UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 8-K
___________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 1, 2019
___________________________________
Booz Allen Hamilton Holding Corporation
(Exact name of Registrant as specified in its charter)
___________________________________
Delaware | 001-34972 | 26-2634160 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
8283 Greensboro Drive, McLean, Virginia | 22102 | |||
(Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: (703) 902-5000
___________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On February 1, 2019, Booz Allen Hamilton Holding Corporation (the “Company”) issued a press release announcing its results of operations for the fiscal quarter ended December 31, 2018. A copy of the press release is attached hereto as Exhibit 99.1.
On February 1, 2019, the Company posted to the “Investor Relations” section of its website the presentation that accompanies the earnings conference call. A copy of the presentation is attached hereto as Exhibit 99.2.
Item 9.01 Financial Statements and Exhibits.
Exhibit No. | Description | |
99.1 | ||
99.2 | ||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Booz Allen Hamilton Holding Corporation | |
BY: | /s/ Lloyd W. Howell, Jr. |
Lloyd W. Howell, Jr. | |
Executive Vice President, Chief Financial Officer and Treasurer | |
Date: February 1, 2019
INDEX TO EXHIBITS
Exhibit No. | Description | |
99.1 | ||
99.2 | ||
Exhibit 99.1
BOOZ ALLEN HAMILTON ANNOUNCES
THIRD QUARTER FISCAL 2019 RESULTS
FY19 Bottom Line and Margin Guidance Again Raised; Revenue Guidance Narrowed After Strong YTD Performance
Q3 Revenue Increase of 13.1 percent to $1.66 billion, and Revenue, Excluding Billable Expenses1 Growth of 12.2 percent
Diluted Earnings Per Share of $0.92 and Adjusted Diluted Earnings Per Share1 of $0.72
22.7 percent Increase in Total Backlog to $20.5 billion; and Book-to-Bill of 0.45x
Quarterly Dividend Raised By 4 Cents to $0.23 per Share
McLean, Virginia; February 1, 2019 - Booz Allen Hamilton Holding Corporation (NYSE: BAH), the parent company of management and technology consulting and engineering services firm Booz Allen Hamilton Inc., today announced preliminary results for the third quarter of fiscal 2019.
In the quarter, the Company continued very strong performance for the fiscal year, resulting in the raising of full-year guidance for Adjusted Diluted Earnings Per Share1 to between $2.65 and $2.75, the second consecutive quarterly increase in bottom line guidance for the fiscal year. The Company also raised guidance for Adjusted EBITDA Margin on Revenue1 to 10 to 10.5 percent, narrowed the Revenue guidance to 7 to 8 percent and reported continued headcount growth.
“Our third quarter results put us on track for another successful year, with significant increases in earnings driven by organic revenue growth and excellent contract-level performance,” said Horacio Rozanski, president and chief executive officer. “Booz Allen is operating at the intersection of consulting, technology and mission, which allows us to create value for clients and deliver on the revenue, profit margin, and capital deployment goals outlined in our Investment Thesis.”
The Company reported third quarter Revenue growth of 13.1 percent, and a 12.2 percent increase in Revenue, Excluding Billable Expenses.1 The strong top line growth and a lower corporate tax rate were among the contributors to a 76.2 percent increase in Net Income to $132.0 million and a 36.6 percent increase in Adjusted Net Income1 to $103.0 million. The Company also reported a 23.8 percent increase in Adjusted EBITDA1 to $179.7 million, and Adjusted EBITDA Margin on Revenue1 was 10.8 percent. Diluted EPS for the quarter was $0.92, up $0.41 or 80.4 percent, and Adjusted Diluted EPS1 for the quarter was $0.72, up $0.21 or 41.2 percent. Adjusted Net Income1 and Adjusted Diluted EPS1 each exclude the effect of a $29.0 million tax benefit the Company realized in its third quarter of fiscal 2019 from the approval by the Internal Revenue Service of a tax accounting method change.
