Horacio Rozanski

Thank you, Lucy, and good morning, everyone. Thank you for joining the call.
This morning, Matt and I will discuss the company's excellent second-quarter results. But before we do, allow me to take a moment to acknowledge that the people of Booz Allen continue to excel under circumstances that are far from ordinary. Every day, we see headlines. They highlight conflict and human loss around the world, divisive politics here at home, and more recently, the impact of two devastating hurricanes.
The news is heartbreaking and deeply concerning, yet through it all, the people of Booz Allen remain focused, focused on serving our clients, on living our values, and on taking care of each other. This focus and this commitment have been the core of our company for 110 years. We believe that supporting missions of national importance is more urgent today than ever, bringing leading-edge technology to national missions at speed and scale is essential for it is how we best serve American citizens, protect the US and our allies, and secure a peaceful and prosperous future.
Booz Allen's exceptional people make this a reality every single day. I am grateful to everyone of my colleagues, grateful for their dedication, for their talent, and for their passion. Thank you.
With that as a backdrop, let's discuss the quarter. In Q2, our operational momentum accelerated, driving excellent topline performance and cash generation, strong profitability and headcount growth, and record backlog. In addition to strong business performance, we also realized some discrete items this quarter that further enhance our results and which Matt will discuss in a few minutes. Despite the challenges and uncertainties in the environment, we believe we are well positioned operationally and strategically to deliver on this fiscal year and beyond. Our growth strategy, VoLT, which stands for velocity, leadership, and technology continues to fuel our performance and positions us for the future.
We now expect to deliver above our original expectations for fiscal year 2025 and are pleased to raise and narrow our top and bottomline guidance. This revised range also positions us to exceed the top end of our multiyear investment thesis which concludes at the end of this fiscal year. I am tremendously proud that our people have driven performance above the ambitious expectations we set in 2021. Booz Allen has delivered outstanding organic revenue growth, disciplined capital deployment, and a robust increase in EBITDA dollars. This is the ultimate proof point that VoLT is working.
Before Matt takes you through our performance and guidance in-depth, I would like to spend a few minutes talking about the evolving dynamics within each of our markets. As you well know, our clients are operating in highly complex environments. They are increasingly pressured by geopolitical instability, rapidly advancing technology cycles, and a growing threat landscape, all in from political and economic environment. Within this context, Booz Allen's strives to use innovation to help our clients navigate these expanding and durable challenges and to drive our own financial performance. And just as we have transformed to gain speed and scale in bringing technology to missions, we feel we are prepared to adapt to these conditions and achieve our growth goals.
I'll start with our civil portfolio which continues to be strong and vibrant. Civil revenues rose approximately 12% from the prior-year quarter, exclusive of the discrete items Matt will cover in more detail. Technology has fundamentally altered the relationship between the federal government and its citizens. It has also changed the means, methods, and pace of collaboration between government agencies. Across a range of missions, we are helping our clients support citizens, their well-being, and the resilience of the national economy.
We put together these test-driven, double-digit growth in this business for the past 13 quarters, along with strong margins and high demand. And so today, building on two decades supporting civil clients with IT modernization and transformation, we are able to capitalize on technology advancements and leverage data to deliver scaled outcomes at the mission level. As our civil clients' missions become more complex and interconnected, Booz Allen is in a unique position to help them and in doing so continue robust growth over the medium term.
In the immediate term, our civil clients are facing greater uncertainty inherent in the current political season and limited visibility into the next administration's domestic agenda. This is manifesting in some turbulence in the demand and acquisition processes and an increasing price competition. Our near-term prospects remain strong, but we are seeing more disruption in the procurement environment than in the past two years.
Let's turn now to the intelligence market. We are thrilled to see a return to growth this quarter as anticipated. Revenue increased 8% year-over-year in this market, exclusive of the discrete items. We have completed our transition of this business from primarily analysts focused to one that is truly technology-enabled. It is optimized to leverage advanced technologies to support intelligence missions across domains.
Our approach to cyber as one battle space is a great example. We organized our cyber business to meet adversaries where they are, across defense, intel, civil and commercial infrastructures, enabling us to bring the full scale and expertise in Booz Allen anywhere in this mission.
Those of you who had a chance to attend our cyber event last month, our Helix Center for Innovation, saw how the evolution of this business over 3 decades has positioned Booz Allen at the center of nearly all major cyber missions across public and private sectors.
We expect our total cyber revenue to reach between $2.5 billion and $2.8 billion by the end of this fiscal year and we aim to double that revenue in the next 5 years. Without a doubt, Booz Allen is one of the most impactful cybersecurity firms today. Given the accelerated pace and scope of our other series, and the relative budget stability in this market, we believe we are well positioned to capture future opportunities.
We expect to see significant growth in our intelligence business, both in the near and in the medium term. Finally, and excitingly, our defense business, which has delivered double-digit growth for the past 6 quarters continues to accelerate with revenue increasing 17% year-over-year, exclusive of discrete items. This is driven by 2 primary components: one, the strategic support we are providing to clients around the world on existing geopolitical conflicts; and two, the increasingly important role that Booz Allen plays in modernizing existing systems and building the war-fighting capability of the future.
Aligned with strategic defense missions in Europe, the Pacific and elsewhere, we have won several awards exceeding $500 million each just in the first half of FY '25. This critical work is delivered by a growing defense talent base and augmented by technology investments in key areas, including space, AI and the digital battle space.
Together these components, exceptional talent and cutting-edge technology drive growth across our defense business. And they are producing new opportunities, such as our recent 5-year $2.6 billion task order award called Service Solutions for modernization, analysis, readiness capability, threat and training or SMART. SMART includes a full spectrum of innovative enterprise services and solutions. This work supports the modernization of current for structure capabilities across the Army and its strategic mission partners.
SMART is one of a number of contracts that focuses on the acceleration of technology into defense missions. This is well aligned to Booz Allen's focus on delivering innovation at speed, including through dual-use technologies. We continue to build, partner and invest in new ways to help maintain U.S. technological superiority in our national security posture.
Amid geopolitical conflict and tension, urgency for accelerating defense missions and strong demand for emerging technology, we remain confident about the continued expansion of our defense business and of its impact.
To summarize, across our business, we are staying close to our clients and mapping a path of growth that responds to their evolving needs. VoLT has positioned us to accelerate a virtuous cycle across client work talent and investments. And as you well know, Booz Allen always looks to outpace and especially so in rapidly evolving markets.
Thus, I am extremely pleased with the progress we have made, strategically and financially at the midpoint of this fiscal year and as we approach the end of our investment thesis period. Working alongside our clients, Booz Allen is making a tangible difference across the most critical and most enduring missions of our time.
And with that, Matt, the floor is yours.

