Seven facts about Booz Allen Hamilton

June 10, 2013

The leaker of sensitive documents from the National Security Agency, Edward Snowden, was an employee of Booz Allen Hamilton, one of the largest and most successful contractors for defense and intelligence agencies. So who are these guys? Here's what you ought to know, according to information gleaned from the company's filings with the Securities and Exchange Commission.


A Booz-Allen cyber solutions facility in Maryland. (Jeffrey MacMillan/Capital Business)

They're huge. Booz has 24,500 employees, $5.8 billion in revenue for its 2013 fiscal year, $219 million in profits and a stock market value of $2.5 billion. They lease 3.2 million square feet of office space across many facilities, which is more space than the Empire State Building.

It makes its money servicing the federal government. Says the company's 10-K filing: "We have strong and longstanding relationships with a diverse group of clients at all levels of the U.S. government. During fiscal 2013, we derived 99% of our revenue from services under more than 5,700 contracts and task orders. The single largest entity that we served in fiscal 2013 was the U.S. Army, which represented approximately 16% of our revenue in that period. We derived 91% of our revenue in fiscal 2013 from engagements for which we acted as the prime contractor."

It's majority-owned by the Carlyle Group. The Washington-based private equity company engineered the company's split from its commercially-focused cousin in 2008, and remains the largest shareholder. Carlyle owns 67.3 percent of Booz Allen's stock. For Carlyle, the Booz Allen deal is a return to its roots. The company made its name in the 1980s and 1990s with a number of buyouts of government contractors. But now is a global private equity giant that invests in almost anything you might imagine, with $176 billion in assets managed in 114 different funds.

Its profits have risen rapidly in the last few years. In the fiscal year ended March 31, 2010, the company reported operating income of less than $200 million on revenue of $5.1 billion, as almost every dollar it brought in went out the door to employees. In the three years since, revenue has risen only modestly to $5.8 billion, but operating income has more than doubled to $446 million. In other words, sales are rising slowly, but profit margins rose dramatically. That explains how bottom line earnings went from $25 million in fiscal 2010  to almost nine times that in 2013.

It's trying to figure out how to identify terrorists through social media. On April 1 of this year, Booz Allen created a "Strategic Innovation Group," with 1,500 employees, aimed at creating new products that clients (read: government agencies) don't know they need yet. Among its areas of focus? "Developing predictive intelligence services that include anticipatory cyber threat solutions, protection, and detection capabilities and the application of social media analytics designed to provide early identification of trends that would otherwise not be possible using after-the-fact analysis of traditional data sources."

It pays well. There have been reports that Snowden made $200,000 annually despite not having a college degree [Update: Booz Allen says Snowden was actually paid $122,000 per year]. But that's nothing compared to the company's top brass. Chairman Ralph W. Shrader was paid $1.2 million in base salary and a total of $3.1 million in fiscal 2012. Four other named executive vice presidents had total pay packages in the $2 million to $3 million range.

The biggest risk for the company? That its relationship with U.S. government agencies will sour. Every public company must list "risk factors" for investors in their SEC filings, the things that could cause the company's earnings to fall. Booz Allen Hamilton lists this as its first risk factor: "We depend on contracts with U.S. government agencies for substantially all of our revenue. If our relationships with such agencies are harmed, our future revenue and operating profits would decline." It goes on to note that "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." It is of course too early to say whether the leaks by Snowden would damage those relationships, but the company's stock did decline Monday, off 3.5 percent in early afternoon, on a day that the overall stock market was little changed.

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