Total backlog increased by 22.7 percent over the prior year period to $20.5 billion, and the Book-to-Bill ratio for the third quarter was 0.45x. As of December 31, 2018, headcount was more than 1,050 higher than the prior year, and increased by nearly 460 since the end of the prior quarter.
Reflecting strong performance, the Company declared a $0.04 cent increase in its quarterly dividend, to $0.23 per share, which is payable on February 28, 2019, to stockholders of record on February 14, 2019.
Financial Summary
All comparisons are to the prior year period, as restated as a result of the adoption of two accounting standards, ASC 606 and ASU 2017-07, that were both effective April 1, 2018. A description of key drivers can be found in the Company’s Earnings Call Presentation for the third quarter posted on investors.boozallen.com.
Third Quarter, ended December 31, 2018 - A summary of Booz Allen’s results for the third quarter of fiscal 2019 is below.
• | Revenue: $1.66 billion, an increase of 13.1 percent. |
• | Revenue, Excluding Billable Expenses:1 $1.15 billion, an increase of 12.2 percent. |
• | Operating Income: $161.9 million, an increase of 26.0 percent; and Adjusted Operating Income:1 $161.9 million, an increase of 26.0 percent. |
• | Net Income: $132.0 million, an increase of 76.2 percent; and Adjusted Net Income:1 $103.0 million, an increase of 36.6 percent. |
• | EBITDA: $179.7 million, an increase of 23.8 percent; and Adjusted EBITDA:1 $179.7 million, an increase of 23.8 percent. |
• | Diluted EPS and Adjusted Diluted EPS:1 $0.92 and $0.72, respectively, up from $0.51 and $0.51, respectively. |
As of December 31, 2018, total backlog was $20.5 billion, compared to $16.7 billion as of December 31, 2017, an increase of 22.7 percent. Net cash provided by operating activities for the third quarter of fiscal 2019 was $8.6 million as compared to $68.9 million in the prior year period. Free Cash Flow1 for the third quarter was $(9.8) million, compared with $42.8 million in the prior year period.
Nine Months Ended December 31, 2018 - Booz Allen’s cumulative performance for the first three quarters of fiscal 2019 has resulted in:
• | Revenue: $4.92 billion, an increase of 8.5 percent. |
• | Revenue, Excluding Billable Expenses:1 $3.46 billion, an increase of 9.5 percent. |
• | Operating Income: $467.3 million, an increase of 20.4 percent; and Adjusted Operating Income:1 $471.0 million, an increase of 21.4 percent. |
• | Net Income: $329.0 million, an increase of 50.1 percent; and Adjusted Net Income:1 $305.1 million, an increase of 38.4 percent. |
• | EBITDA: $517.7 million, an increase of 18.7 percent; and Adjusted EBITDA:1 $521.3 million, an increase of 19.5 percent. |
• | Diluted EPS and Adjusted Diluted EPS:1 $2.27 and $2.12, respectively, up from $1.46 and $1.49, respectively. |
1 Revenue, Excluding Billable Expenses, Adjusted Operating Income, Adjusted Net Income, Adjusted EBITDA, Adjusted Diluted EPS, Adjusted EBITDA Margin on Revenue and Free Cash Flow are non-GAAP financial measures. See “Non-GAAP Financial Information” below for additional detail.
Financial Outlook
For our fiscal 2019, we are updating guidance on Revenue, Adjusted EBITDA Margin on Revenue1 and Adjusted Diluted EPS1 issued on October 29, 2018:
•Revenue: Growth in the 7 to 8 percent range
•Adjusted EBITDA Margin on Revenue: 1 10 to 10.5 percent
•Adjusted Diluted EPS: 1 $2.65 - $2.75
This Adjusted Diluted EPS1 estimate is based on fiscal 2019 estimated average diluted shares outstanding in the range of 141 million to 144 million shares, and assumes an effective tax rate in the range of 24 percent to 26 percent, which excludes any re-measurements of our deferred taxes related to the Tax Cuts and Jobs Act, including benefits we realized during our third quarter of fiscal 2019 from the approval by the Internal Revenue Service of a tax accounting method change.