Matt Calderone

Thank you, Horacio, and good morning, everybody. As Horacio said, we had a strong second quarter, both operationally and financially. We continue to generate significant momentum in the quarter. And as a result, Booz Allen remains well positioned to deliver compounding growth and financial returns into the future. I have a lot of good news to report, but I recognize that our results this quarter may require more explanation than usual.
To aid in that, we have provided a detailed crosswalk of our fiscal year guidance in our earnings presentation.
I have 6 takeaways from our performance in the quarter that should frame how you interpret our results. First, we had a strong operating quarter. At the top line, organic revenue growth was in the solid double digits even when excluding some discrete items in the quarter.
Adjusted EBITDA margins increased significantly due to improved operational performance, cost discipline taking hold faster than anticipated and reversal of some of the nonoperational and timing-related factors discussed on our last call.
Second, we continue to build significant momentum. We booked $8.2 billion of awards in the second quarter, not including work under protest. Our backlog now stands at a record $41 billion. We continue to hire aggressively. Through the first half of this fiscal year, we have increased client staff by 4.3%.
Third, 3 discrete items occurred in the quarter that will collectively provide immediate and long-term financial benefits. I will cover these in detail in a moment. Fourth, we deployed a significant amount of capital to generate value for shareholders. In the quarter, we repurchased about 1.2% of our shares or $232 million worth at an average price of $146.63 per share.
Fifth, as a result, we are pleased to raise guidance across all metrics for full fiscal year 2025. And finally, as Horacio said, we are now guiding to exceed the top end of our investment thesis, almost entirely through organic performance.
As I mentioned, our headline numbers were positively impacted by 3 discrete items in the quarter. Let me walk you through these items before I dive into our second quarter numbers in more detail.
Please turn to Slide 10. First, we collected a $115 million recovery from our insurers related to the Department of Justice settlement last fiscal year. This was not contemplated in our original fiscal year guidance is additive to operating cash flow for the quarter and is excluded from adjusted EBITDA.
Second, we received a roughly $200 million tailwind to operating cash this quarter related to the modernization of our payroll in July. This was reflected in our original fiscal year guidance. And finally, we received results of incurred cost submission audits for 3 historical rate years.
This resulted in a change in estimate for our provision for claim costs for all rate years subsequent to fiscal year 2011. As we have disclosed, Booz Allen did not have normal course government cost accounting audits for more than a decade. As a result, by the end of last quarter, we had accumulated a reserve of about $375 million for estimated adjustments to historical claim costs.
This provision for claim costs covers all rate years subsequent to our fiscal year 2011, none of which have been fully resolved. Since our settlement last July, a wide range of activity has resumed, including incurred cost submission audits for a total of historical rate years.
Teams from Booz Allen, along with our government counterparts at DCMA and DCAA, have worked tirelessly to address this backlog of audits. And thanks to their efforts, we are also now back on a normal course annual review cycle. This work has been hard, but the collective focus on collaboration, mutual respect and transparency has yielded real progress. I very much appreciate the efforts of everyone to date while recognizing that significant work remains to be done.
The impact of this effort will occur over 3 time frames. First, we changed our estimate of the provision for claim costs for all open rate years back to fiscal year 2011. Our total provision for claim costs as of September 30 and was reduced to $246 million. This reduction increased revenue by $122 million in the second quarter or 4.6%.
Of this $122 million, about $113 million were related to reserves for historical years and thus have been excluded from adjusted EBITDA. Second, we reduced the provision for claim costs for the first half of this fiscal year and revised our forecast for the second half.
We anticipate about a $30 million positive impact to adjusted EBITDA for this fiscal year relative to our original guidance assumptions. Third, we anticipate an approximately 20 basis point increase in our profit margins going forward. This will better reflect the underlying profitability of our business and is consistent with industry practice.
Please note that while we continue to make progress with our regulators, there have not been any final resolutions nor any cash settlements related to our open rate years. I'll now cover our quarterly results in more detail. Please turn to Slide 6.
