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Economic Times
02-06-2025
- Business
- Economic Times
Gold prices to witness big moves, may hit Rs 1.10 lakh/10g in one year. Is now the time to buy?
Gold is poised for a significant rally over the next 12 months, with prices in India expected to surge to as high as Rs 1,10,000 per 10 grams and $4,000 per ounce in the global market amid the persisting geopolitical uncertainties. ADVERTISEMENT According to a report by Angel One, gold prices should accumulate near the Rs 85,000 level when meaningful dips occur. 'Investors with a long-term perspective... should accumulate on every dip, taking advantage of value average for higher returns,' the report said. Further, from a portfolio strategy standpoint, Angel One recommends maintaining a gold allocation of at least 10%. Analysts at Angel One noted, 'Our advice to investors is to allocate at least 10% of their portfolio allocation towards gold for better diversification.'Echoing a similar sentiment, Joni Teves, Precious Metals Strategist at UBS Investment Bank, also stated that she is bullish on gold and believes that diversification is likely to continue to drive prices higher.'We remain bullish on gold and think diversification should continue to drive prices higher. We don't think positioning is crowded and there is plenty of room for investors to continue building gold allocations,' Teves said. ADVERTISEMENT Lingering worries over US fiscal deficits, globally surging bonds, Dollar weakness and intensifying trade war make a strong case for gold extending its rally further, though it is to be noted that markets are still somewhat sceptical of Trump's threat to the US Dollar Index has weakened 7% this year and is likely to fall further on US exceptionalism being put into question. USDINR volatility will significantly affect domestic gold prices. ADVERTISEMENT 'Gold bulls need to be cautious about the possibility of Trump shifting his stance on EU tariffs and progress in trade deals with other trading partners,' noted Praveen Singh of Mirae Asset Sharekhan.'A decisive breach of the resistance zone of $3365-$3371 may take the yellow metal to $3435 and will bring the all-time high of $3500 in focus,' Singh added while highlighting that he maintains a bullish stance on gold. ADVERTISEMENT After delivering strong gains over the past year and a half, the yellow metal continues to shine as a preferred asset for investors seeking long-term value and portfolio has historically proven to be a reliable wealth creator, especially in times of economic uncertainty, and recommends a strategy of value averaging for accumulation. ADVERTISEMENT Amid global macroeconomic shifts, central bank buying, and steady demand from jewellery and investment sectors, Angel One advises investors to allocate at least 10% of their portfolio to gold for better One, in its report, has also highlighted that gold has already delivered strong returns over the past one and a half years and continues to offer a compelling investment case for long-term one looks at the table below, it clearly states that investment in gold pays good returns. Hence, one should make investments in gold from a long-term the demand front, the report outlines that jewellery has consistently contributed over 50% of total gold demand for more than a decade. Additionally, central banks have emerged as a key source of demand post-COVID, with their interest in gold rising steadily over the past four years.'This trend will likely continue in 2025, boosting the yellow metal prices for the second half of 2025,' analysts at Angel One also emphasised the role of gold as a stable asset in uncertain times. 'Gold as an asset has been a good diversifier in any portfolio for decades,' the report said, adding that both geopolitical tensions and macroeconomic factors have influenced gold the supply side, it was mentioned that global gold supply has been steady at over 4,000 tons annually for the past decade, reinforcing the metal's fundamental strength. Also read: Bulls & bears played tug of war in June over last 10 years. Should you stay put or take a vacation? (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times) (You can now subscribe to our ETMarkets WhatsApp channel)
Economic Times
26-05-2025
- Business
- Economic Times
Commodity Talk: Gold has more room to run and potential for stronger diversification, says UBS' Joni Teves
We remain bullish on gold and think diversification should continue to drive prices higher. We don't think positioning is crowded and there is plenty of room for investors to continue building gold allocations, says Joni Teves, Precious Metals Strategist at UBS Investment Bank. She thinks risks are skewed to the upside for gold, with the potential for even stronger diversification, especially if investors reallocate away from US assets into alternatives like gold. ADVERTISEMENT Q: The world seems to be a little less uncertain now with the US-China tariff truce, India-Pakistan ceasefire and other things. Do you think UBS's gold price target of $3,500 is achievable and sustainable in 2025?We remain bullish on gold and think diversification should continue to drive prices higher. We don't think positioning is crowded and there is plenty of room for investors to continue building gold allocations. Q: Gold prices have fallen by over 7% ($250) from their peak and are trading around $3,230 per ounce on the COMEX. Do you see the weakness to continue in the short term and what level could be hit on the downside? Price action is very headline driven at the moment. There is scope for consolidation over the Northern Hemisphere summer months, but we expect the market to be well supported over all. Interest to buy dips remains high in our view. Q: The demand for gold has been coming from various quarters like central banks, funds and retail investors and in that context do you think supply and demand are evenly matched and if there is a gap, can you quantify that? There has been an increase in demand for gold across the board, but limited supply response - there is no material hedging from producers and scrap flows are limited by expectations of even higher prices ahead. ADVERTISEMENT Q: How are you seeing credit rating cuts for the US by Moody's, Fitch and others and can it take the prices even beyond your targets?We think risks are skewed to the upside for gold, with the potential for even stronger diversification, especially if investors reallocate away from US assets into alternatives like gold. Q: What should be the strategy to trade gold and given the bullish view you have, how much should the allocation be in one's portfolio? The appropriate level of gold holdings depends on many factors such as the composition of the portfolio, risk appetite, macro view, etc. ADVERTISEMENT (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times) ADVERTISEMENT (You can now subscribe to our ETMarkets WhatsApp channel)
Time of India
26-05-2025
- Business
- Time of India
Commodity Talk: Gold has more room to run and potential for stronger diversification, says UBS' Joni Teves
We remain bullish on gold and think diversification should continue to drive prices higher. We don't think positioning is crowded and there is plenty of room for investors to continue building gold allocations, says Joni Teves , Precious Metals Strategist at UBS Investment Bank . She thinks risks are skewed to the upside for gold, with the potential for even stronger diversification, especially if investors reallocate away from US assets into alternatives like gold. Q: The world seems to be a little less uncertain now with the US-China tariff truce, India-Pakistan ceasefire and other things. Do you think UBS's gold price target of $3,500 is achievable and sustainable in 2025? We remain bullish on gold and think diversification should continue to drive prices higher. We don't think positioning is crowded and there is plenty of room for investors to continue building gold allocations. Q: Gold prices have fallen by over 7% ($250) from their peak and are trading around $3,230 per ounce on the COMEX. Do you see the weakness to continue in the short term and what level could be hit on the downside? Price action is very headline driven at the moment. There is scope for consolidation over the Northern Hemisphere summer months, but we expect the market to be well supported over all. Interest to buy dips remains high in our view. Q: The demand for gold has been coming from various quarters like central banks, funds and retail investors and in that context do you think supply and demand are evenly matched and if there is a gap, can you quantify that? There has been an increase in demand for gold across the board, but limited supply response - there is no material hedging from producers and scrap flows are limited by expectations of even higher prices ahead. Q: How are you seeing credit rating cuts for the US by Moody's, Fitch and others and can it take the prices even beyond your targets? We think risks are skewed to the upside for gold, with the potential for even stronger diversification, especially if investors reallocate away from US assets into alternatives like gold. Q: What should be the strategy to trade gold and given the bullish view you have, how much should the allocation be in one's portfolio? The appropriate level of gold holdings depends on many factors such as the composition of the portfolio, risk appetite, macro view, etc.