Conference Call Information
Booz Allen will host a conference call at 8 a.m. EST on Friday, February 1, 2019, to discuss the financial results for its Third Quarter of Fiscal 2019 (ended December 31, 2018).
Analysts and institutional investors may participate on the call by dialing (877) 375-9141 International: (253) 237-1151, using passcode 3886157. The conference call will be webcast simultaneously to the public through a link on the investor relations section of the Booz Allen Hamilton web site at investors.boozallen.com. A replay of the conference call will be available online at investors.boozallen.com beginning at 11 a.m. EST on February 1, 2019, and continuing for 30 days.
About Booz Allen Hamilton
For more than 100 years, business, government, and military leaders have turned to Booz Allen Hamilton to solve their most complex problems. They trust us to bring together the right minds: those who devote themselves to the challenge at hand, who speak with relentless candor, and who act with courage and character. They expect original solutions where there are no roadmaps. They rely on us because they know that-together-we will find the answers and change the world.
We solve the most difficult management and technology problems through a combination of consulting, analytics, digital solutions, engineering, and cyber expertise. With global headquarters in McLean, Virginia, our firm employs approximately 25,800 people globally, and had revenue of $6.17 billion for the 12 months ended March 31, 2018. To learn more, visit www.boozallen.com. (NYSE: BAH)
CONTACT:
Media Relations - James Fisher 703-377-7595;
Investor Relations - Nicholas Veasey 703-377-5332
BAHPR-FI
Non-GAAP Financial Information
“Revenue, Excluding Billable Expenses” represents revenue less billable expenses. Booz Allen uses Revenue, Excluding Billable Expenses because it provides management useful information about the Company's operating performance by excluding the impact of costs that are not indicative of the level of productivity of its consulting staff headcount and its overall direct labor, which management believes provides useful information to its investors about its core operations.
“Adjusted Operating Income” represents Operating Income before: (i) adjustments related to the amortization of intangible assets resulting from the acquisition of our Company by The Carlyle Group (the “Carlyle Acquisition”), and (ii) transaction costs, fees, losses, and expenses, including fees associated with debt prepayments. Booz Allen prepares Adjusted Operating Income to eliminate the impact of items it does not consider indicative of ongoing operating performance due to their inherent unusual, extraordinary or non-recurring nature or because they result from an event of a similar nature.
“Adjusted EBITDA” represents net income before income taxes, net interest and other expense and depreciation and amortization before certain other items, including transaction costs, fees, losses, and expenses, including fees associated with debt prepayments. “Adjusted EBITDA Margin on Revenue” is calculated as Adjusted EBITDA divided by revenue. "Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses" is calculated as Adjusted EBITDA divided by Revenue, Excluding Billable Expenses. Booz Allen prepares Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, and Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses to eliminate the impact of items it does not consider indicative of ongoing operating performance due to their inherent unusual, extraordinary or non-recurring nature or because they result from an event of a similar nature.
“Adjusted Net Income” represents net income before: (i) adjustments related to the amortization of intangible assets resulting from the Carlyle Acquisition, (ii) transaction costs, fees, losses, and expenses, including fees associated with debt prepayments, (iii) amortization or write-off of debt issuance costs and write-off of original issue discount, (iv) release of income tax reserves, and (v) re-measurement of deferred tax assets and liabilities as a result of the Tax Cuts and Jobs Act (the “2017 Tax Act”) in each case net of the tax effect where appropriate calculated using an assumed effective tax rate. Booz Allen prepares Adjusted Net Income to eliminate the impact of items, net of tax, it does not consider indicative of ongoing operating performance due to their inherent unusual, extraordinary or non-recurring nature or because they result from an event of a similar nature. We view net income excluding the impact of the re-measurement of the Company's deferred tax assets and liabilities as a result of the 2017 Tax Act as an important indicator of performance consistent with the manner in which management measures and forecasts the Company's performance and the way in which management is incentivized to perform.