Total revenue for the quarter grew 18% year-over-year to $3.1 million. Organic revenue increased 17% year-over-year and revenue excluding billable expenses grew about 18%. The change in provision for claims cost I just described increased quarterly revenue growth by 4.6%. This increase was felt proportionally across all markets.
Moving now to demand. Please turn to Slide 7. Net bookings for the quarter were $8.2 billion, and our quarterly book-to-bill was 2.6x. This translated to a trailing 12-month book-to-bill of 1.5x. This our highest in 6 years.
Total backlog as of September 30 was a record $41 billion, up about 18% from a year ago.
This exceptional bookings performance, particularly strong in Defense and Intel provides us ample fuel for continued above-market growth. Our performance in the supply side was just as strong. In the first half, we grew client staff by 1,360, a 4.3% increase in client staff in our first half alone.
This puts us on pace to exceed our fiscal year target of 3% to 5% growth and sets us up well for this year and beyond. Our total client staff headcount is now nearly 33,000 employees. This is 8.1% higher than a year ago. In a competitive labor market, the Booz Allen value proposition continues to resonate.
Moving now to the bottom line. We delivered $364 million in adjusted EBITDA approximately 25% higher than the prior year period. Our adjusted EBITDA margin was 11.6%, up 70 basis points compared to the prior year quarter. This exceeded our expectations and was ahead of the moderately ascending margin profile we projected on our first quarter earnings call.
For the first half, our adjusted EBITDA margin was 10.9%, roughly on par with our expectations for the full fiscal year. Moving down the P&L. Net income for the quarter was $390 million, 129% higher year-over-year. In addition to the items I noted previously, this included an $11 million fair value increase to 2 strategic investments in our corporate venture capital fund.
Adjusted net income increased 38% year-over-year to $233 million. Diluted earnings per share increased 133% year-over-year to $3.01 per share. Adjusted diluted earnings per share increased 40% year-over-year to $1.81.
Transitioning to the balance sheet. We ended the second quarter with $559 million of cash on hand, net debt of $3 billion and a net leverage ratio of 2.3x adjusted EBITDA for the trailing 12 months.
Free cash flow for the quarter was $563 million. The result of $587 million of cash from operations less $24 million of CapEx. In addition to the impact of discrete items I noted earlier, we had a strong collection quarter, evidenced by a 4-day DSO improvement over the prior year quarter.
Turning now to capital deployment on Slide 8. In the second quarter, we deployed a total of $300 million. This included $232 million in share repurchases million in quarterly dividends and $2 million of strategic investments through our corporate venture capital fund. In addition, I'll note that our Board has approved a quarterly dividend of $0.51 per share which will be payable on December 4 to stockholders of record as of November 15.
The strength of our balance sheet gives us operating flexibility and the ability to deploy capital in a disciplined manner to generate value for shareholders. It remains a source of strategic advantage. Our strong first half performance sets us up well for potential volatility and uncertainty in the second half. We are on track for an excellent fiscal year overall.
Let me now walk you through our updated guidance for fiscal year 2025. Please turn to Slide 9. At the top line, we now expect revenue growth of 11% to 13%. We are raising our adjusted EBITDA guidance to a range of $1.3 billion to $1.33 billion. This implies an adjusted EBITDA margin of about 11%.
We now anticipate operating cash flow of between $925 million and $1.025 billion and free cash flow of between $825 million and $925 million. Lastly, we are raising our ADEPS guidance to a range of $6.10 to $6.30 per share. In closing, we are extremely proud of our second quarter performance.
Let me share again my 6 core takeaways. First, we had a strong operating quarter. Second, we continue to build significant momentum. Third, 3 discrete items occurred that collectively provide immediate and long-term financial benefits. This includes an anticipated roughly 20 basis point lasting increase to EBITDA margins.
Fourth, we deployed a significant amount of capital to generate value for shareholders. Fifth, we are pleased to raise guidance across all metrics for full fiscal year 2025. And finally, we are now guiding to exceed the top end of our investment thesis almost entirely through organic performance, a truly exceptional feat.
As always, Booz Allen continued to build in this quarter, positioning us well to deliver compounding growth, and financial returns well into the future.
With that, operator, let's open the line for questions.

