risks, particularly in the event of a data breach, and could have a material adverse effect on our business, including how we use personal information or our results of operations. Certain international,foreign, U.S. federal, state laws and regulations also impose obligations to maintain and implement an information security program that includes administrative, technical, physical, or organizational safeguards, and in some cases may require cybersecurity audits, risk assessments, or compliance measures relating to automated decision-making technologies, as well as obligations to give notice to affected individuals and to certain regulators in the event of a data breach. We may be required to spend significant resources to comply with these information security and data breach legal requirements. A significant data breach (including various forms of external attack, such as ransomware, as well as data incidents resulting from internal actions or omissions) could have negative consequences for our business and future prospects, including possible penalties, fines, damages, reduced customer demand, legal claims against and by customers, personnel, business partners or other persons claiming to be affected, harm to our systems and operations and harm to our reputation and brand.

In addition, as a contractor supporting defense and national security customers, we are subject to certain additional regulatory compliance requirements relating to data privacy and cybersecurity. Under the DFARS and other federal regulations, our networks and IT systems are required to comply with the security and privacy controls in certain National Institute of Standards and Technology Special Publications (“NIST SP”). To the extent that we do not comply with the applicable security and control requirements, unauthorized access or disclosure of sensitive information could result in a contract termination, which could have a material adverse effect on our business and financial results and lead to reputational harm. We are also subject to the Department of DefenseWar Cybersecurity Maturity Model Certification (“CMMC”), requirements, which willare being phased into covered solicitations and contracts and require all contractors to receiveobtain specificspecified certifications relating to specified cybersecurity standards in order to be eligible for certain contract awards.awards and, in some cases, contract modifications or option exercises. Although we have obtained CMMC level 2 certification, maintaining that status and satisfying applicable ongoing compliance, assessment, affirmation, monitoring, remediation, and renewal requirements may require significant effort and expense. In addition, CMMCcertain certification requirements may be required in modifications to existing contracts. To the extent we are unable to achieve certification in advance of applicable contract awards that specify the requirement, we will be unable to bid on such contract awards or on follow-on awards for existing work with the Department of Defense, depending on the level of standard as required for each solicitation, or be ineligible to receive option awards under existing contracts that specify the certification requirement, which could adversely impact our revenuesubcontractors and profitability. In addition, our subcontractors, and in some cases our vendors,vendors may also be required to adherecomply to thewith CMMC programrequirements. requirementsIf andwe, potentiallyor tomembers achieve certification. Shouldof our supply chainchain, fail to meetmaintain required compliance requirementsor certification levels, we could be unable to bid on, receive, or achievecontinue certification,performing thiscertain maycontracts or contract options, which could adversely affect our abilityrevenue, toprofitability, receiveand award or execute on relevant government programs.reputation. In addition, any obligations that may be imposed on us under the CMMC may be different from or in addition to those otherwise required by applicable laws and regulations, which may cause additional expense for compliance.

We develop and utilizeuse artificial intelligence, which could expose us to risks including potential liability as well asfinancial, regulatory, competition,strategic, reputationalreputational, and other risks.

We utilizeuse artificial intelligence, including generativeagentic, physical, and adversarial artificial intelligence, machine learning, and similar tools and technologies (collectively, “AI”) that collect, aggregate, analyze,manipulate, or generate data orand other materials (collectively, “AI”)systems in connection with our business. The development, deployment and oversight of the use of AI by us, either directly,directly by our staff or indirectly through our suppliers,suppliers or by engaging third-party AI developers, as well as the use of AI by competitors, is expected to requirerequires us to invest substantially in AI technology resources and related governance. There are significant risks involved in using AI andis no assurance can be providedguarantee that our use of AI will enhance our products or services, produce the intended results, or keep pace with the use of AI by our competitors. For example, AI algorithms may produce incomplete, insufficient, inaccurate, biased or otherwise flawed results or rely upon incomplete, insufficient, inaccurate, biased or inaccurateotherwise flawed data, and any of these deficiencies may not be easily detectable despite internalthe policies and diligence effortsmitigations in placeplace. to mitigate such deficiencies. The degradedDegraded or flawed performance could also result from adversarial attacks that include data poisoning, prompt injection, malware risks, and evasion techniques. If the AI that we use produces deficient, inaccurate, or controversial results, or if public opinion of AI is adversely affected due to actual or perceived risks regarding the usage of AI, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputational harm, or other adverse impacts on our business and results of operations.business. Further, ownership and intellectual property rights of content generated by artificialor intelligencemanipulated with AI is a developing area.area, This presentspresenting unique complexity and challenges that could affect our business interests and impactrestrict our delivery of AI-driven solutions. If we, or the third-party AI developers on which we rely, do not have sufficient rights to use the data or other material relied upon by such AI technologies, we also may incur liability through the alleged violation of applicable laws and regulations, third-party intellectual property, data privacy, or other rights,rights or contractual obligations. Although we conduct diligence on third-party AI developers, we will not be able to control the manner in which third-party AI technologies are developed or maintained. Our ability to develop, deploy, maintain, or scale AI technologies may also depend on our ability to obtain or access high-quality datasets, models, computing resources, and other AI system components from third parties on commercially reasonable terms, and any limitation, interruption, pricing change, licensing restriction, or other reduction in such access could impair our ability to deliver AI-enabled solutions competitively or at all. It is not possible to predict all the operational or technological risks that may arise relating to the use of AI, any of which may materially and adversely affect our business and results of operations.

Legal and regulatory frameworks related to the use of AI are evolving, including due to the perceived or actual risks of bias, lack of transparency, and information security. The technologies underlying AI and its uses are subject to a variety of laws and regulations, including intellectual property, data privacy and security, consumer protection, competition, and equal opportunity laws, and may be subject to new laws and regulations or new interpretations of existing laws and regulations. AI is the subject of ongoing review by various U.S. and foreign governmental and regulatory agencies. For example, there have been significant changes inThe U.S. policy environment for AI policyis introducedrapidly bychanging thethrough executive orders, other executive actions, agency guidance, procurement directives, and rulemaking, and these developments may impose new presidentialor administration,different includingcompliance theobligations, rescindingalter ofenforcement the prior administration’s October 2023 executive order on Safe, Secure,priorities, and Trustworthyrequire Artificialus Intelligence.to modify our AI governance, development, deployment, and contracting practices. In addition, in March 2024, the EU enactedAI aAct, newwhich regulation applicableapplies to certain AI technologiessystems and thegeneral-purpose AI models and affects data and governance practices used to train,develop, testtest, deploy, and deployuse them.them, is being implemented in phases. The enactment or expansion of laws and regulations related to the use of AI in our operations could result in increased compliance costs related to our use of AI, while the persistence of regulatory ambiguity results in uncertainty regarding potential compliance obligations and presents challenges to longer-term strategic decision-making. Additionally, we may not always be able to anticipate how courts and regulators will apply existing laws to AI, predictAI how new legal frameworks will develop to address AI, or otherwisehow we must respond to these frameworksframeworks, as they are still rapidly evolving. We may also have to expend resources to adjust our offerings in certain jurisdictions if the legal frameworks on AI are not consistent across jurisdictions. Furthermore, it is not possible to predict all the operational or technological risks that may arise relating to the use of AI, any of which may materially and adversely affect our business and results of operations.