Yahoo
24-05-2025
- Business
- Yahoo
Q4 2025 Booz Allen Hamilton Holding Corp Earnings Call
Dustin Darensbourg; Head, Investor Relations; Booz Allen Hamilton Holding Corp Horacio Rozanski; Chairman, President & Chief Executive Officer; Booz Allen Hamilton Holding Corp Matthew Calderone; Chief Financial Officer; Booz Allen Hamilton Holding Corp Kristine Anderson; Chief Operating Officer; Booz Allen Hamilton Holding Corp Gavin Parsons; Analyst; UBS Investment Bank Colin Canfield; Analyst; Cantor Fitzgerald & Co. Sheila Kahyaoglu; Analyst; Jefferies Ronald Epstein; Analyst; Bank of America Louie Dipalma; Analyst; William Blair & Company L.L.C. Scott Mikus; Analyst; Melius Research Operator Good morning and thank you for standing by. Welcome to Booz Allen Hamilton's earnings call covering fourth quarter fiscal year 2025 results. (Operator Instructions) I'd now like to turn the call over to the Head of Investor Relations, Dustin Darensbourg. Dustin Darensbourg Good morning, and thank you for joining us for Booz Allen's fourth quarter fiscal year 2025 earnings call. We hope you've had an opportunity to read the press release we issued earlier this morning. We have also provided presentation slides on our website and are now on slide 2. With me today to talk about our business and financial results are Horacio Rozanski, our Chairman, Chief Executive Officer and President; Matt Calderone, Executive Vice President and Chief Financial Officer; and Kristine Martin Anderson, Executive Vice President and Chief Operating Officer. As shown on the disclaimer on slide 3, please keep in mind that some of the items we will discuss this morning are forward-looking and may 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 to differ materially from forecasted results discussed in our SEC filings and on this call. All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements and speak only as of the date made. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. During today's call, we will also discuss some non-GAAP financial measures and other metrics, which we believe provide useful information for investors. We include an explanation of adjustments and other reconciliations of our non-GAAP measures to the most comparable GAAP measures in our fourth quarter fiscal year 2025 earnings release and slides. Numbers presented may be rounded and as such, may vary slightly from those in our public disclosure. It is now my pleasure to turn the call over to our Chairman, CEO and President, Horacio Rozanski. We are now on slide 4. Horacio Rozanski Thank you, Dustin. Welcome, everyone and thank you for joining the call today. Kristine, Matt and I are proud to share strong financial results for fiscal year 2025 as well as our outlook for fiscal year 2026 and beyond. And I'm happy to welcome Kristine to the Q&A portion of the earnings call. Booz Allen delivered a strong year of top line and bottom line growth in FY25. We also reached $1.315 billion of adjusted EBITDA. This exceeded the top end of our ambitious target range we set at our Investor Day in October 2021 and represents 12% compounded EBITDA growth, nearly all organic over our investment thesis period. I am incredibly proud of the people of Booz Allen for their dedication and hard work over the past three years. These results are a credit to them. Through a changing landscape, we remain focused on delivering outcomes and bringing their passion and commitment to America's most essential missions. A heartfelt thank you to our colleagues for all you do for our company and for our nation. To frame the conversation about fiscal year 2026, let me reiterate what I mentioned on the October earnings call. All presidential transitions create some degree of near-term disruption followed by opportunity. Half a year later, we now see that these dynamics are indeed in play at a rate and speed that is beyond what we originally expected. As the Trump administration focuses on reducing government spending, increasing efficiency and reimagining agency missions, Booz Allen must once again adapt and accelerate. Let me begin by describing the current environment as we experience it. The federal government is rethinking agency emissions, finding ways to accomplish those missions differently and looking for ways to reduce spending and increase efficiency. To get there, we are seeing agency reorganizations, reductions in government personnel and spending levels as well as contract reviews. These are especially acute in civilian agencies. And as a result, we are seeing a decrease in the pace of awards in civil as well as run rate changes in some of our contracts. At the same time, the government is leading initiatives to improve procurement regulations and practices such as the revision of the federal acquisitions regulation or FAS, and we expect to see more contracts move to fixed price and outcome based. We also see a focus on massively upgrading legacy systems and rapidly injecting advanced technology into revised missions. These present great opportunities for more impact and increase value to the government as well as stronger financial performance for Booz Allen. In combination, these dynamics are currently impacting Booz Allen's view of FY26. We believe that our defense and national security portfolio will continue to grow this year as we accelerate the injection of AI and commercial technology into missions. In contrast, we expect our Civil business to decline this year. Diving more into civil. Our largest contracts have been reviewed. We are proud that our solutions stood up well, and our contracts are mostly intact. The work is excellent, and the missions are critical. Having said that, the run rate on five large technology contracts has been reduced significantly in support of the administration's desire to reduce spending overall. This slowdown coincided with the ending of a large signal truck at the VA. Together, this led to a significant number of employees needing to be redeployed simultaneously. Under normal circumstances and as our history shows, the dynamism of our business typically allows us to move our highly skilled talent quickly to new opportunities. But at a time when procurements are moving much slower than normal, this has been challenging. As we proactively anticipate continued market and budget dynamics, we have made the decision to restructure and reset our Civil business. We are making targeted cost and headcount reductions to match anticipated demand. These are a combination of reductions in bench, delayering of management and adjusting our infrastructure to match. These situations are difficult, and they are not taken lightly. Our actions are very targeted, and we believe that they will preserve and enhance our ability to invest both in our business and in our people. Matt will cover all the details of our FY26 outlook in a few minutes. Now let me talk more about the opportunities on the horizon, especially those being created through our close collaboration with the General Services Administration or GSA. GSA wanted to explore ways they could transform and centralize government procurement. They began a contract review exercise, looking for efficiencies, cost savings and opportunities to bring in new tech like AI. We were in the first group of companies to take part in that exercise, which has since expanded to include many more companies in our industry. I'm proud to say that GSA and Booz Allen have built a very productive relationship. I want to highlight two specific outcomes of our efforts. First, GSA got to know us better. They now understand the value we deliver across a full range of missions. This is important because GSA and the Federal Acquisition Service or FAS will be driving an efficiency agenda across government for the foreseeable future, including the consolidation of services and acquisition processes. And second, we have a unique opportunity to offer FAS our thoughts on how to accelerate the move to outcome based procurement and bring Agentic capabilities to enable these conversions. For years, I have argued that the move to outcomes was necessary for the federal government. GSA and FAS understand this and are leading the way. We are optimistic that the process that could have taken a decade or more accelerated during this administration. We believe a more efficient government will buy differently, more commercial technology, more outcomes, streamline processes and greater speed. And looking ahead, we anticipate these procurement improvements will set a foundation for a