Question and Answer Session

Operator

Thank you so much. (Operator Instructions)
Ellen Page, Jefferies.

Ellen Page

Guidance implies a deceleration. I guess there's onetime items in Q2, but 9% organic in H2, I think. How do we think about the drivers of growth in the back half? And what are you contemplating in terms of election risk and the risk from a change in administration?

Horacio Rozanski

Sure, Ellen. Why don't I start. First of all, as you said, this is a turbulent environment with some uncertainty in it. Our -- it's inevitable to know that we're 11 days from a very significant election that will not just affect who's in the White House, but also could affect who controls its Chamber of Congress. And that does create some potential for reduced visibility and change your priorities and agendas in the near term, as we said, particularly in our civil market.
We are also -- geopolitically, there are 2 ongoing wars in the Middle East and Eastern Europe and increasing tensions in the India Pacific, which also affects the entirety or markets. And so taken together, this is a more volatile external environment that we've seen in a while. So against that backdrop, the performance in the first half is something that we're very proud of.
The team did an exceptional job managing through all of that and doing 2 things. First of all, delivering excellent results, but importantly, driving momentum. And so when you look at hiring, when you look at backlog, when you look at all of the leading indicators of the business are all extremely positive and, to some degree, ahead of pace. So we feel very good about where we are. There's always the possibility of a black swan type event.
We have not contemplated that into anything by definition because you can't know what that could be. But this is my third change of administration. This will be my third change of administration in the almost decade that I've been in this job and then many more in my time at Booz Allen. And I will tell you this, our operating mall becomes a unique asset when there's a change in priorities because we tend to be able to adapt to changing priorities to figure out how to support clients against new demands really faster than anybody else. And while past is not necessarily an indication of future and all of that, we look to outpace when there's a change like this.
And so as I look at the business, and again, absent something totally unforeseen, I feel very bullish about where we are, both at the top line and at the bottom line. I said, look, not just at this year, but coming into next year.