“Adjusted Diluted EPS” represents diluted EPS calculated using Adjusted Net Income as opposed to Net Income. Additionally, Adjusted Diluted EPS does not contemplate any adjustments to net income as required under the two-class method of calculating EPS as required in accordance with GAAP.
“Free Cash Flow” represents the net cash generated from operating activities less the impact of purchases of property and equipment.
“Net Debt Leverage Ratio” represents leverage expressed as a fraction: (i) total debt (defined as current and long-term debt) minus cash, divided by (ii) Adjusted EBITDA for the prior twelve month period.
Booz Allen utilizes and discusses in this release Revenue, Excluding Billable Expenses, Adjusted Operating Income, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses, Adjusted Net Income, and Adjusted Diluted EPS because management uses these measures for business planning purposes, including managing its business against internal projected results of operations and measuring its performance. Management views Adjusted Operating Income, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses, Adjusted Net Income, and
Adjusted Diluted EPS as measures of the core operating business, which exclude the impact of the items detailed in the supplemental exhibits, as these items are generally not operational in nature. These supplemental performance measures also provide another basis for comparing period to period results by excluding potential differences caused by non-operational and unusual or non-recurring items. Management also utilizes Revenue, Excluding Billable Expenses because it provides management useful information about the Company's operating performance by excluding the impact of costs that are not indicative of the level of productivity of its consulting staff headcount and its overall direct labor, which management believes provides useful information to its investors about its core operations. Booz Allen also utilizes and discusses Free Cash Flow in this release because management uses this measure for business planning purposes, measuring the cash generating ability of the operating business and measuring liquidity generally. Booz Allen presents these supplemental measures because it believes that these measures provide investors and securities analysts with important supplemental information with which to evaluate Booz Allen’s performance, long term earnings potential, or liquidity, as applicable, and to enable them to assess Booz Allen’s performance on the same basis as management. These supplemental performance measurements may vary from and may not be comparable to similarly titled measures by other companies in Booz Allen’s industry. Revenue, Excluding Billable Expenses, Adjusted Operating Income, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses, Adjusted Net Income, Adjusted Diluted EPS, and Free Cash Flow are not recognized measurements under GAAP and when analyzing Booz Allen’s performance or liquidity, as applicable, investors should (i) evaluate each adjustment in our reconciliation of revenue to Revenue, Excluding Billable Expenses, operating income to Adjusted Operating Income, net income to Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses, Adjusted Net Income, and Adjusted Diluted Earnings per Share, and net cash provided by operating activities to Free Cash Flow, (ii) use Revenue, Excluding Billable Expenses, Adjusted Operating Income, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses, Adjusted Net Income, and Adjusted Diluted EPS in addition to, and not as an alternative to revenue, operating income, net income or diluted EPS as measures of operating results, each as defined under GAAP, and (iii) use Free Cash Flow, in addition to, and not as an alternative to, net cash provided by operating activities as a measure of liquidity, each as defined under GAAP. Exhibit 4 includes a reconciliation of Revenue, Excluding Billable Expenses, Adjusted Operating Income, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses, Adjusted Net Income, Adjusted Diluted EPS, and Free Cash Flow to the most directly comparable financial measure calculated and presented in accordance with GAAP.
With respect to our expectations under “Financial Outlook” above, a reconciliation of Adjusted Diluted EPS guidance to the closest corresponding GAAP measure is not available without unreasonable efforts on a forward-looking basis due to our inability to predict our stock price, equity grants and dividend declarations during the course of fiscal 2019. Projecting future stock price, equity grants and dividends to be declared would be necessary to accurately calculate the difference between Adjusted Diluted EPS and GAAP EPS as a result of the effects of the two-class method and related possible dilution used in the calculation of EPS. Consequently, any attempt to disclose such reconciliation would imply a degree of precision that could be confusing or misleading to investors. We expect the variability of the above charges to have an unpredictable, and potentially significant, impact on our future GAAP financial results.