new kind of growth. We are committed to moving fast in those directions so that we can both help these initiatives exceed and be successful ourselves. We're optimistic about the opportunities ahead across our VoLT strategy, which stands for Velocity, Leadership and Technology is aligned with the changes we are seeing across governments. We have a leading position in the major technologies that will drive mission acceleration and efficiency, especially AI. We have a track record of building successful partnerships with technology firms of all sizes, from start-ups to hyperscalers, and we have strong positions and are working nonstop to create value in the areas that matter most. From reducing duplication in costs, to increasing readiness on lethality for the war fighters defending our nation. Let me provide some color in each area. Starting with artificial intelligence. There is significant demand, and that demand is only increasing. In FY25, our AI business grew over 30% year-over-year to approximately $800 million. As AI becomes increasingly foundational to how the government operates, agencies are investing more and moving toward enterprise scale implementation. In Defense and Intelligence, AI is now embedded in mission workflows, enabling faster imagery analysis through computer vision, enhancing decision-making through tailored generative models, and delivering autonomous solutions at the tip of the spear. With more than a decade of investment, enhancement in implementation experience, Booz Allen is well positioned to lead the next phase of AI transformation across the federal enterprise. Next, we are strengthening private sector partnerships and are a proud leader in the advanced technology ecosystem. We are building on a proven track record of accelerating the adoption of technologies that produce impactful mission outcomes. We recently announced we are combining our expertise in AI and 5G and 6G with NVIDIA's transformative technologies to accelerate the delivery of edge applications. We also continue to invest in early-stage technology companies through Booz Allen Ventures. We believe that we are stronger together, which is why we will continue developing our technologies and combine our strength with others. Lastly, we are continuing to share our big ideas, working in partnership with our customers and the private sector. For example, we are talking to multiple agencies about cloud migration and consolidation. We have big ideas for transitioning thousands of data centers to a cloud-based architecture to make data more accessible. The private sector has already done this, and we've seen that it's more efficient, cheaper and more secure. All of which aligns with administration's vision. Importantly, making data more readily available is also crucial for our war fighters because it allows us to apply advanced AI tools to increase their readiness and lethality. One way we are doing this is by collaborating with the United States Army. We are building an AI-enabled tactical software system to more quickly recognize targets and generate [coal] for fire emissions. The prototype can reduce the time to respond to threats from 15 minutes to 1 minute. The bottom line is this. We understand our customers' mission needs, and we have the technical expertise to deliver solutions that not only meet those needs but also anticipate what's next. That gives me great confidence in Booz Allen's ability to maximize the opportunities ahead and provide the advanced technologies America needs to thrive. So in this period of transformation for Booz Allen and our nation, we will accelerate by focusing on the following operating priorities for FY26. We are resetting and restructuring our Civil business. So it returns to growth rapidly after an adjustment period in the coming months. We are positioning ourselves to lead the way and capture major outcome-based opportunities. This includes reimagining how we deliver our work such as using AI to accelerate software development, increase our value and reduce cost to the government. We are directing significant resources to the areas that will best position us for growth. This includes missions in INDOPACOM and space as well as critical technologies like Agentic AI, quantum and software-defined communications. We are rapidly advancing our partnerships with established technology firms and new entrants. This entails going to market together to provide novel solutions as well as becoming their scaling partner as they capture demand across their broader markets. And finally, we are continuing to create efficiencies in our own business so we can move faster, invest more and realize greater shareholder value even in a volatile environment. To wrap things up. I hope that you will take three things away from my remarks this morning. First and foremost, Booz Allen is not standing still to see what happens next. We are moving aggressively to lead the way in a changing market. Second, we are strategically advantaged. We have been investing ahead of these changes, both in our own positions and in the critical partnerships that will be required. And third, we're on the side of change. We are committed to America's priority missions and to enabling a more nimble and efficient federal government. For all these reasons and while recognizing that there are challenges ahead, the people of Booz Allen are energized and we are optimistic. We are ready to meet this moment. And with that, Matt, over to you. Matthew Calderone Thank you, Horacio. Good morning, everyone. I also want to take a moment to express my sincere appreciation for the hard work and dedication of Booz Allen's people. We are in a period of rapid change. Technology is changing, our missions are changing, and our customers are changing. Booz Allen's people continue to lean into this change. They are rising to the challenge of transforming Booz Allen and delivering the technology and mission outcomes that this country needs. I am confident that Booz Allen will continue to deliver significant value to our customers, our nation and our shareholders. We said on our most recent earnings call that we anticipated a period of short-term disruption and a slow down in the procurement environment, particularly in our Civil business, and that this would be closely followed by meaningful new growth opportunities. In his remarks, Horacio described both the disruption and the ample opportunity we are experiencing. You will see the impact of these two dynamics, which are beginning to overlap and are not playing out evenly across our markets in both our results for the fourth quarter of fiscal year 2025 and our guidance for fiscal year 2026. Before we dive into the quarter, I'd like to cover the highlights of our overall performance for fiscal year 2025. Please turn to page 5. For the full fiscal year, we delivered over 12% revenue growth, nearly all of it organic. We ran the business efficiently, enabling us to deliver another year of double-digit profit growth. Our adjusted EBITDA increased 12% to $1.315 billion. This yielded adjusted EBITDA margin of 11%. Adjusted diluted earnings per share grew over 15%, driven by increased profitability and a lower share count. We generated robust free cash flow of $911 million. We deployed a total of $1.2 billion of capital to generate shareholder value, including repurchasing about 4.3% of our shares outstanding since the beginning of the fiscal year. We did this while maintaining a net debt to adjusted EBITDA ratio of 2.4 times. And finally, as Horacio noted, with the performance, we exceeded the ambitious multiyear investment thesis targets we put out at our 2021 Investor Day. This was done almost entirely through organic performance and leaves us ample balance sheet capacity to generate incremental shareholder returns in the future. In summary, we delivered yet another excellent fiscal year. I will now turn to our fourth quarter performance. In the fourth quarter, we delivered solid results. For the quarter, top line revenue grew 7% year-over-year to $3 billion. Almost all of this was organic. Revenue excluding billable expenses was up 6% year-over-year. For the fourth quarter, growth was driven by strong performance in our Defense and Intel businesses, where revenue was up 14% and 5%, respectively, versus the prior year. Our Defense business continues to deliver cutting-edge technical and mission outcomes that are critical to the war fighter and to our nation's efforts to deter our adversaries. Our Intel business continues to gain