Ellen Page

Helpful. And maybe one for Matt. You mentioned that you haven't seen a cash impact from the change in audit adjustments. What could -- what's the range of outcomes there? Can you help us understand that?

Matt Calderone

We have not seen a cash impact. And a reminder, we haven't fully settled these rate years, although we do have 4 audits, which gave us comfort in changing the estimates for the impact of the backlog. But I would not build any exploitation of cash into your models. Right now, we think we're appropriately reserved, and that should be your expectation.

Operator

Cai von Rumohr, TD Cowen.

Cai von Rumohr

Good results. So Matt, you basically mentioned the benefits of the payroll modernization and Ellen's point regarding the claims you've got good improvement in your DSOs about, what, 64 days. That's still well above many of your competitors. Where do you think that number can go? And how long would it take to get there?

Matt Calderone

Thanks, Cai. And as I've mentioned, I think at your conference, embedded in our DSO numbers is about 5 days of DSOs that are tied up in the resolution of these backlog audits. Look, we aspire to generate 100% or more free cash flow relative to net income. And we're close to there, Cai. We improved DSO performance this year, as you said, 4 days in the quarter, 2 days for the full year.
We think that 2 days will persist, and we're going to continue to work on it to bring us closer to where we want to be. But very happy with our cash performance overall. Obviously, the onetime good guy of the net insurance recovery was excellent in this quarter, and we continue to improve operationally.

Cai von Rumohr

Terrific. And then obviously, the bookings were great, all of that's fabulous. In prior quarters, you've given some useful metrics in terms of gauging your potential going forward. That would be qualified pipeline submitted proposals and proposals in process. Where were they at the end of the quarter?

Matt Calderone

Yes. We had so much news, Cai, to report that. It was a busy quarter. But our qualified pipeline is roughly in line with where it was at this point last year. It's about $20 billion or more in qualified pipeline.
But we had a strong finish to last year as well. So we're really pleased with our book-to-bill. As you know, this excludes water under protest, but we're in as good a place as we've been really in the last half a decade from a demand perspective.

Horacio Rozanski

Yes, that's absolutely right. I think it's worth sort of coming back to that point that we really are not demand constrained. I mean if you look at the last 12 months, the trailing book-to-bill is 1.5, which is we haven't seen something along those numbers in 5 or 6 years. And what makes me excited is when I look at the work we're doing in the Pacific. When I look at the work we are doing against key domestic priorities, like public health.
We see demand increasing, and we see what we're bringing, which is the top AI business, the top cyber business, leading business in digital transformation and then new ideas around using AI for software-defined networks using Quantum as really thinks our clients are more and more interested in, more and more asking for and more and more getting included in some of these very large procurements.

Operator

Louie DiPalma, William Blair.

Louie DiPalma

Can you discuss just how strong the demand environment is relative to how there seems to potentially be a headwind from the Avana contract next year. And I think, Matt, at a recent conference, you alluded to a churn incident related to a Department of Veterans Affairs contract that was awarded to Deloitte. Is demand so strong that any 1 particular contract or 2 contracts isn't enough to really sway the overall organic revenue trajectory of the company?