For the same reason, a reconciliation of Adjusted EBITDA Margin on Revenue guidance to the closest corresponding GAAP measure is not available without unreasonable efforts on a forward-looking basis due to our inability to predict specific quantifications of the amounts that would be required to reconcile such measures.
In addition, management may discuss its target for net debt leverage ratio from time to time. A reconciliation of net debt leverage ratio to the closest corresponding GAAP measure is not available without unreasonable efforts on a forward-looking basis due to our inability to predict specific quantifications of the amounts that would be required to reconcile such measures. Consequently, any attempt to disclose such reconciliation would imply a degree of precision that could be confusing or misleading to investors.
Forward Looking Statements
Certain statements contained in this press release and in related comments by our management include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include information concerning Booz Allen’s preliminary financial results, financial outlook and guidance, including forecasted revenue, Diluted EPS, and Adjusted Diluted EPS, future quarterly dividends, and future improvements in operating margins, as well as any other statement that does not directly relate to any historical or current fact. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “forecasts,” “expects,” “intends,” “plans,” “anticipates,” “projects,” “outlook,” “believes,” “estimates,” “predicts,” “potential,” “continue,” “preliminary,” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to have been correct.
These forward-looking statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
These risks and other factors include: efforts by Congress and other U.S. government bodies to reduce U.S. government spending and address budgetary constraints, including automatic sequestration required by the Budget Control Act of 2011 (as subsequently amended) and the U.S. deficit, as well as associated uncertainty around the timing, extent, nature, and effect of such efforts; delayed funding of our contracts due to uncertainty relating to funding of the U.S. government, and a possible failure of Congressional efforts to approve such funding and to craft a long-term agreement on the U.S. government’s ability to incur indebtedness in excess of its current limits, or changes in the pattern or timing of government funding and spending (including those resulting from or related to cuts associated with sequestration); any issue that compromises our relationships with the U.S. government or damages our professional reputation, including negative publicity concerning government contractors in general or us in particular; changes in U.S. government spending, including a continuation of efforts by the U.S. government to decrease spending for management support service contracts, and mission priorities that shift expenditures away from agencies or programs that we support; U.S. government shutdowns, including the partial government shutdown that ended on January 25, 2019, and any future shutdowns as a result of the failure of elected officials to fund the government beyond February 15, 2019; the size of our addressable markets and the amount of U.S. government spending on private contractors; failure to comply with numerous laws and regulations, including, but not limited to, the Federal Acquisition Regulation ("FAR"), the False Claims Act, the Defense Federal Acquisition Regulation Supplement and FAR Cost Accounting Standards and Cost Principles; our ability to compete effectively in the competitive bidding process and delays or losses of contract awards caused by competitors' protests of major contract awards received by us; the loss of General Services Administration Multiple Award schedule contracts, or GSA schedules, or our position as prime contractor on government-wide acquisition contract vehicles, or GWACs; changes in the mix of our contracts and our ability to accurately estimate or