momentum as we are solving some of the nation's most challenging, technical and intelligence problems. We anticipate that both our Defense and Intel businesses will continue its strong organic growth in fiscal year 2026. For the past few quarters, we have described a slowdown in the civil procurement and spending environment. Over the last few months, these trends accelerated. Since the beginning of April, we have seen a reduction in run rate on five of our large civil technology projects that we believe will collectively create about a 3% headwind to firm-wide revenue for fiscal year 2026. As Horacio noted, these forces have limited our ability to redeploy staff in the near term, keeping talent rolling off one of our civil contracts that ended last fiscal year, the previously disclosed recompete that we lost at the VA. The impact of this loss now represents an additional approximately 3% headwind to our consolidated top line for FY26. As a result of these factors, year-over-year revenue in Civil was flat in the fourth quarter, and we now anticipate that our Civil business will see a revenue decline in the low double digits in FY26. However, we do anticipate our Civil business will rebound as a number of big transformation and efficiency initiatives for our Civil customers are already beginning to take shape. Pivoting now to demand. Net bookings for the quarter totaled $2.1 billion, resulting in a quarterly book-to-bill of 0.71 times, in line with historical averages. This brought our trailing 12-month book-to-bill to 1.39 times above our trailing five-year average of 1.28 times. We ended the year with a record year-end backlog of $37 billion, up 15% year-over-year. Our qualified pipeline for fiscal year 2026 is $53.4 billion. This is below our record qualified pipeline for fiscal year 2025, but importantly, is higher than our pipeline for fiscal year 2024. Given market dynamics, in the short term, we anticipate that there will be more variability in converting bookings to revenue than we have seen in previous years. That said, we believe we have the backlog, the pipeline and the big ideas for customer transformation needed to support our medium and long-term growth aspirations. On the talent front, Booz Allen closed the fiscal year with nearly 36,000 employees. Our customer-facing staff grew 4.2% year-over-year. Due to the contract impacts we've described, we anticipate that we will see an approximately 7% reduction in Booz Allen staff in the first quarter. This is very heavily concentrated in our Civil business. We are moving aggressively to right size our talent base, both to match immediate contract level demand and to reshape our workforce for the future. This decision was painful. But by taking this action, we have ensured we have both the capacity to invest in growth and the right talent to deliver against future mission needs. Turning now to profitability, adjusted EBITDA grew to $316 million, up 10.5% over the prior year quarter. This translated to an adjusted EBITDA margin of 10.6%, up 30 basis points over the prior year's quarter. Working down the P&L, our net income was $193 million, 51% higher year-over-year. And adjusted net income was $203 million, up 17% from this time last fiscal year. Diluted earnings per share was $1.52 per share, a 55% increase from the prior year period. Adjusted diluted earnings per share was $1.61 per year, up 21% year-over-year. The increase in fourth quarter ADEPS was driven by our overall profitability, a reduction in share count and a gain from the close of the sale of SnapAttack. This was slightly offset by higher net interest expense. Transitioning to the balance sheet. We ended the fiscal year with $185 million of cash on hand. Net debt of $3.1 million and a net leverage ratio of 2.4 times adjusted EBITDA for the trailing 12 months. During Q4, we executed a $650 million bond issuance. This transaction was well received by the credit markets and provides us with additional liquidity and the capacity to opportunistically deploy capital. Free cash flow for the quarter was $194 million, the result of $218 million of cash from operations plus $24 million of CapEx. Moving now to capital deployment. During the quarter, we deployed a total of $403 million to generate value for shareholders. This included $310 million in share repurchases at an average price of $118.96 per share. We also made $23 million in strategic investments, including our recently announced investment in Shield AI. And finally, we paid $70 million in quarterly dividends. Today, we are pleased to announce that our Board of Directors has approved a quarterly dividend of $0.55 per share, which will be payable on June 27 to stockholders of record as of June 11. We continue to have a very strong balance sheet. This gives us flexibility in how we operate our business and the ability to deploy capital in response to the evolving environment in ways that generate additional value for shareholders. Now please turn to page 9 where we provide our outlook for fiscal year 2026. As Horacio acknowledged, today's environment is extremely dynamic. We have less visibility into the forces that will shape business than we typically have at this point in our fiscal year. Our fiscal year '26 outlook is informed by our current assessment of the many factors that will drive performance. This includes anticipated growth in our Defense and Intel businesses and a near-term reset of our Civil portfolio. Our fiscal year '26 guidance is as follows. We expect to deliver revenue between $12 billion and $12.5 billion. We expect to generate adjusted EBITDA dollars in the range of $1.315 billion to $1.37 billion. This implies a full year adjusted EBITDA margin of about 11% on par with fiscal year 2025. We expect ADEPS to be in the range of $6.20 per share to $6.55 per share. This assumes an adjusted effective tax rate between 23% and 25% as well as a marginally higher interest expense. It does not assume any impact from our venture investments. Lastly, we expect free cash flow to be between $700 million and $800 million. As we forecast our growth cadence for the full year, we anticipate that revenue and profit growth will be comparatively lower in the first half, particularly in our second quarter given the strong prior year comps and the impact of the onetime actions we have described today. We then anticipate a meaningful reacceleration in the second half. This is based on the strength of our backlog, the size of significant recent wins in our opportunity pipeline and the expectation of a meaningful uptick in hiring. In closing, we could not be prouder of how we finished fiscal year 2025, the final year of our investment thesis. Our results show our relentless focus on the mission, on operational excellence and on generating shareholder value. Booz Allen continues to transform. While cognizant of the uncertainty in our environment, excited about our strategic direction, our alignment to the government's mission priorities and our central position in the evolving technology ecosystem. We remain very optimistic about the future. With that, Operator, let's open the line for questions. Operator (Operator Instructions) Gavin Parsons, UBS. Gavin Parsons In this environment of unpredictable, I guess, descoping and cancellations, how do you get comfortable that kind of you've got your arms around the impact and there's not potentially more to come throughout the year? Horacio Rozanski Thanks for the question. Let me try and frame the entirety of what we see and try and answer your question from that perspective. I'll start by saying, very proud of the last year, very proud of the last three years and our ability to demonstrate significant shareholder value creation through what was already a changing environment. As we look at the world now, we are seeing two sets of overlapping dynamics. One set of dynamics is, as we said in the prepared remarks, our Civil business is going through this what we hope, we believe, will be a onetime reset where most of the reviews have been concluded very positively regarding our technology and our work. But we're facing this deceleration at a time where procurements are still somewhat frozen. The other side of the dynamic is continued strength in our Defense business and growing strength in our Intelligence business. So that's sort of one set of dynamics. And the other dynamic is, while we are seeing -- we have seen, especially in Civil, some of these resets which, by the way, was mostly, as we pointed out, the slowdown in spending