Further, we face significant competition from other companies that are developing their own AIAI-enabled featurestechnologies, and technologies. Other companieswhich may develop AI features and technologies that are similar orbe superior to our technologies or are more cost-effective to develop and deploy. Additionally,In whileaddition, as we develop and deploy AI-enabled solutions, our customers may not accept new pricing models designed to reflect the value, efficiency gains, or differentiated capabilities of those solutions, which could limit our ability to realize an adequate return on our AI investments. While AI is currently the focus of significant investment and strategic prioritization, there is a risk that if the expected value of AI does not materialize at scale, or if high-profile AI failures emerge, customers may reassess their AI plans, which could lead to reduced funding and a reduction in certain of our AI initiatives. These factors could materially and adversely affect our business, financial condition and results of operations.

Our business depends in large part upon our ability to attract and retain sufficient numbers of highly qualified individuals who may have advanced degrees and/or appropriate security clearances. We compete for such qualified personnel with other U.S. government contractors, the U.S. government, and private industry, and such competition is intense. Personnel with the requisite skills, qualifications, or security clearance may be in short supply or generally unavailable. The government and industry have recognized that the current process for obtaining security clearances is time-consuming, sometimes taking years to complete, and can present a risk to customer mission. See “—We may fail to obtain and maintain necessary security clearances which may adversely affect our ability to perform on certain contracts.” In addition, as technologies and customer demands evolve rapidly, including in AI and other advanced technologies, we may need to make significant investments to train and re-skill our workforce, and we may not be successful in doing so quickly enough or at all.

Our ability to attract and retain skilled and qualified employees may also be impacted by our engagements in, or perceived connections to, politically or socially sensitive activities. In addition, our ability to recruit, hire, and internally deploy former employees of the U.S. government is subject to complex laws and regulations, which may serve as an impediment to our ability to attract such former employees, and failure to comply with these laws and regulations may expose us and our employees to civil or criminal penalties. Additionally, our ability to attract, hire, and retain skilled and qualified employees may be impacted by our engagements in, or perceived connections to, politically or socially sensitive activities, adverse labor and economic market conditions, as well as pandemics, epidemics or similar disease outbreaks.

Adverse labor and economic market conditions and intense competition for skilled personnel may inhibit our ability to recruit new employees, including any necessary actions in response to any pandemics, epidemics or similar disease outbreaks. If we are unable to recruit and retain a sufficient number of qualified employees, or cannot obtain their appropriate security clearances in a timely manner, or fail to deploy such employees, our ability to maintain and grow our business and to effectively serve our customers could be limited and our future revenue and results of operations could be materially and adversely affected. Furthermore, to the extent that we are unable to make necessary permanent hires to appropriately serve our customers, we could be required to engage larger numbers of contracted personnel, which could reduce our profit margins.

Many U.S. government programs require contractor employees and facilities to have security clearances. Security clearances are issued at the discretion of the U.S. government and there can be no assurance that we will be able to obtain or maintain the security clearances necessary to perform our contracts. Depending on the level of required clearance, security clearances can be difficult and time-consuming to obtain. In the current environment we are seeing delays by the U.S. government in the processing of security clearances and there have been recent examples of large numbers of security clearances being revoked by executive orders by the new presidential administration.orders. If we or our employees are unable to obtain or retain necessary security clearances in a timely manner, or a significant number of our employees lose security clearances, we may not be able to win new business, and our existing customers could terminate their contracts with us or decide not to renew them. To the extent we are not able to obtain and maintain facility security clearances or engage employees with the required security clearances for a particular contract, we may not be able to bid on or win new contracts, effectively rebid on expiring contracts, or retain existing contracts, which may adversely affect our operating results and inhibit the execution of our growth strategy.

Moreover, instability in the credit or capital markets in the U.S., including as a result of failures of financial institutions and any related market-wide reduction in liquidity, or concerns or rumors about events of these kinds or similar risks, could affect the availability of credit, making it relatively difficult or expensive to obtain additional capital at competitive rates, on commercially reasonable terms or in sufficient amounts, or at all, thus making it more difficult or expensive for us to access funds or refinance our existing indebtedness, or obtain financing for acquisitions. Such instability could also cause counterparties, including vendors, suppliers and subcontractors, to be unable to perform their obligations, or to breach their obligations, to us under our contracts with them. If any such counterparties are unable to perform their obligations to us or our customers, we may be required to provide additional services or make alternate arrangements on less favorable terms. In addition, instability in the credit or capital markets could negatively impact our customers’ ability to fund their project and, therefore, utilize our services, which could have a material adverse effect on our business, results of operations and financial condition. Further, if one or more financial institutions with which we maintain our cash, cash equivalents, or other investments were to fail or become subject to receivership or similar proceedings, our access to such funds could be temporarily impaired, which could adversely affect our liquidity, disrupt our business, or otherwise materially adversely affect our results of operations.

We are exposed to the risk that fraud or other misconduct by employees, subcontractors, suppliers or other third parties with which we do business could occur. Misconduct by employees, subcontractors or suppliers could include intentional or unintentional failures to comply with U.S. government procurement regulations, engaging in other unauthorized activities, misusing authorized access, or falsifying time records. Misconduct could also involve the improper use or mishandling of our customers’ sensitivesensitive, classified, or classifiedexport-controlled information, or the inadvertent or intentional disclosure of our or our customers' sensitive information in violation of our contractual, statutory, or regulatory obligations, among other things. It is not always possible to deter employee, subcontractor, or supplier misconduct, and the precautions we take to prevent and detect this activity may not always be effective in controlling unknown or unmanaged risks or losses, which could materially harm our business. As a result of such misconduct, our employees could lose their security clearances and we could face fines and civil or criminal penalties, loss of facility clearance accreditation, and suspension, proposed debarment or debarment from bidding for or performing under contracts with the U.S. government, as well as reputational harm, which would materially and adversely affect our results of operations and financial condition.