Horacio Rozanski

Louie, that's a great question. I think the 2 of us are potentially going to want to comment on it. Let me start by saying, as you know, we're not defined by a single contract, and it's the strength of the business overall that has driven Booz Allen. If I take you back to take you forward. We had a discussion last year about an Intel contract and what that was going to do when we ended the year with extraordinary organic growth and that momentum continues to drive into the business.
Because we have the ability to -- the rare occasion that we do lose a contract, the ability to retain the talent and reapply the talent to other things. Intel is a great launching point for that conversation because if you look at the growth that they're experiencing now and some of the things are winning now. There are no -- they're in also in part driven by the fact that we were able to take some extraordinary cyber talent and apply them to new things, and that has driven new growth. And that's really the way, as you know, we operate.
You look at our civil business, as I mentioned, we are seeing a little more price competition. We are seeing more procurement disruption that we've seen in a little while. I think part of that is driven by the fact that the domestic agenda is most affected when there's a change in administration and regardless how the election turns out, this is a change of administration. And so we're beginning to see that. Having said that, we feel really good about where we are.
There's growth in some areas, accelerated growth in some areas. There's potentially some contract churn in other areas. When you put it all together, we think our Civil business is going to continue to grow nicely, and we feel good about it. And then ultimately, to go back to your original point about Avana and the totality of our defense business. As you see the defense business is really on fire in terms of capturing new demand.
We are very proud of the work that we've done in support of DoD on Avana from its very inception as a relatively small program inside the controllership to what it's become, which is really the leading program to give war fighters for all levels, complete visibility into the data set for DoD is something that had never been done before. And I think if you asked our clients who deserve all the credit for doing this, they would recognize that Booz Allen has played a valuable role. So that's a good place to be going into a competition. But more broadly than that, I mean if you look at our portfolio, in defense. You have things obviously that get recompeted.
You have completely new work, some of which we won in this quarter in the Pacific. And then you have programs like smart. If I take you back, Smart started at the global threat mitigation program many years ago, it was actually the first $1 billion task core that Booz Allen ever on and it's now at $2.6 billion, and this is 1 of these hybrid contracts where each recompete is both a continuation of work and an expansion of scope and an expansion of need as new technology deployed around the world at the speed that war fighters need becomes a greater need. So defense have a tremendous quarter, 17% for the quarter is pretty extraordinary for a business that is half of our portfolio, and we see potential for more.

Matt Calderone

We've been talking about for the past few quarters about how we thought this year had slightly more recompete risk, but also significantly more opportunity. If you look at the totality of our proposal pipeline and you saw that play out. I think we've won 7 jobs in the first half over $0.5 billion, let that sink in for a minute. And it's really a testament to how well we are positioned strategically to the resilience of our business model and the strength of our portfolio that even if we do lose a recompete, we can post the kind of numbers we pushed this quarter. So we feel really good about where we are.
As Horacio said, mix may be shifting a little bit in the near term, but there's real optimism and energy in the business. We're doing exactly the kind of work we want to be doing, and we feel good about the future.

Louie DiPalma

And on that subject of scope expansions, I think at the recent Helix cybersecurity event, you talked about how an attach rate of how a very high percentage, I forget off the top of my head, of your overall contracts have a cybersecurity component. And then last year at the Helix, you talked about how a very high percentage of your overall contracts have an AI component now. And does this like lead for like more scope expansion such that like when you're renewing these contracts, there might be like a plus 10% or plus 20% just because you're adding 0 trust or language learning models to your existing contracts?

Horacio Rozanski

I think that's exactly right. Look, each contract is different and they're all not going to have scope expansions and everything else. But overall, as I talked about at the cyber event, we believe that the notion of convergence of these technologies into emissions in aggregate is here to stay. So this is not about delivering cyber in 1 place and delivering AI in another place and delivering digital in other place and delivering edge in a fourth place and space in a fifth place is how all of these things come together to affect the mission where the answer is going to be where the demand is going to be and where Booz Allen is already playing. Again, I go back to our operating model, the fact that we have a very collaborative culture.
The fact that we have a common incentive structure, the fact that people are thought from an early day at Booz Allen to work together and integrate. It's a huge asset as all of these technologies come together. Last year, as you know, we talked about AI and cyber. This year, we talked about cyber and AI. All of these things are coming together, and we believe that we're uniquely positioned to capture that opportunity.

Operator

Tobey Sommer, Truist Securities.

Tobey Sommer

I was wondering if you could comment about the relatively strong increase in backlog and the slightly slower increase in funded backlog. What's the explanatory factor between the discrepancy between the 2?

Matt Calderone

There's really nothing I take away from that. I mean our contracts are slightly longer in duration, which means they're funded in different ways. A lot of the big jobs were winning, but I wouldn't read anything into it.