against a few technology contracts, there have been relatively few and far between, call it, 1% of our portfolio that has been outright canceled and that really tracks to what the 1% of our portfolio that we gained was actually consulting type programs, which is really legacy work that we were doing. So -- and then the other side of it is we are -- first of all, in Defense and Intel, we're still winning work against a strong procurement environment. And even in Civil, we're beginning to see opportunities take shape that we will take advantage of. So our approach has been to take a significant restructuring in our Civil business now so that we are positioned to grow and so that we can invest across the portfolio where again, the one P&L really helps us. And because the environment in Defense and Intel is so dynamic, and there is -- the procurement activity is still strong, we're in a position to absorb things there as well and continue strong growth vector as we see it right now. And then ultimately, from a strategy standpoint, as we pointed out, we believe we are extraordinarily well aligned and well positioned against both the key missions, the key technologies and the major opportunities we see in the horizon. Operator Colin Canfield, Cantor Fitzgerald. Colin Canfield Okay. Maybe if we could talk about some of the comments you made around kind of reset and what your expectation is on the multiyear growth environment. Maybe just kind of digging into how you think about kind of Defense and Civil and kind of where we stand on the reality of FY25 sub versus FY26 request? Kind of what you're hearing from congressional folks? And then also maybe, Matt, if you could talk about kind of how you're think about repurchases and what the bogey is for the year? Horacio Rozanski So why don't I start with sort of the macro level and then maybe Kristine can talk a little bit about each one of our markets and then Matt will cover the back -- your second question, I guess. I think the way we see the environment very much matches the way we're seeing the budgetary environment, right? I mean the bill that is making its way to the Senate, as we speak, has a significant plus up for defense. And at the same time, the stated priority about reducing spending -- discretionary spending on some of the sole agencies and actions that have already taken place is what we are talking about. So our Civil business, I think, has already gone through the majority of its reviews. And in Defense and in Intel, this is what we're seeing. Doubling down on priorities around into Pacific, where, as you know, Booz Allen has a very strong footprint and a lot of growth opportunity in space, both in programs that are already underway where we have strong place and opportunities around Golden Dome, where we believe we have unique technology and capability to bring to bear. And then the defense of the Homeland, which is really around -- especially the southern border and which is the integration of not just defense, but defense, intelligence analysis and certainly the civil agencies that are primarily responsible. So -- and then what they're trying to do there is primarily inject technology, a lot of commercial technology, Agentic AI, the discussion has really moved away from whether AI was important to national security to how fast can we implement AI in national security and Booz Allen again, has a tremendous track record there. Kristine Anderson I would say, for our Civil business, in particular, while there have been some slowdowns in contracts that really reflects the administration's desire to tackle really big challenges, really advancing the tech even faster and we've been very excited about the opportunity to present our ideas. And so we have developed and are in discussions with the government on tens of big ideas, and we're getting really positive responses. It's actually pretty exciting to be asked to extend some successful event -- solutions and one mission to others. And we were ready, right? We've already been piloting both AI-assisted coding and Agentic AI, a large software program that's almost insatiable in its requirements, and we were able to lean into the call for efficiencies and move past the pilot to full production across the program. So it's a win-win-win for us, the government and the Americans that are served by that program. And then also in Defense and Intel, the business is very strong, and we are very aligned with the administration's priorities to counter China and protect the Homeland. We are anticipating that our counterterrorism expertise will position us really well against the sophisticated threat. And we have also presented very big bold ideas there as well and are in discussions around them. Matthew Calderone Gavin, I'll take your balance sheet capital deployment question. Obviously, the balance sheet continues to be a strength of ours. We deployed $1.2 billion last year and basically maintained leverage. The strength of our organic growth over the past couple of years allowed us to deploy a lot of capital to generate value for shareholders. And I think we've demonstrated our ability both to deploy capital consistently across the board, but also to be flexible inside the various modalities of capital deployment to deploy where we think we can generate the most value. We've shown that we will buy back our shares, we believe that it's good value for shareholders. We're still committed to M&A, more biased to tuck-in than ever, given how rapidly the technology market is changing and our need to continue to invest to acquire technologies that are leading edge and will advance and accelerate our strategic objectives. I do think you'll see us lean in a little bit more on the Venture side as well. We've gotten tremendous value. We're beginning to see it on the financial side, but really on the strategic side from our venture investments. It's part of our long-term commitment to be a commercial technology accelerator. I think that's one of the macro trends that Horacio and Kristine referenced, where we've really been at the forefront, and I think you'll see us accelerate that as well. But committed to deploying capital, share repurchases obviously is an important lever there. Operator Sheila Kahyaoglu, Jefferies. Sheila Kahyaoglu So maybe if we could start -- two questions for you guys. And you could hear me okay? Matthew Calderone Can you speak a little louder? It's a little quiet in the room. Sheila Kahyaoglu Oh, sorry about that. So maybe if we could talk about the low double-digit decline for Civil in fiscal '26, how do we think about the catalyst for that stability in the business, we're talking about second half improving? And [TTAM] is maybe a few points, so that -- how do we think about other program specifics that are driving it? And when do you think about the improvement in civil again? Kristine Anderson Yeah. The vast majority, as Horacio mentioned, of our Civil programs have already been reviewed. And I would remark that we weren't targeted in those reviews. What we saw was agencies and departments looking at their full portfolio with targets in mind and whether it was on or off the GSA list, this is really agency-driven, and our tech and our talent fared really well in those reviews. But there has been a short-term slowdown in the actual burn rates as they start to position for some of the transformation objectives that they have in bringing new tech in. And so our view overall is that to win in that environment, you need three things to be true. One, the tech needs to be excellent. And we have received really high marks for our technical work and the quality of our people. Second, you have to have a vision around how that will evolve in a direction that makes sense to commercial tech leaders that come from outside government. And so, for example, our cloud, our AI-assisted coating and our Agentic-AI have been recognized, and that's already leading to new opportunities. And third, you have to be willing to convert your contracts to outcome space, particularly in Civil and we've been a long-term champion of that shift because we love that agility and flexibility that you get in the tech staff and staffing. So the pivot part really comes from being able to extend those capabilities to accelerate the mission areas. Horacio Rozanski I would -- the only thing I would add to that, and I think two thoughts. First of all, I think we're -- our thought process is we wanted to do a onetime reset and restructuring of our Civil business so it