Our business operates in a highly competitive industry, and we generally compete with a wide varietycompanies of U.S.all governmenttypes contractors,and sizes, including large enterprise software companies, large global technology providers, government contractors focused principally on the provision of technology services to the U.S. government, large defense contractors,contractors that provide both products and technology services to the U.S. government, diversified service providers, andsystems integrators, small businesses.businesses, and technology startups. We may also face competition from new entrants into our marketsmarkets, including companies divested by large prime contractors in response to increasing scrutiny of organizational conflicts of interest issues.issues or commercial companies in response to the U.S. government’s push for modernization and innovation in procurement. There iscontinues alsoto abe significantan industry trend towards consolidation, which may result in the emergence of companies that are better able to compete against us. Some of these companies possess greater financial resources and larger technical staffs, and others have smaller and more specialized staffs. These competitors could, among other things:

On March 15, 2025, the President signed into law the Full-Year Continuing Appropriations and Extensions Act, 2025, which fundsfor the U.S. government under a continuing resolution through September 30, 2025, itsgovernment’s fiscal year end.2026 were delayed, with Congress enacting partial appropriations legislation in multiple tranches, with such appropriations ultimately covering a majority of federal agencies. However, a full-year, comprehensive appropriations agreement has not been reached for all agencies, and certain portions of the government have been funded through continuing resolutions or remain subject to funding uncertainty, including the Department of Homeland Security, for which funding has been provided only on a partial basis, while certain components, including its immigration enforcement operations, remain subject to funding uncertainty. As a result, uncertainty regarding federal funding levels persists. To the extent the U.S. Congress is unable to approve the annual federal budget before the expirationstart of thisthe continuingU.S. resolution,government’s fiscal year 2027, funding for new projects may not be available and funding on contracts we are already performing may be delayed. If Congressional efforts to approve such funding fail, and Congress is unable to craft a long-term agreement on the U.S. government’s ability to incur indebtedness in excess of its current limits, the U.S. government may not be able to fulfill its current funding obligations and there could be significant disruption to all discretionary programs, which would have corresponding impacts on us and our industry. Any such delays would likely result in new business initiatives being delayed or canceled and a reduction in our backlog, and could have a material adverse effect on our revenue and operating results.

We are focused on growing our presence in our addressable markets by: expanding our relationships with existing customers, acquiring new customers by leveraging our core competencies, further developing our existing capabilities and service offerings, creating new capabilities and service offerings to address our customers' emerging needs, and undertaking business development efforts focused on identifying near-term developments and long-term trends that may pose significant challenges for our customers. These efforts entail inherent risks associated with innovation and competition from other participants in those areas, potential failure to help our customers respond to the challenges they face, our ability to comply with uncertain evolving legal standards applicable to certain service offerings, including those in the cybersecurity area, and, with respect to potential internationalgrowth growth,in foreign jurisdictions, risks associated with operating in foreign jurisdictions, such as compliance with applicable foreign and U.S. laws and regulations that may impose different and, occasionally, conflicting or contradictory requirements, and the economic, legal, and political conditions in the foreign jurisdictions in which we operate, including the GDPR.GDPR and the EU AI Act. See “—Implementation of and compliance with various data privacy and cybersecurity laws, regulations and standards could require significant investment into ongoing compliance activities, trigger potential liability, and limit our ability to use personal data.” As we attempt to develop new relationships, customers, capabilities, and service offerings, these efforts could harm our results of operations due to, among other things, a diversion of our focus and resources and actual costs, opportunity costs of pursuing these opportunities in lieu of others and a failure to reach a profitable return on our investments in new technologies, capabilities, and businesses, including expenses on research and development investments, and these efforts could ultimately be unsuccessful.

In addition, with the growth of our U.S. and internationalforeign operations, we are providing customer services and undertaking business development efforts in numerous and disparate geographic locations both domestically and in select internationalforeign locations. Our ability to effectively serve our customers is dependent upon our ability to successfully leverage our operating model across all of these and any future locations, maintain effective management controls over all of our locations to ensure, among other things, compliance with applicable laws, rules and regulations, and instill our core values in all of our personnel at each of these and any future locations. Any inability to ensure any of the foregoing could have a material adverse effect on our business and results of operations.

We depend on the timely collection of our receivables to generate cash flow, provide working capital, and continue our business operations. If theany of our U.S. government or anycommercial other governmentcustomers, or any prime contractor for whom we are a subcontractorsubcontractor, fails to pay or delays the payment of invoices for any reason, our business and financial condition may be materially and adversely affected. TheFor example, our U.S. orgovernment any other governmentcustomers may delay or fail to pay invoices for a number of reasons, including lack of appropriated funds, lack of an approved budget, lack of revised or final settled billing rates as a result of open audit years or as a result of audit findings by government regulatory agencies. Some prime contractors for whom we are a subcontractor have significantly fewer financial resources than we do, which may increase the risk that we may not be paid in full or that payment may be delayed. In recent months, we have experienced, and may continue to experience, delays in the payment of invoices by our U.S. government customers. Should such delays become significant, there may be a material and adverse affect toon our business.

We may consummate acquisitions, investments, partnerships, joint ventures and divestitures, which involve numerous risks and uncertainties.

•as a result of increased scrutiny by antitrust authorities and anticipated changes to mandatory filing requirements, we may announce acquisition or investment transactions that require significant time and resources to complete, are challenged by such authorities or are ultimately not fully completed due to a failure to obtain antitrust or other related regulatory approvals;

The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources, and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Item 1A. Risk Factors” and “Introductory Note — Cautionary Note Regarding Forward-Looking StatementsStatements.”. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

We publicly disclose certain non-GAAP financial measurements, including Revenue, Excluding Billable Expenses, EBITDA and Adjusted EBITDA, because management uses these measures for business planning purposes, including to manage our business against internal projected results of operations and measure our performance. We view Adjusted EBITDA as a measure of our core operating business, which excludes the impact of the items detailed below, as these items are generally not operational in nature. These non-GAAP measures also provide another basis for comparing period to period results by excluding potential differences caused by non-operational and unusual or non-recurring items. In addition, we use Revenue, Excluding Billable Expenses because it provides management useful information about the Company's operating performance by excluding the impact of costs such as subcontractor expenses, travel expenses, and other non-labor expenses incurred to perform on contracts. Billable expenses generally have lower margin and thus are less indicative of our profit generation capacity. Management believes this metric provides useful information about our business. Thesebusiness.These supplemental performance measurements may vary from and may not be comparable to similarly titled measures by other companies in our industry. Revenue, Excluding Billable Expenses, EBITDA and Adjusted EBITDA are not recognized measurements under accounting principles generally accepted in the United States (“GAAP”) and when analyzing our performance, investors should (i) evaluate each adjustment in our reconciliation of revenue to Revenue, Excluding Billable Expenses, net income to EBITDA and Adjusted EBITDA, and (ii) use Revenue, Excluding Billable Expenses, EBITDA and Adjusted EBITDA in addition to, and not as an alternative to, revenue and net income, as measures of operating results, each as defined under GAAP. We have defined the aforementioned non-GAAP measures as follows:

•EBITDA represents net income attributable to common stockholders before income taxes, net interest expense, net and other income (expense), net, and depreciation and amortization.