Horacio Rozanski

And we're not seeing anything unusual in the funding environment at this point.

Tobey Sommer

Okay. And with respect to the conflicts in the Middle East and Europe, should they be resolved or come to some sort of conclusion What, if any, impact do you think that might have on the company?

Horacio Rozanski

I hope all of that happens. I think the world would be a better place and Booz Allen would be a happier place to follow these conflicts were resolved. Just to dimensionalize it, we have about 800 people working across European theaters. So and some of that is certainly surge capacity over the immediate needs. But honestly, should those conflicts be resolved and let's hope that they are the, call it, a couple of hundred people, give or take, that could be all of a sudden not needed for that have unique skills, we will be -- we would love to put them on some of these new work that we just won.

Tobey Sommer

And then don't the recruiting environment and retention environment. I was just hoping you could comment on that. We're now several years into kind of easier recruiting and improvement in retention broadly. Do you see those trends continuing into calendar .

Horacio Rozanski

In general, yes. I mean I think part of it is the -- it is a, call it, less crazy environment, especially for tech talent now than it was 3 or 4 years ago. But importantly, every day, we see the Booz Allen as more of a destination for unique talent. I think this combination of leading-edge technology and mission -- when I talk to candidates to recent hires to very senior people that have an interest in Booz Allen, that is really resonated. And I think it's giving us not just numbers, but it's giving us a depth of talent.
We wouldn't have been able to capture. I'll share an anecdote just to give you a sense that we were talking about we have a senior open position. And the first part of the search was done confidentially meaning we couldn't -- our recruiters could not tell the market who they were recruiting from -- and we saw some level of interest. And then when we were able to move to the phase where we could say that it was for Booz Allen, there was a huge spike in both the quantity and the quality of very senior level resumes that we got to see. And I think that's what's happened.
I think in addition to being a little bit better market, our brand is as strong as I've ever seen it, and I've been in and around this topic for over 20 years now.

Matt Calderone

Historically, slightly more than 1/3 of our employees come through employee referrals. That number has actually ticked up. And as Horacio said, there is an energy and an excitement in Brazil that is as strong as I've ever seen it. People view their work as important, impactful, interesting. It means they're staying and they're recommending us to their friends.
Just to give you 1 data point. We crossed -- we had 1 month, I think, this quarter, but if not this quarter, last quarter, we had over 100,000 applicants to Booz Allen and let that sink in for a minute. We're a place where people want to come because they want to grow their careers, they want to do work that's deeply technical and work that has real mission impact. So we don't foresee those trends changing.

Operator

David Strauss, Barclays.

Josh Korn

This is actually Josh Korn on for David. So last quarter, you talked about margin impact from hiring and contract time and things like that. And I think you suggested things would progress sort of a little more slowly throughout the year off of Q1. So I just wanted to ask about how those factors trended in the second quarter and how they improved contributing to the big margin increase this time.

Matt Calderone

Yes, you saw the results. I think it snapped back in some ways faster than we thought. So good operating quarter. Cost discipline took hold and a lot of the onetime or timing-related items we highlighted in Q1 actually reverted in some cases, quicker than we thought. So I'd really think about Q1 and Q2 as a whole.
For the first half, we delivered margins of we're guiding to 11% for the year overall. We're right where we want to be after 6 months. But I'll remind you again, we do focus on EBITDA dollars. We are incredibly proud the fact that we ended last year at $1.175 billion in adjusted EBITDA, we're guiding to $1.3 billion to $1.33 billion this year. That's a great year.

Operator

Mariana Perez Mora, Bank of America.

Mariana Perez Mora

So my question is going to be about like defense and Intel and the transition. So you mentioned in the prepared remarks, that in the intelligence business, it's more like technology that analyst solutions or missions right now. I was surprised at USA to learn that you're going to open your third engineering facility, focused on rapid prototyping for the tactical assault kit attack solutions that you acquired with parts. You have been really successful navigating this balance between being the agnostic integrator of technologies but also jumping into technology solutions where the analysts or the engineer and the technology were insuperable taste have an outcome on time. How are you thinking about the hardware?
How are you thinking about this like software-driven card works technologies and solutions in the future? And how do you think totaling could play a role and add value in that regard?