can regain a growth trajectory as quickly as possible because of the -- a lot of it is happening in quarter, it may take through next quarter to work itself through the financials, but we're beginning, as Kristine said, to see the opportunities. And then the other thing is, as with any new administration, the procurement environment slowed down significantly, almost frozen a number of these agencies because the below cabinet level positions have not been filled and people were waiting to see what the specific agendas were. Now that those are beginning to get fleshed out, we're getting strong indications that our -- because our tech works and we're so positioned against the things that they're trying to do that we're going to see growth in the second half. Sheila Kahyaoglu Got it. And then maybe if we could just talk about your typical revenue algorithm is usually based on headcount and some salary composition. So how do we think about the down 7% in Q1 for headcount? I think that was total company. How do we bridge that to the revenue of flat to up low single digits? Matthew Calderone I'll start. And you're correct, 7% was total company, but very heavily concentrated in our Civil business. I think look, our business is changing. And there are three dynamics where -- or three areas where the traditional algorithm may look a little different than what we've experienced in the past. The first we referenced in the prepared remarks, we're actually winning a lot of work, right? Our book-to-bill last quarter was 0.7 times, very much in line with historical averages. And just to give you a dollar figure, that's about a little over $2 billion in what we won. And we're actually -- we've won a lot of work this quarter. Particularly in our Defense and Intel space, we anticipate that our book-to-bill this quarter will be in line, if not better than historic norms. But the first thing we referenced is the conversion of backlog and bookings to near-term revenue, I think, will be a little bit more variable than we've seen in the past just because there's less consistency in sort of in-year spending actions. That's one. The second is, we moved to outcome-based contracting. We talked about that for years. We've been very much an advocate for it. It's good for us. Good for the government. Over time, you'd expect that to be accretive to margins. And then the third is what you referenced, which is the traditional headcount math. I think you've talked about for the majority of our business that's not fixed price. Typically, the algorithm is headcount growth plus 3%. Given that the preponderance of the headcount reductions we are seeing is in our Civil business, and that is less -- it's more fixed price, it's less dependent on billing by the hour. I'm not sure you're going to see an exact -- you're just going to hold exactly to historic equations. But I think it's going to break that math a little bit, but it's still a very good predictor in our Defense and Intel business. Headcount tends to be the best predictor in the near term of what revenue looks like. But when you add it all up, particularly given the year-over-year comps from last year where we had a strong first half, we do expect our first half this year be a little bit more under pressure, but to see acceleration in the back half, particularly as hiring picks up and we get through this period of resetting and rebalancing. Kristine Anderson Yeah. I would add that we're always hiring, right? We -- every month, we're adding hundreds of employees. We do expect to have significant headcount in the second year. And we have really matured our AI-enabled advanced tech solution that we use for recruiting and deployment of staff. And so we're looking to be even more effective at that this year. Operator Ronald Epstein, Bank of America. Ronald Epstein I'm on for Mariana today. She's traveling. Maybe just a couple of things. And you alluded to it a little bit clear. If the government is looking for more commercial terms, even in defense, how do you invest in the right things to do that? How are you set up to do that? It does seem like in the defense market the government is looking at different ways of contract and there's a bigger push for commercial terms. So -- and how do you think about it? And how does that impact your business? Horacio Rozanski Ron, yeah, I'll start. The -- I think the trend that you're pointing out is one that we've been tracking for a while, and it's actually accelerating. I think this is why we have built partnerships and made investments all the way from hyperscalers to the start-ups and everything and everyone in between and we've been doing that for a while. I think it's fair to say and you'd have to ask them, but I think I'll say it that we are the preferred player in terms of helping these commercial solutions get missionized in a way that they make sense that we have created the capacity and the ability to co-create with them. I often talk about the fact that, for example, even edge cloud solutions that have been created for the commercial markets assume a degree of connectivity that doesn't happen in space and doesn't happen underwater and doesn't happen in EW challenged environments, and we have built our own tech to put on top of their stack to solve those kinds of problems and we're recognized for that. So we actually both have been a proponent and welcoming this notion. And then as Matt pointed out, more recently because we have such good relationships with many of these firms, they're coming to us more broadly to talk about help us scale. Help us think about what are all the things we need to do that will make us bigger and better. We're making investments in some of these companies like we've done directly with Shield. And our venture portfolio of start-ups is really performing very well in all of that. So when you look at all of it, this notion of commercial tech being more aggressively utilized in defense is a net positive to Booz Allen given that we're partnering with them to create those solutions. Ronald Epstein Got it. And then maybe as a follow-on, and I think Sheila was getting at this, but maybe softer, I'll be more direct. It does seem like, at least perceptional, that you guys have a branding issue. Meaning every kind of article that we saw about dose and consulting and government contractors and so on and so forth, you see picture of Booz Allen, Booz Allen pops up all over the place. Seemingly, at least from my vantage point, that seems unfair. But that being said, why do you think that's the case? And what do you do about it? About pivoting into maybe a better spotlight in the government? Horacio Rozanski I think I would say a couple of things about this. First of all, I think when you're the market leader, you're the most interesting to write about. And so we have the distinct pleasure of being written about a lot. And as you know, we tend to be relatively humble and quiet about our own communications and we've always wanted our customers to take the credit for the win because ultimately, it's certainly their decisions to make and our tech supports them. So we found ourselves in that reality. And what we do about it is we're -- we've gotten a lot better at telling our story. I think that's resonated. We -- some of it is what you see in terms of us being in the media more and having a lot more conversations and clarifying our positioning as an advanced technology company, and I think that's working. But also, the part you don't see is the number of conversations we are having with people across administration and the relationships that we're building -- and I think as Kristine pointed out, this is true certainly in our Civil business, but it's true more broadly. I think once people start to really interact with the technology that we've built, that speaks much louder than a newspaper article ever could. And so we're, I think, emerging from that transition with our brand, ultimately it's going to be strengthened as a result of all of the scrutiny. Operator Louie DiPalma, William Blair. Louie Dipalma You have several large AI contracts, including the joint Warfighter National Mission Initiative eMAPS 2.0 and Advana and it seems these programs experienced tremendous success over the years and very wide adoption. Are you still excited about the future of these programs? I think you mentioned how your AI business has grown to over $800 million. But with a lot of the scrutiny, has there been any changes to your optimism for your AI business, particularly