otherwise recover expenses, time, and resources for our contracts; continued efforts to change how the U.S. government reimburses compensation related costs and other expenses or otherwise limit such reimbursements and an increased risk of compensation being deemed unallowable or payments being withheld as a result of U.S. government audit, review, or investigation; our ability to realize the full value of and replenish our backlog, generate revenue under certain of our contracts and the timing of our receipt of revenue under contracts included in backlog; changes in estimates used in recognizing revenue; an inability to attract, train, or retain employees with the requisite skills and experience; an inability to timely hire, assimilate and effectively utilize our employees, ensure that employees obtain and maintain necessary security clearances and/or effectively manage our cost structure; the loss of members of senior management or failure to develop new leaders; misconduct or other improper activities from our employees or subcontractors, including the improper use or release of our clients' sensitive or classified information; increased insourcing by various U.S. government agencies due to changes in the definition of “inherently governmental” work, including proposals to limit contractor access to sensitive or classified information and work assignments; increased competition from other companies in our industry; failure to maintain strong relationships with other contractors or the failure of contractors with which we have entered into a sub- or prime- contractor relationship to meet their obligations to us or our clients; inherent uncertainties and potential adverse developments in legal or regulatory proceedings, including litigation, audits, reviews, and investigations, which may result in materially adverse judgments, settlements, withheld payments, penalties, or other unfavorable outcomes including debarment, as well as disputes over the availability of insurance or indemnification; internal system or service failures and security breaches, including, but not limited to, those resulting from external cyber attacks on our network and internal systems; risks related to changes to our operating structure, capabilities, or strategy intended to address client needs, grow our business or respond to market developments; risks associated with increased
competition, new relationships, clients, capabilities, and service offerings in our U.S. and international businesses; failure to comply with special U.S. government laws and regulations relating to our international operations; risks related to our indebtedness and credit facilities which contain financial and operating covenants; the adoption by the U.S. government of new laws, rules, and regulations, such as those relating to organizational conflicts of interest issues or limits; risks related to completed and future acquisitions, including our ability to realize the expected benefits from such acquisitions; an inability to anticipate or estimate the tax implications of changes in tax law or utilize existing or future tax benefits; variable purchasing patterns under U.S. government GSA schedules, blanket purchase agreements and indefinite delivery, indefinite quantity, or IDIQ, contracts; and the impact of changes in accounting rules and regulations, or interpretations thereof, that may affect the way we recognize and report our financial results, including changes in accounting rules governing recognition of revenue. Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K, filed with the SEC on May 29, 2018.
All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made and, 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.
Exhibit 1
Booz Allen Hamilton Holding Corporation
Condensed Consolidated Statements of Operations
Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||
(Amounts in thousands, except per share data) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Revenue | $ | 1,663,112 | $ | 1,470,709 | $ | 4,923,957 | $ | 4,536,524 | ||||||||