•Adjusted EBITDA represents net income attributable to common stockholders before income taxes,tax netexpense, interest,interest expense, net and other income (expense), net, and depreciation and amortization and before certain other items, including the change in provision for claimed costs for historical rate years, acquisition and divestiture costs, financing transaction costs, DC tax assessment adjustment, the reserve associated with the U.S. Department of Justice (the “DOJ”) investigation disclosed 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 and2024, the insurance recoveries related to the settlement of that matter.matter, and other corporate expenses. The Company prepares Adjusted EBITDA to eliminate the impact of items it does not consider indicative of ongoing operating performance due to their inherent unusual, extraordinary or non-recurring nature or because they result from an event of a similar nature.

* Revenue, Excluding Billable Expenses includes $113 million of revenue and $18 million revenue for fiscal 2025 and 2024 respectively, resulting from the reduction to our provision for claimed costs (see note (ba) below).

(ba) Represents the reduction to our provision for claimed costs for years prior to fiscal 2025 recorded during the second quarters of fiscal 2025 and 2024, which resulted in a corresponding increase to revenue, as a result of the Defense Contract Audit Agency's findings related to its audits of our claimed costs for multiple fiscal years. See Note 19, “Commitments and Contingencies,” to the consolidated financial statements containedin withinthe this Annual Report onCompany's Form 10-K for the fiscal year ended March 31, 2025 for further information.

(db) Reflects expenses associated with debt financing activities incurred during the second quartersquarter of fiscal 2024 and 2023.2024.

(ec) Reflects the impact (specifically the revenue from recoverable expenses) of the Company's 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”). See Note 13, “Income Taxes,” to the consolidated financial statements contained within the Annual Report on Form 10-K for the fiscal year ended March 31, 2024 for further information.

(fd) Reserve associated with the U.S. Department of Justice's investigation of the Company. See Note 20, “Commitments and Contingencies,” to the consolidated financial statements contained within the Annual Report on Form 10-K for the fiscal year ended March 31, 2024 for further information.

(gf) Reflects insurance recoveries from claims related to the Company’s fiscal 2024 settlement as described in Note 19,20, “Commitments and Contingencies,” to the consolidated financial statements contained within thisthe Annual Report on Form 10-K.10-K for the fiscal year ended March 31, 2024.

The U.S. continues to face an uncertain and evolving political, budgetbudgetary and regulatory environment, and we expect this uncertainty will continue. Our business performance is affected by the overall level of U.S. government spending and the alignment of our offerings and capabilities with the spending priorities of the U.S. government.

The U.S. government iscontinues drivingto drive changes in the structure and priorities of U.S. government agencies and thecontinues U.S.to government is currently in the process of reviewingreview spending across U.S. government agencies to ensure it aligns with the new administration’s priorities of maximizing governmental efficiency and productivity. We have been, and will continue to be, subject to these reviews, and we have had, and may in the future have, certain of our contracts impacted, reduced or canceled as a result of these reviews. We have also experienced price adjustments and renegotiations prior to option exercise of certain of our contracts as a result of these reviews and may in the future continue to experience such adjustments. Further, we are, and may in the future be, subject to customer mandates to formulate additional methods by which to achieve efficiencies in providing our services, and we remain in ongoing discussions with various U.S. government departments and agencies in relation to cost reductions and other potential contract modifications. There can be no assurance that these reviews will not ultimately have a material adverse impact on our business and financial performance. There has been a marked increase in negative publicity regarding government contractors (including the Company) in connection with the U.S. government’s efforts to improve efficiency and reduce costs, which could harm our reputation and could have a material impact on our business, results of operations and financial condition.

The new U.S. government administration ishas puttingput in place a number of Executiveexecutive Ordersorders and actions that have and could continue to affect our business. U.S. government agencies are also undertaking their own independent reviews of their contract portfolios and reviewing future procurements in response to recent Executiveexecutive Ordersorders focused on efficiency in government procurement. At the same time that the scrutiny is increasing, there have been reductions in personnel at U.S. government agencies with which we do business. These reductions in personnel, along with the changing political and regulatory environment, hashave led to a slowerslowed procurement environment, with delays in the granting of new contract awards, increased willingness by agencies to not spend government money, delays in the processing of payments by government payment offices, as well as increased processing times for security clearances and other governmental consents,consents. eachThis slowed procurement environment has resulted in a substantial reduction in the ordinary end of whichgovernment couldfiscal resultyear funding surge when compared to prior fiscal years and, in the aggregate, has resulted in negative impacts to our business and financial performance.

Substantially all of our revenue is derived from services provided under contracts and task orders with the U.S. government, primarily by our customer staff and, to a lesser extent, our subcontractors. Funding for our contracts and task orders is generally linked to trends in budgets and spending across various U.S. government agencies and departments. We provide services under a large portfolio of contracts and contract vehicles to a broad customer base, and we believe that our diversified contract and customer base lessens potential volatility in our business; however, a reduction in the amount of services that we are contracted to provide to the U.S. government or any of our significant non-U.S. government customers could have a material adverse effect on our business and results of operations. In particular, the Department of Defense is one of our significant customers, and the Bipartisan Budget Control Act of 2011 (“BCA”) originally required nine automatic spending cuts (referred to as “sequestration”) of $109 billion annually from 2013 to 2021, half of which was intended to come from defense programs, though less than $1.0 billion has been cut for defense programs per year under the BCA. Mandatory sequestrations under the BCA were subsequently extended by the Bipartisan Budget Acts of 2013, 2015, 2018 and 2019, the Military Retired Pay Restoration Act, the CARES Act and the Infrastructure Investment and Jobs Act. The extension of the mandatory sequestration applies an 8.3% reduction in defense spending in each year from 2021 through 2031. This could result in a commensurate reduction in the amount of services that we are contracted to provide to the Department of Defense and could have a material adverse effect on our business and results of operations, and given the uncertainty of when and how these automatic reductions required by the BCA may return and/or be applied, we are unable to predict the nature or magnitude of the potential adverse effect.