with the Department of Defense. Horacio Rozanski I'm happy to start with that. Louie, I think the AI is a strength of Booz Allen. I think people recognize it. And it's more and more embedded, there are certain programs that early on were sort of the leaders in terms of implementing AI capabilities. But AI is now embedded in just about everything that we do. And as I mentioned before, we're not seeing AI ask a question of, well, is this good for the mission? Will it ever get adopted? Will the Department of Defense adopt AI? I think all those bridges have been crossed. The question now is how quickly how do you bring the right technologies? How do you make commercial technology, both safe, reliable and secure enough to be able to use it against some of these missions. And again, we have a track record of doing that, that is second to none. And then as we look forward, I would point you to the fact that the move to Agentic AI is going to be really transformational for the global economy, for America and certainly for our national security missions. And we have what I believe is a leading position there. And we've done some stuff on our own research side that is really breakthrough physical AI, which is sort of the key to autonomy, the key to digital twins, the key to being able to simulate and put AI into the field a lot faster. Significant upside there for Booz Allen. And then the third area that we've been talking about for a while, and I think it's starting to get recognized, is this topic of other [Serial] AI. And the reality is all of these models and all these AI capabilities are tremendous and create a potential new attack surface and we are at the leading edge of making sure we know how to defend AI models and AI infrastructure from attack. And then that will take me to the last point, which is you've tracked our cyber business for quite some time. The -- I talked before about convergence between cyber and AI and then cyber and AI in space. And again, these are areas where we are doing some really cool leading-edge stuff, we -- you probably saw that we have now upgraded our presence in AI in space by moving Space LlAMA to the research side of the International Space Station. Again, that's a research project, but it demonstrates both that it can be done and that we know how to do it. So yeah, I am extraordinarily optimistic about the future of AI and Booz Allen's role in it. Louie Dipalma Great. And I guess drilling a little deeper with Advana, do you expect to continue to be the main delivery partner with Advana and similarly with Thunderdome, you just mentioned cybersecurity and zero trust and you're partnering with several commercial vendors there. For these big programs that you are providing your own unique code and software stack on top of existing commercial offerings, do you expect to continue to add that value for DoD? Horacio Rozanski In both of those cases and in many others, frankly, I think the reason that these programs have been so successful is that we did not start from scratch, is that we took the best commercial technology and work that we've done and technology that we built to create complete solutions that really address mission needs. And I think these programs are standing the test of both the quality of what they're providing and the impact on mission. And so we are bullish about our ability to continue to work there to incorporate newer and more commercial technology into these missions so that they can run more efficiently, more effectively, more cheaply, faster and all of the above. And that's -- we don't stand still. So we're certainly working hard. Matthew Calderone And I would just add -- Thunderdome in particular, but also a number of other large technology programs, we're working actively to convert them to outcome-based because I think that -- these programs are ripe given the nature of what we do. And as you said, the fact that we are increasingly adding on our own technology, building under the tech stack of others and playing a foundational role in generating real products and solutions around these, outcome-based contracting is the future, and we look forward to continuing to work with our customers across the board to drive that across our large technology projects. Operator Scott Mikus, Melius Research. Scott Mikus Horacio, in the wake of a budget control at 2011 and sequestration, there was obviously a lot of consolidation in the industry. It seems like if the government wants to actually drive efficiencies, they probably need to consolidate a lot of contracts. So do you expect this to drive a push or another wave of consolidation among the government services providers? Horacio Rozanski I think this is -- let me start by saying, I mean, if you really look at this industry, it's actually quite fragmented. I think if you aggregate it, what's the concentration of the top number of players in totality amount of single digit of the available market. And so when there are processes like this, there are people that take share, there are people that lose share, and there's changes to the industry. I think that the significant changes that we are seeing that I spoke to before, is you have new defense tech companies coming in very strong to create and drive solutions at speed that weren't there before. And we're looking strongly to align with that. But as I think -- as I look at Booz Allen in all of this, I'll -- I guess I'll make the three points that I made earlier. We are being aggressive. The fact is we have a strong balance sheet. But more importantly, we are not standing still to continue to position and reposition ourselves and drive shareholder value. We're strategically advantaged because a lot of the things that we did under whole are really becoming essential now to delivering the mission, and we are not -- we're on the side of change and of looking for ways to add increasing value to all the missions that we support. And so when I look at all of that, I -- this current fiscal year, as we've said, it's a challenging year, especially in our Civil business. But as I look at the medium and the long term, a few quarters out, I am very optimistic that the things that are changing in the environment, will actually allow us to be extremely successful. Scott Mikus Okay. And then thinking about the nonclient-facing headcount, I think it was down 100 people quarter-over-quarter. And you called out the 7% headcount reduction in the first quarter that's largely in your Civil business, your margin guide is flat year-over-year. Is there upside to the margin or EBITDA guidance if you reduce that nonclient-facing headcount more? Do you get to keep those savings? Or do they end up being passed back to the customer? Matthew Calderone Yeah. We've been, I think, aggressively managing the totality of our cost structure. I'll remind you that historically, our solar business, because it is more fixed price in nature, has been more profitable than the average. So we're really pleased that we're able to manage our cost base in a way that we'll maintain margins even while we're resetting our Civil business, but also honestly, the capacity to invest and grow because we're continuing to invest ahead of the business both in building new technologies and bringing on exciting new technical talent and in a lot of the partnerships with commercial technology and defense technology companies that Horacio described. So we've been getting a lot leaner over the past few years and getting scale out of the business. We anticipate continuing to do so. But I would not anticipate near-term upside in the margins. We talked about long term, as we shift to outcome-based, there is potential there, but I wouldn't expect that in the near term. Operator Thank you. And this concludes our Q&A session. I will turn it back to Horacio Rozanski for final remarks. Horacio Rozanski Thank you, Carmen, and thank you all for your questions and for being here with us this morning. I hope that Matt and Kristine and I conveyed both a sense of our near-term priorities and also our optimism about what's ahead for our people, for our customers and for our investors. We are on the positive side of change, we're strategically positioned for a era of tech-driven growth. And we're doubling down on what Booz Allen does best, which is using advanced technology to keep America strong and safe. And I appreciate all of you being part of how we do that and thank you for joining us today. Operator And thank you all for participating, and you may now disconnect.
