Booz Allen Hamilton announces new round of layoffs

McLean-based Fortune 500 government contractor Booz Allen Hamilton is launching another round of layoffs after a weak quarter, citing earlier federal contract reductions and an ongoing slowdown in federal funding.

During a Friday earnings call, CEO Horacio Rozanski said the company is “making the difficult decision to reduce layers and numbers in our senior ranks.” He said these actions “will allow us to continue to invest in our priority growth areas and accelerate decision-making.” However, he didn’t specify how many positions are being cut.

Booz Allen’s revenue declined 8.1% year over year to $2.9 billion in Q2. Meanwhile, the company’s net income was $175 million, a 55.1% year-over-year decrease from about $390 million.

The company attributes the weaker-than-expected revenues and profits to a “continued funding slowdown.”  The Trump administration has canceled or altered billions of dollars in federal contracts since the start of the year.  Rozanski noted the second quarter is typically the company’s most active as it coincides with the end of the government’s fiscal year. But he said there were no major procurement actions in its civil business this year.

“I am disappointed in our results this quarter and that we are lowering guidance across all key metrics,” he said. “Simply put, the strength in our national security portfolio cannot offset the current year decline in our civil business. This has led us to reassess our market assumptions and to take bold and significant action immediately.”

In May, Booz Allen announced it would lay off 7% of its 35,800-employee workforce, mainly in its civil division, by the end of June. The layoffs were to be a roughly 2,500-person reduction, leaving a workforce of around 33,300. The company said these layoffs were primarily due to a slowdown in the federal government’s civil procurement and spending environment, with the run rates of five of Booz Allen’s major civil technology contracts reduced in April. At the time, Rozanski said the company anticipated its civil business would rebound.

But while the company touted solid growth across its national security portfolio during its second quarter, it admitted last week that its civil business is experiencing delayed recovery.

As of Sept. 30, the end of the second quarter, the company reported its headcount was 32,500 — a steeper drop from expectations back in May.

The company’s customer-facing staff in Q2 declined about 10% year-over-year (from 32,700 to 29,600), according to Matthew Calderone, Booz Allen’s chief financial officer.  Those workforce reductions, he said, “largely reflect lingering effects from contract run rate reductions in our civil business as well as deliberate actions to improve utilization of existing staff.”

In addition to the layoffs, Calderone announced the company was restructuring its business to cut $150 million in annual costs.

Calderone noted that the ongoing government shutdown is likely to have a “modest negative impact” on the company’s revenue and profitability for the full fiscal year.

“Make no mistake, this is not the year that Booz Allen wanted to deliver, and we are taking significant actions in response,” he said.

Booz Allen representatives did not immediately return requests for comment.