The amount of risk and potential reward varies under each type of contract. In the aggregate, the contract type mix in our revenue for any given period will affect that period's profitability. As described above in “U.S. Political, Budget and Regulatory Environment,” we expect the recent executive order directing agencies, subject to certain exceptions, to increase usage of fixed-price contract will result in an overall change in our contract type mix over time. Changes in contract type as a result of re-competes and new business could influence the percentage/mix in unanticipated ways. See “Item 1A. Risk Factors—Industry and Economic Risks.”

Contract DiversityPortfolio and Revenue Mix

We generate revenue under our contracts and task orders through our provision of services as both a prime contractor and a subcontractor, as well as from the provision of services by subcontractors under contracts and task orders for which we act as the prime contractor. ForAs eachshown ofin fiscalthe 2025,table 2024,below, andthe 2023, 95%majority of our revenue was generated by contracts and task orders for which we served as the prime contractor; 5% of our revenue was generated by contracts and task orders for which we served as a subcontractor; androughly 25% of our revenue was generated by services provided by our subcontractors. The mix of these types of revenue affects our operating margin. Substantially all of our operating margin is derived from direct customer staff labor as the portion of our operating margin derived from fees we earn on services provided by our subcontractors is not significant.

•Unfunded Backlog. Unfunded backlog represents the value of orders (including exercised optional orders) for services under existing contracts for which funding has not been appropriated or otherwise authorized.

Our backlog does not include contracts that have been awarded but are currently under protest and also does not include any task orders under indefinite delivery/indefinite quantity (“IDIQ”) contracts, General Services Administration Schedule(“GSA”) Multiple Award schedule contracts (“GSA schedules”) or other master agreement contract vehicles, except to the extent that task orders have been awarded to us under those contracts.

Our total backlog consists of contractual values which is inclusive of remaining performance obligations, and potential contract value from unexercised option periods and other unexercised optional orders. Our total backlog reflects retrospective application of the Company’s change in policy during the fourth quarter of fiscal 2025, to exclude from total backlog, in all periods presented, orders under contracts for which the period of performance has expired. As of March 31, 20252026 and March 31, 2024,2025, the Company had $9.5$10.7 billion and $8.7$9.5 billion of remaining performance obligations, respectively, and we expect to recognize approximately 65% of the remaining performance obligations as of March 31, 20252026 as revenue over the next 12 months, and approximately 70%75% over the next 24 months. The remainder is expected to be recognized thereafter. We also expect to recognize revenue from a substantial portion of funded backlog as of March 31, 2026, within the next twelve months. However, given the uncertainties discussed below, as well as the risks described in “Item 1A. Risk Factors,” we can give no assurance that we will be able to convert our backlog into revenue in any particular period, if at all. Our backlog includes orders under contracts that in some cases extend for several years. The U.S. Congress generally appropriates funds for our customers on a yearly basis, even though their contracts with us may call for performance that is expected to take a number of years to complete. As a result, contracts typically are only partially funded at any point during their term and all or some of the work to be performed under the contracts may remain unfunded unless and until the U.S. Congress makes subsequent appropriations and the procuring agency allocates funding to the contract.

We cannot predict with any certainty the portion of our backlog that we expect to recognize as revenue in any future period and we cannot guarantee that we will recognize any revenue from our backlog. The primary risks that could affect our ability to recognize such revenue on a timely basis or at all are: program schedule changes, contract modifications, and our ability to assimilate and deploy new customer staff against funded backlog; cost-cutting initiatives and other efforts to reduce U.S. government spending, which could reduce or delay funding for orders for services; and delayed funding of our contracts due to delays in the completion of the U.S. government's budgeting process and the use of continuing resolutions by the U.S. government to fund its operations. TheIn addition, the amount of our funded backlog is also subject to change,change due to, among other factors: changes in congressional appropriations that reflect changes in U.S. government policies or priorities resulting from various military, political, economic, or international developments; changes in the use of U.S. government contracting vehicles, and the provisions therein used to procurethese our services and adjustments to the scope of services, or cancellation of contracts, by the U.S. government at any time.factors. In our recent experience, none of the followingslowed additionalprocurement risksenvironment and reductions in contract value have had a material negative effect on our ability to realizeconvert backlog to revenue as of March 31, 20252026, butand could have aadditional material effectimpacts in the future: for funded backlog, the unilateral right of the U.S. government to cancelour multi-year contractsbusiness and relatedfinancial orders or to terminate existing contracts for convenience or default; in the case of unfunded backlog, the potential that funding will not be made available; and, in the case of priced options, the risk that our customers will not exercise their options.performance.

The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources, and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in our Annual Report on Form 10-K for the fiscal year ended March 31, 20252026 filed with the Securities and Exchange Commission on May 23,22, 2025,2026, or Annual Report, and under Part II, “Item 1A. Risk Factors,” and “— Special Note Regarding Forward LookingForward-Looking Statements” of this Quarterly Report. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Our results of operations have been, and we expect them to continue to be, affected by the following factors, which may cause our future results of operations to differ from our historical results of operations discussed under “—Results of Operations.” As a result, we began actions in the third fiscal quarter to reduce costs by approximately $150 million annually.

The U.S. continues to face an uncertain and evolving budgetary and regulatory environment, and we expect this uncertainty will continue. Additionally, we continue to see a slower procurement environment compared to prior fiscal years. Our business performance is affected by the overall level of U.S. government spending and the alignment of our offerings and capabilities with the spending priorities of the U.S. government.

The U.S. government iscontinues drivingto changes in the structure and priorities of U.S. government agencies and the U.S. government is currently in the process of reviewingreview spending across U.S. government agencies to ensure it aligns with the administration’s priorities of maximizing governmental efficiency and productivity. Additionally, U.S. government agencies continue their own independent reviews of their contract portfolios and future procurements in response to recent executive orders focused on efficiency in government procurement. We have been, and will continue to be, subject to these reviews, and we have had, and may in the future have, certain of our contracts impacted, reduced or canceled or experience price adjustments and renegotiations, as a result of these reviews. We have also experienced price adjustments and renegotiations prior to option exercise of certain of our contracts as a result of these reviews and may in the future continue to experience such adjustments. Further, we are, and may in the future be, subject to customer mandates to formulate additional methods by which to achieve efficiencies in providing our services, and we remain in ongoing discussions with various U.S. government departments and agencies in relation to cost reductions and other potential contract modifications. There can be no assurance that these reviews will not ultimately have a material adverse impact on our business and financial performance.