Horacio Rozanski

That's a great question. So for context, I think what we really did is we took work prototyping work that was being done across our defense portfolio and integrated it primarily into 3 facilities in order to be able to gain scale and expertise and accelerate all of that. But this is not entirely new. It's just an accelerating area of focus. I think what we're seeing, especially when it comes to our defense business is that so much is of what's needed is going to happen at the edge.
It needs to happen in environments where communications are degraded or nonexistent. It needs to happen in a way that can respond to the unique needs of a war fighter where -- which may be something that needs to get carried on a belt or it needs to be able to withstand the acceleration of a fighter jet. And so we think about ourselves as the people that can really integrate across the entirety of that solution. We don't expect we're going to be making a lot of these things. We expect that we can partner, we expect that we can bring to all use technologies to play much faster.
We can adapt things that are already out there, perhaps for commercial living consumer use into these missions. And we see Booz Allen as the people who can do it most reliably, fastest and ultimately, who can scale this. the fastest. We have work ongoing already that integrates things that are happening on the edge on technology stacks that we are building from scratch with some of our partners to things that happen in the cloud, and those 2 things need to communicate when they can and operate asynchronously when they won't be able to, to things we're doing in space. So this is an area, and it all fits into this notion that we believe our clients ultimately will be moving to a more outcome-based view.
We believe we have unique intellectual property and intellectual capital that will give us both the opportunity to play there, but also the opportunity to increase our EBITDA dollar acceleration to increase our margins and so forth over the medium to longer term. And we're very excited about everything that's happening there. And it's all really happening again against this modality that says, what are the missions of national priority? What are the new technologies in their totality that need to be brought in and how can we do that at scale and fast?

Mariana Perez Mora

Great. And then my second question is around the civilian clients. Despite this near-term turbulence, how do you see the market going forward? And where do you see most of the demand? Because I could see a case for like protecting critical infrastructure, like from cybersecurity and things like that, like getting digitalization to actually be more cost-effective in a budget pressure environment?
Like where do you see most of the opportunities going forward?

Horacio Rozanski

If I had to summarize the -- our presence and our growth in the civilian market, I think there were would be data-enabled missions where are all the places we're bringing data in a different way will accelerate mission success. Public health is a clear area, and I was just in Atlanta and at the CDC understanding from our clients, what they need and working with them on it. A lot of our work at the VA in terms of modernizing and accelerating so that our veterans get better care and faster or work in law enforcement, which connects deeply to our work in national security and across the board. And as you say, climate, the defense of critical infrastructure and so forth, the common threat for us is, in any place we're bringing data to the mission fastest, creates mission leverage. That's where Booz Allen is excelling.
That's where Booz Allen is playing our best role and that's where I think the real growth is going to be in the medium term. And I think this is a pretty robust set of opportunities that will respond to the next administration's priorities once we understand what those are.

Operator

And this concludes our Q&A session, and I will turn the call back to Horacio Rozanski for his concluded comments.

Horacio Rozanski

Thank you, Carmen, and thank you all for your questions and for being with us this morning. At the start of the call, I touched on the recent hurricanes, which have impacted millions of people, and that includes many of our colleagues. So before we conclude today, if you'll allow me, I'd like to take a moment to recognize the incredible people of Booz Allen and how they've come together in the wake of these storms. Our crisis management teams worked literally around the clock to account for everybody to provide assistance to thousands of employees that were in the path of these 2 storms as they get across the Southeast. Our client teams answered the call and work on providing information that ultimately became life-saving information and support to first responders.
And then volunteers in that area and Farmwise across Booz Allen gave their time, donated money, donated things and stood up to help all affected. And that's really the spirit of Booz-Allen. It's all inspiring to watch my colleagues rise up at a time like this. And so I just want to finish by thanking everybody at Booz Allen for always being there for one another and for once again showing the world who we are. And with that, thank you again for being on the call, and have a great day.

Operator

Thank you, ladies and gentlemen. This concludes our program, and you may now disconnect.