Operating costs and expenses: | ||||||||||||||||
Cost of revenue | 750,680 | 678,574 | 2,285,062 | 2,111,058 | ||||||||||||
Billable expenses | 510,047 | 443,015 | 1,465,831 | 1,378,235 | ||||||||||||
General and administrative expenses | 222,673 | 203,946 | 655,410 | 611,008 | ||||||||||||
Depreciation and amortization | 17,780 | 16,701 | 50,359 | 48,196 | ||||||||||||
Total operating costs and expenses | 1,501,180 | 1,342,236 | 4,456,662 | 4,148,497 | ||||||||||||
Operating income | 161,932 | 128,473 | 467,295 | 388,027 | ||||||||||||
Interest expense | (22,036 | ) | (20,604 | ) | (67,357 | ) | (60,309 | ) | ||||||||
Other income (expense), net | 373 | (1,370 | ) | (2,415 | ) | (3,849 | ) | |||||||||
Income before income taxes | 140,269 | 106,499 | 397,523 | 323,869 | ||||||||||||
Income tax expense | 8,232 | 31,572 | 68,569 | 104,683 | ||||||||||||
Net income | $ | 132,037 | $ | 74,927 | $ | 328,954 | $ | 219,186 | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.92 | $ | 0.51 | $ | 2.29 | $ | 1.48 | ||||||||
Diluted | $ | 0.92 | $ | 0.51 | $ | 2.27 | $ | 1.46 | ||||||||
Exhibit 2
Booz Allen Hamilton Holding Corporation
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share and per share data) | December 31, 2018 | March 31, 2018 | |||||
(Unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 211,859 | $ | 286,958 | |||
Accounts receivable, net of allowance | 1,322,097 | 1,133,705 | |||||
Prepaid expenses and other current assets | 127,910 | 71,309 | |||||
Total current assets | 1,661,866 | 1,491,972 | |||||
Property and equipment, net of accumulated depreciation | 153,720 | 152,364 | |||||
Intangible assets, net of accumulated amortization | 287,490 | 278,504 | |||||
Goodwill | 1,581,160 | 1,581,146 | |||||
Other long-term assets | 113,741 | 102,633 | |||||
Total assets | $ | 3,797,977 | $ | 3,606,619 | |||
Liabilities and stockholders' equity | |||||||
Current liabilities: | |||||||
Current portion of long-term debt | $ | 57,924 | $ | 63,100 | |||
Accounts payable and other accrued expenses | 615,618 | 557,559 | |||||
Accrued compensation and benefits | 297,785 | 282,750 | |||||
Other current liabilities | 133,096 | 125,358 | |||||
Total current liabilities | 1,104,423 | 1,028,767 | |||||
Long-term debt, net of current portion | 1,715,367 | 1,755,479 | |||||
Other long-term liabilities | 302,932 | 259,882 | |||||
Total liabilities | 3,122,722 | 3,044,128 | |||||
Stockholders’ equity: | |||||||
Common stock, Class A — $0.01 par value — authorized, 600,000,000 shares; issued, 159,273,352 shares at December 31, 2018 and 158,028,673 shares at March 31, 2018; outstanding, 140,971,874 shares at December 31, 2018 and 143,446,539 shares at March 31, 2018 | 1,593 | 1,580 | |||||
Treasury stock, at cost — 18,301,478 shares at December 31, 2018 and 14,582,134 shares at March 31, 2018 | (633,724 | ) | (461,457 | ) | |||
Additional paid-in capital | 387,651 | 346,958 | |||||
Retained earnings | 937,663 | 690,516 | |||||
Accumulated other comprehensive loss | (17,928 | ) | (15,106 | ) | |||
Total stockholders’ equity | 675,255 | 562,491 | |||||
Total liabilities and stockholders’ equity | $ | 3,797,977 | $ | 3,606,619 | |||
Exhibit 3
Booz Allen Hamilton Holding Corporation
Condensed Consolidated Statements of Cash Flows
Nine Months Ended December 31, | |||||||
(Amounts in thousands) | 2018 | 2017 | |||||
(Unaudited) | |||||||
Cash flows from operating activities | |||||||
Net income | $ | 328,954 | $ | 219,186 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 50,359 | 48,196 | |||||
Stock-based compensation expense | 23,231 | 16,797 | |||||
Excess tax benefits from stock-based compensation | (6,829 | ) | (10,250 | ) | |||
Amortization of debt issuance costs and loss on extinguishment | 8,150 | 4,003 | |||||
Losses on dispositions | 408 | — | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable | (188,392 | ) | (46,370 | ) | |||
Prepaid expenses and other current assets | (51,264 | ) | 7,310 | ||||
Other long-term assets | 34,796 | (4,108 | ) | ||||