We have observed preparatory stepsEfforts by the U.S. government to implement two specific Executiveexecutive Ordersorders that are intended to (i) simplify and accelerate the procurement process through a review and restructuring of the Federal Acquisition Regulation (“FAR”), and its supplements and (ii) modernize defense acquisitions by promoting commercial solutions, innovative acquisition authorities, and other existing streamlined processes.processes remain ongoing. The FAR Council, the body responsible for issuing and maintaining the FAR, completed thePhase preliminary stage1 of FAR reform efforts atand themoved endinto Phase II of September 2025. The Office of Federal Procurement Policy and FAR Council have solicited feedback on thesesuch efforts andin willJune turn2026. next to theThe formal rulemaking process.process Likewise,remains ongoing, with only a portion of formal rules issued; however, proposed rules include changes that formalize the FAR's deviation-based approach and make certain streamlining shifts, as well as incorporating a number of other pending rules. Previously, in early November 2025, the Secretary of War announced and released an associated memorandum regarding a new acquisition strategy and directing certain reforms addressing Department of DefenseWar purchases of military weapons. The Secretary’s accompanying memorandum and strategy outline a number of actions focused on rebuilding the Defense Industrial Base, elevating and empowering the acquisition workforce, maximizing acquisition flexibility, developing high performance systems, and improving effective lifecycle risk management. While the impact of the aforementioned changes remains uncertain, the new acquisition strategy and streamlined procurement processes have the potential to have positive impacts on our business.

On December 18, 2025, the National Defense Authorization Act (“NDAA”) was signed into law, which included a number of reforms that may also impact our business. Although the final bill did not adopt more narrow commercial preferences or expand the statutory definition of contractors who qualify as nontraditional contractors, it did exempt contractors who meet that definition from certain burdensome compliance requirements. The continued focus on removing barriers to new entrants and any related future legislation could reduce the likelihood of direct awards to companies like Booz Allen and effect our competitive position.

On January 7, 2026, the President Trump signed an Executiveexecutive Order,order, “Prioritizing the Warfighter in Defense Contracting” (the “Executive Order”), that, among other things, limits stock buybacks and the payment of dividends by certain defense contractors. TheThis Executiveexecutive Orderorder directs the Secretary of War to identify defense contractors that are underperforming on their contracts, not investing their own capital into necessary production capacity, not sufficiently prioritizing United States Government contracts, or whose production speed is insufficient as determined by the Secretary, and that have, during the period of underperformance or insufficient prioritization, investment, or production speed, engaged in any stock buy-back or corporate distribution. If the Company is identified pursuant to thethis Executiveexecutive Order,order, it may have a negative impact on our dividends, stock buyback programs, and our ability to attract and retain talented executives. Compliance with the requirements of this executive order may be complex, costly and time-consuming, and our subcontractors may not have the necessary resources to ensure compliance. In addition, in March 2026, certain Senators introduced the Warfighter in Defense Contracting Act of 2026, which would codify and go beyond this executive order by instituting, absent a waiver, a blanket prohibition on such dividends, buybacks, and executive compensation above certain levels. In addition, the Senate Armed Services Committee’s version of the NDAA for Fiscal Year 2027 includes a related provision that would require contractors to submit a qualified defense investment plan to increase production capacity or otherwise face restrictions on stockholder distributions. These proposed legislations far exceed the framework contemplated by the executive order and would introduce significant administrative burdens for us and other companies that could be subject to such legislation.

•Funded Backlog. Funded backlog represents the revenue value of orders for services under existing contracts for which funding is appropriated or otherwise authorized less revenue previously recognized on these contracts.

•Unfunded Backlog. Unfunded backlog represents the revenue value of orders (including exercised optional orders) for services under existing contracts for which funding has not been appropriated or otherwise authorized.

•Priced Options. Priced contract options represent 100% of the revenue value of all future contract option periods under existing contracts that may be exercised at our customers’ option and for which funding has not been appropriated or otherwise authorized.

Our total backlog consists of contractual values which is inclusive of remaining performance obligations, and potential contract value from unexercised option periods and other unexercised optional orders. As of DecemberJune 31,30, 20252026 and March 31, 2025,2026, the Company had $10.5$11.1 billion and $9.5$10.7 billion of remaining performance obligations, respectively, and we expect to recognize approximately 65% of the remaining performance obligations as of DecemberJune 31,30, 20252026 as revenue over the next 12 months, and approximately 70%75% over the next 24 months. The remainder is expected to be recognized thereafter. We also expect to recognize revenue from a substantial portion of funded backlog as of DecemberJune 31,30, 2025,2026, within the next twelve months. However, given the uncertainties discussed below, as well as the risks described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2025,2026, we can give no assurance that we will be able to convert our performance obligations or funded backlog into revenue in any particular period, if at all. Our backlog includes orders under contracts that in some cases extend for several years. The U.S. Congress generally appropriates funds for our customers on a yearly basis, even though their contracts with us may call for performance that is expected to take a number of years to complete. As a result, contracts typically are only partially funded at any point during their term and all or some of the work to be performed under the contracts may remain unfunded unless and until the U.S. Congress makes subsequent appropriations and the procuring agency allocates funding to the contract.

We view growth in total backlog as a key measure of our potential business growth. Total backlog increased by 2%3% from DecemberJune 31,30, 20242025 to DecemberJune 31,30, 2025.2026. Additions to funded backlog during the twelve months ended DecemberJune 31,30, 2026 and 2025 and 2024 totaled $11.0$11.7 billion and $11.8$11.5 billion, respectively, as a result of the conversion of unfunded backlog to funded backlog, the award of new contracts and task orders under which funding was appropriated, and the exercise and subsequent funding of priced options.

We cannot predict with any certainty the portion of our backlog that we expect to recognize as revenue in any future period and we cannot guarantee that we will recognize any revenue from our backlog. The primary risks that could affect our ability to recognize such revenue on a timely basis or at all include: program schedule changes, contract modifications,modifications includingand reductionsour in contract value, a reduction in U.S. government spending, whether dueability to costassimilate cuttingand deploy new customer staff against funded backlog; cost-cutting initiatives orand other efforts to reduce U.S. government spending, which could reduce or delay funding for orders for services; and, delayed funding of our contracts,contracts due to delays in the completion of the U.S. government’s budgeting process and the use of continuing resolutions by the U.S. government to fund its operations, and the other risks and factors listed under “— U.S. Budgetary and Regulatory Environment” in this Quarterly Report, as well as those listed under “Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2025.2026. In addition, the amount of our funded backlog is also subject to change due to these factors. In our recent experience, the slowed procurement environment and reductions in contract value have had a negative effect on our ability to convert backlog to revenue as of DecemberJune 31,30, 2025,2026, and could have additional impacts in the future to our business and financial performance.