Yahoo
21-05-2025
- Business
- Yahoo
Trump's Plan to Cap Drug Prices Doesn't Exist
For a moment, Donald Trump finally seemed to be on the verge of real economic populism. The president announced last week that his administration would be instituting a 'most favored nation' policy that would peg drug costs in the United States to the much lower prices paid in other developed countries. 'Some prescription-drug and pharmaceutical prices will be reduced almost immediately by 50 to 80 to 90 percent,' he declared. Robert F. Kennedy Jr., picking up on the horseshoe-theory dynamic, observed, 'I have a couple of kids who are big Bernie Sanders fans. And when I told them that this was going to happen, they had tears in their eyes, because they thought this is never going to happen in our lifetime.' Those tears might have been premature. When the text of Trump's executive order became available, the actual policy turned out to be very different from what the president had claimed. In fact, it wasn't really a policy at all. If the president were serious about solving America's drug-cost crisis, he could choose from a long list of options. Instead, he seems content blaming foreign countries and hoping for the best. The executive order directs Kennedy, the secretary of Health and Human Services, to identify a 'price target' for a given drug, and then asks the pharmaceutical industry to voluntarily charge that price. There is no enforcement mechanism, only a vague promise to 'propose a rulemaking plan to impose most-favored-nation pricing' if companies don't comply. The order amounts to a strongly worded request that the pharmaceutical industry slash its own profit margins. Indeed, after the text of the order became public, drug-company stocks, which had dropped amid rumors of a real most-favored-nation policy, rebounded. 'We see President Trump's tone as relatively positive for the industry,' a pharmaceutical analyst for UBS Investment Bank wrote. 'This is one of the least thought-through executive orders I've ever seen,' Stacie Dusetzina, a professor of health policy at Vanderbilt University, told me. But even before the text circulated, Trump's lack of seriousness should have been apparent. During the press conference announcing the order—the one that made RFK's Bernie-loving children tear up—Trump conspicuously avoided directing any ire toward Big Pharma. 'I'm not knocking the drug companies,' he said at one point. The real enemies, according to Trump, are European leaders who engage in hardball negotiations to lower drug prices for their own people, leaving the heroic American pharma industry with no choice but to charge American consumers exorbitant prices to make up for the shortfall. 'It was really the countries that forced Big Pharma to do things that, frankly, I'm not sure they really felt comfortable doing,' Trump remarked. The result, he said, is a system in which American patients are 'effectively subsidizing socialist health-care systems' across the world while our so-called allies free ride on our generosity. The president went on to announce that the administration would launch investigations into 'foreign nations that extort drug companies.' If those inquiries conclude that Europeans are paying below what Trump thinks are fair prices, he said, he will threaten to raise tariffs until they agree to pay more for drugs. Once foreign nations give in, American pharmaceutical companies will start making more money overseas, and thus will be happy to charge Americans lower prices. The result will be what Trump called 'equalization': higher prices for Europeans, lower prices for Americans, and steady profits for Big Pharma. [Rogé Karma: Do voters care about policy even a little?] To describe this theory as economically illiterate would be too kind. Even if European countries did agree to willingly accept higher drug prices, to expect pharmaceutical companies to respond by charging American consumers less is delusional. Those companies would still be in the business of maximizing their profits. The real reason Americans pay so much for prescription drugs is that, unlike in basically every other rich country, the U.S. government mostly does not negotiate prices with drug manufacturers. The few exceptions are revealing. In 2022, the Biden administration passed legislation allowing the federal government to negotiate the prices Medicare pays for 10 top-grossing drugs. Last summer, new prices for those drugs, effective 2027, were announced, each more than 60 percent lower on average—an outcome that occurred without a single European country paying more. Even if Trump ultimately follows through on the executive order's threat to develop a most-favored-nation policy, that effort is almost assured to fail. The executive branch likely doesn't have the authority to impose such a policy universally without congressional legislation. (When Trump, during his first term, tried to use executive authority to run a mere trial for most-favored-nation pricing within Medicare, the order was blocked by the courts.) Even if the courts decided that the authority existed, the policy's fine print would have to be airtight so that pharmaceutical companies couldn't easily game the system—by, for instance, raising the list prices of their drugs in foreign countries (while offering discounts and rebates) to avoid having to reduce prices in the U.S. That would be a tall order for the administration responsible for the chaotic 'Liberation Day' tariffs. 'When you decide to mess with a big, complex system like this, the small, technocratic details really matter,' Rachel Sachs, a health-policy expert at Washington University School of Law, told me. Many more viable paths to lower drug costs are available. Most obvious, Trump could work with Congress to expand the federal government's ability to negotiate drug prices—a policy that would also reduce the deficit or help offset the extension of the 2017 tax cut. If he's hung up on the idea of most-favored-nation pricing, he could simply throw his support behind a bill introduced in 2021 by Bernie Sanders and Ro Khanna, which would permit manufacturers to make affordable generic versions of any drug whose U.S. price is above the median price in Canada, Japan, the U.K., Germany, and France. (If drug companies tried to game the system by raising prices elsewhere, the bill also lists a set of separate criteria that the HHS secretary could use to determine whether a drug is 'excessively priced.') Drug companies insist that cutting their revenues so dramatically would threaten innovation. The evidence for that proposition is mixed at best, but if Trump is worried about it, the government could boost public funding for research or offer cash prizes for certain drug discoveries. Instead, of course, Trump is doing the opposite of all that. He has issued executive orders that will slow the implementation of Biden's drug-price negotiations and halt investigations into how to reduce drug prices further. Meanwhile, his administration has already slashed billions in research funding for the National Institutes of Health—the institution responsible for the basic science research behind nearly every single new drug in the U.S.—and proposed a budget that would cut its funding even more. 'This is exactly the kind of thing you'd do if your goal was to completely destroy drug innovation in the U.S.,' Dusetzina told me. The unified Trumpian worldview sees nearly every problem in America as the product of foreign countries ripping us off. Trump would like voters to believe that high drug costs can be solved via some combination of tariff threats and trade restrictions. Whether he himself believes this is ultimately beside the point. Trump could deliver lower drug prices to the American people if he really wanted to. Instead, he's offering snake oil. Article originally published at The Atlantic