Revenue decreased 10%4% to $2,620$2,800 million, and 6% to $8,434 million, respectively,million for the three and nine months ended DecemberJune 31,30, 20252026 compared to the prior year period. The decrease was primarily driven by the impact of a slowed procurement andwhich funding environment, including the government shutdown that occurredresulted in thereduced thirdheadcount quarter of fiscal 2026. These factors drove a decrease in headcount, as well as a decline inand billable expenses. In addition, revenue was positively impacted in the prior year by $122 million representing the reduction to our provision for claimed costs recorded during the second quarter of fiscal 2025.

Cost of revenue includes direct labor, related employee benefits, and overhead. Overhead consists of indirect costs, including indirect labor relating to infrastructure, management and administration, and other expenses. Cost of revenue as a percentage of revenue was 48% and 45%49% for both the three andJune nine30, months ended December 31, 20252026 and 2024,2025, respectively. Cost of revenue decreased 4%6% for the three months ended DecemberJune 31,30, 2025, and remained flat for the nine months ended December 31, 2025,2026 as compared to the three and nine months ended DecemberJune 31,30, 2024.2025. The decrease for the quarter-to-date period was primarily due to decreases in salaries and related benefits due to overall headcount reductions. The prior year also included $30 million in costs related to employee severance and related charges, not present in the current year.

Billable expenses include direct subcontractor expenses, travel expenses, and other expenses incurred to perform on contracts. Billable expenses as a percentage of revenue were 30% for both the three months ended June 30, 2026 and 32%2025, respectively. Billable expenses decreased 5% for the three months ended DecemberJune 31,30, 2025 and 2024, respectively, and 31% and 32% for the nine months ended December 31, 2025 and 2024, respectively. Billable expenses decreased 18% and 10% for the three and nine months ended December 31, 2025, respectively,2026 compared to the three and nine months ended DecemberJune 31,30, 2024.2025. The decreases were primarily attributable to decreases in theother usedirect ofexpenses subcontractorsand subcontractor expenses, driven by customer demand and timing of customer needs, partially offset by increases in other direct expenses as compared to the prior year.needs.

Depreciation and amortization includes the depreciation of computers, leasehold improvements, furniture and other equipment, and the amortization of internally developed software, as well as third-party software that we use internally, and of identifiable long-lived intangible assets over their estimated useful lives. Depreciation and amortization expense remainedincreased flat13% for the three months ended DecemberJune 31,30, 2025, and decreased 2% for the nine months ended December 31, 2025, respectively,2026, as compared to the three and nine months ended DecemberJune 31,30, 2024.2025, primarily due to the amortization of acquired intangible assets as a result of the Company’s acquisition of Defy Security.

Operating income decreasedincreased 21%9% to $230 million and decreased 30% to $770$279 million for the three and nine months ended DecemberJune 31,30, 2025, respectively,2026 compared to the three and nine months ended DecemberJune 31,30, 2024,2025, reflecting decreasesan increase in operating margin from 10%9% to 9% and from 12% to 9%.10%. Operating income was driven by the factorsdecrease in expenses noted above.above, partially offset by lower declines in revenue.

Interest expense, net increased 12% and 10%9% for the three and nine months ended DecemberJune 31,30, 2025, respectively,2026 as compared to the three and nine months ended DecemberJune 31,30, 2024, primarily due to increases of $10 million and $29 million in bond interest expense, respectively,2025, driven by the $650 million Senior Notes due 2035 (issueddecreases in Marchinterest ofincome fiscalfrom 2025).lower Thiscash wasbalances and lower rates, partially offset by lower interest rates on the Company’s term loans, as well as increases in interest income, reflecting the higher cash balances following the bond issuance noted above.loans.

Other income (expense),income, increased to $4$20 million for the three months ended DecemberJune 31,30, 20252026 from $(1)$3 million for the three months ended DecemberJune 31,30, 2024, and decreased to $5 million for the nine months ended December 31, 2025 from $6 million for the nine months ended December 31, 2024.2025. The increase over the quarter-to-date period was primarily driven by a $7 million gain recognized on the sale of a group of contracts. Largerlarger increases in the fair value of the Company’s investments reflected in fiscal 20252027 as compared to fiscal 2026 offset the gain noted above, driving a decrease over the year to date period.2026.

Income tax expense decreasedincreased 121% and 104%196% for the three and nine months ended DecemberJune 31,30, 20252026 as compared to the three and nine months ended DecemberJune 31,30, 2024.2025. The effective tax rate decreasedincreased to (7.0)%21.1% from 24.7%(25.5)% for the three month period and to (1.6)% from 24.0% for the nine month period. The decreaseincrease in tax expense was primarily driven by an increase in pre-tax income and a reductiondecrease in the incomeuncertain tax position reserve relatedin the prior year that did not recur in the current period. See Note 9, “Income Taxes,” to the completioncondensed ofconsolidated IRSfinancial examinationstatements proceduresfor infurther the first quarter, the decrease in pre-tax income, and the tax benefit recognized in the third quarter as a result of a higher-than-estimated research and development tax credit and additional foreign derived intangible income deductions.information.

We publicly disclose certain non-GAAP financial measurements, including Revenue, Excluding Billable Expenses, EBITDA and Adjusted EBITDA, because management uses these measures for business planning purposes, including to manage our business against internal projected results of operations and measure our performance. We view Adjusted EBITDA as a measure of our core operating business, which excludes the impact of the items detailed below, as these items are generally not operational in nature. These non-GAAP measures also provide another basis for comparing period to period results by excluding potential differences caused by non-operational and unusual or non-recurring items. In addition, we use Revenue, Excluding Billable Expenses because it provides management useful information about the Company's operating performance by excluding the impact of costs such as subcontractor expenses, travel expenses, and other non-labor expenses incurred to perform on contracts. Billable expenses generally have lower margin and thus are less indicative of our profit generation capacity. Management believes this metric provides useful information about our business. Thesebusiness.These supplemental performance measurements may vary from and may not be comparable to similarly titled measures by other companies in our industry. Revenue, Excluding Billable Expenses, EBITDAEBITDA, and Adjusted EBITDA are not recognized measurements under accounting principles generally accepted in the United States (“GAAP”) and when analyzing our performance, investors should (i) evaluate each adjustment in our reconciliation of revenue to Revenue, Excluding Billable Expenses, net income to EBITDAEBITDA, and Adjusted EBITDA, and (ii) use Revenue, Excluding Billable Expenses, EBITDAEBITDA, and Adjusted EBITDA in addition to, and not as an alternative to, revenue and net income, as measures of operating results, each as defined under GAAP. We have defined the aforementioned non-GAAP measures as follows:

•EBITDA represents net income before income taxes, interest expense, net and other income (expense),income, and depreciation and amortization.

•Adjusted EBITDA represents net income before income tax (benefit) expense, interest expense, net and other income (expense),income, and depreciation and amortization and before certain other items, including change in provision for claimed costs for historical rate years, certain other corporate expenses, and certain insurance recoveries.expenses. The Company prepares Adjusted EBITDA to eliminate the impact of items it does not consider indicative of ongoing operating performance due to their inherent unusual, extraordinary or non-recurring nature or because they result from an event of a similar nature.

(ba) In fiscal 2027, other corporate expenses consist primarily of acquisition related costs associated with the acquisition of Defy Security, and the agreement to acquire Ultra Mission Solutions. In fiscal 2026, other corporate expenses consist primarily of nonrecoverable costs associated with employee severance from cost management and restructuring initiatives, as well as transaction costs associated with a divestiture.divestiture, and acquisition related costs associated with the acquisition of Defy Security, which closed in the first quarter of fiscal 2027. See Note 13,20, “Supplemental Condensed Consolidated Financial Information,” and Note 21, “Subsequent Events,” to the condensed consolidated financial statements within the Annual Report on Form 10-K for the fiscal year ended March 31, 2026 for further information. In fiscal 2025, other corporate expenses consist primarily of acquisition related costs from the acquisition of PAR Government Systems Corporation (“PGSC”).

As of DecemberJune 31,30, 2025,2026, our total liquidity was $1.9$2.0 billion, consisting of $882$540 million of cash and cash equivalents and $1.0$1.5 billion available under the Revolving Credit Facility. In the opinion of management, we will be able to meet our liquidity and cash needs through a combination of cash flows from operating activities, available cash balances, and available borrowing under the Revolving Credit Facility. If these resources need to be augmented, additional cash requirements would likely be financed through the issuance of debt or equity securities.

•debt service requirements for borrowings under our Credit Agreement and interest payments for the Senior Notes due 2028, Senior Notes due 2029 and2029, Senior Notes due 2033,2033 and Senior Notes due 2035; and

Net cash provided by operations was $801$281 million for the ninethree months ended DecemberJune 31,30, 20252026 compared to $790$119 million in the prior year period. The increase in operating cash was primarily driven by strong working capital management and lower tax payments as compared to the prior year. This was partially offset by the $115 million in insurance recoveries received in fiscal year 2025, along with the change to the Company's payroll cadence during the second quarter of fiscal 2025.

Net cash used in investing activities was $52$328 million in the ninethree months ended DecemberJune 31,30, 20252026 compared to $184$32 million in the prior year period. The decreaseincrease in investing cash used over the prior year was primarily due to the Company's acquisition of PGSCDefy Security and an increase in the prior year, as well as the proceeds from the divestiturefunding of astrategic group of contractsinvestments in the currentfirst year.quarter of fiscal 2027.

Net cash used in financing activities was $752$141 million in the ninethree months ended DecemberJune 31,30, 20252026 compared to $706$261 million in the prior year period. The increasedecrease in financing cash used over the prior year was primarily due to ana increasedecrease in share repurchases ofyear $24over million and an increase in term loan payments of $22 million.year.

On JanuaryJuly 23,24, 2026, the Company announced a regular quarterly cash dividend in the amount of $0.59 per share. The quarterly dividend is payable on MarchAugust 2,28, 2026 to stockholders of record on FebruaryAugust 13,14, 2026.

During the three and nine months ended DecemberJune 31,30, 2025,2026, a quarterly cash dividendsdividend of $0.55 and $1.65$0.59 per share,share respectively, werewas declared and paid totaling $67$73 million and $205 million, respectively.million.

On December 12, 2011, the Board of Directors initially approved a share repurchase program, which was subsequently increased from time to time, and most recently increased by $500 million to $4,085 million on October 22, 2025. The Company may repurchase shares pursuant to the program by means of open market repurchases, directly negotiated repurchases or through agents acting pursuant to negotiated repurchase agreements. During the first ninethree months of fiscal 2026,2027, the Company purchased 4.70.6 million shares of the Company's Class A Common Stock for an aggregate of $486$50 million. As of DecemberJune 31,30, 2025,2026, the Company had approximately $759$634 million remaining under the repurchase program.

The Senior Notes due 2033 and Senior Notes due 2035 were issued by Booz Allen Hamilton pursuant to the Baserespective Indenture, among Booz Allen Hamilton, the Company and U.S. Bank Trust Company, National Association, as trustee, as supplemented by the respective Supplemental Indenture and are fully and unconditionally guaranteed on an unsecured and unsubordinated basis by the Company pursuant to the Baserespective Indenture.

The tables below present the summarized financial information as combined for the Company and Booz Allen Hamilton as of March 31, 20252026 and as of and for the ninethree months ended DecemberJune 31,30, 2025,2026, after the elimination of intercompany transactions and balances between the Company and Booz Allen Hamilton and excluding the subsidiaries of both entities that are not issuers or guarantors of the Senior Notes due 2033 and Senior Notes due 2035, including earnings from and investments in these entities. The summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under Regulation S-X and is not intended to present our financial position or results of operations in accordance with GAAP.

Special Note Regarding Forward LookingForward-Looking Statements

Certain statements contained or incorporated in this Quarterly Report on Form 10-Q (the “Quarterly Report”), include forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “forecasts,” “expects,” “intends,” “plans,” “anticipates,” “projects,” “outlook,” “believes,” “estimates,” “predicts,” “potential,” “continue,” “preliminary,” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to have been correct. These forward-looking statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from any future results, levels of activity, performanceperformance, or achievements expressed or implied by these forward-looking statements. TheseA number of important factors could cause actual results to differ materially from those contained in or implied by these forward-looking statements, including the risks and factors listed under “Item 1A. Risk Factors” and elsewhere in this Quarterly Report, as well as those listed under “Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2026. In light of these risks, uncertainties, and other factorsfactors, include:the forward-looking statements might not prove to be accurate and you should not place undue reliance upon them. All forward-looking statements speak only as of the date made and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.