Accrued compensation and benefits | 22,670 | 12,016 | |||||
Accounts payable and other accrued expenses | 62,740 | (18,435 | ) | ||||
Accrued interest | (2,666 | ) | 4,130 | ||||
Other current liabilities | 6,146 | (8,744 | ) | ||||
Other long-term liabilities | (5,100 | ) | 23,189 | ||||
Net cash provided by operating activities | 283,203 | 246,920 | |||||
Cash flows from investing activities | |||||||
Purchases of property, equipment, and software | (58,076 | ) | (63,067 | ) | |||
Payments for business acquisitions, net of cash acquired | (20 | ) | (19,113 | ) | |||
Insurance proceeds received for damage to equipment | — | 810 | |||||
Net cash used in investing activities | (58,096 | ) | (81,370 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from issuance of common stock | 8,104 | 6,322 | |||||
Stock option exercises | 9,371 | 9,925 | |||||
Repurchases of common stock | (181,413 | ) | (199,010 | ) | |||
Cash dividends paid | (81,808 | ) | (75,748 | ) | |||
Dividend equivalents paid to option holders | (267 | ) | (890 | ) | |||
Repayment of debt | (116,031 | ) | (262,363 | ) | |||
Proceeds from debt issuance | 62,072 | 428,292 | |||||
Payment on contingent liabilities from acquisition | (234 | ) | — | ||||
Net cash used in financing activities | (300,206 | ) | (93,472 | ) | |||
Net (decrease) increase in cash and cash equivalents | (75,099 | ) | 72,078 | ||||
Cash and cash equivalents — beginning of period | 286,958 | 217,417 | |||||
Cash and cash equivalents — end of period | $ | 211,859 | $ | 289,495 | |||
Supplemental disclosures of cash flow information | |||||||
Cash paid during the period for: | |||||||
Interest | $ | 62,067 | $ | 48,044 | |||
Income taxes | $ | 77,475 | $ | 114,782 | |||
Supplemental disclosures of non-cash investing and financing activities | |||||||
Noncash financing activities | $ | 3,033 | $ | — | |||
Exhibit 4
Booz Allen Hamilton Holding Corporation
Non-GAAP Financial Information
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||
(In thousands, except share and per share data) | 2018 | 2017 | 2018 | 2017 | |||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
Revenue, Excluding Billable Expenses | |||||||||||||||
Revenue | $ | 1,663,112 | $ | 1,470,709 | $ | 4,923,957 | $ | 4,536,524 | |||||||
Billable expenses | 510,047 | 443,015 | 1,465,831 | 1,378,235 | |||||||||||
Revenue, Excluding Billable Expenses | $ | 1,153,065 | $ | 1,027,694 | $ | 3,458,126 | $ | 3,158,289 | |||||||
Adjusted Operating Income | |||||||||||||||
Operating Income | $ | 161,932 | $ | 128,473 | $ | 467,295 | $ | 388,027 | |||||||
Transaction expenses (a) | — | — | 3,660 | — | |||||||||||
Adjusted Operating Income | $ | 161,932 | $ | 128,473 | $ | 470,955 | $ | 388,027 | |||||||
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue & Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses | |||||||||||||||
Net income | $ | 132,037 | $ | 74,927 | $ | 328,954 | $ | 219,186 | |||||||
Income tax expense | 8,232 | 31,572 | 68,569 | 104,683 | |||||||||||
Interest and other, net (b) | 21,663 | 21,974 | 69,772 | 64,158 | |||||||||||
Depreciation and amortization | 17,780 | 16,701 | 50,359 | 48,196 | |||||||||||
EBITDA | 179,712 | 145,174 | 517,654 | 436,223 | |||||||||||
Transaction expenses (a) | — | — | 3,660 | — | |||||||||||
Adjusted EBITDA | $ | 179,712 | $ | 145,174 | $ | 521,314 | $ | 436,223 | |||||||
Adjusted EBITDA Margin on Revenue | 10.8 | % | 9.9 | % | 10.6 | % | 9.6 | % | |||||||
Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses | 15.6 | % | 14.1 | % | 15.1 | % | 13.8 | % | |||||||
Adjusted Net Income | |||||||||||||||
Net income | $ | 132,037 | $ | 74,927 | $ | 328,954 | $ | 219,186 | |||||||
Transaction expenses (a) | — | — | 3,660 | — | |||||||||||
Release of income tax reserves (c) | (462 | ) | — | (462 | ) | — | |||||||||
Re-measurement of deferred tax assets/liabilities (d) | (28,972 | ) | — | (27,908 | ) | — | |||||||||
Amortization or write-off of debt issuance costs and write-off of original issue discount | 533 | 672 | 2,401 | 1,993 | |||||||||||
Adjustments for tax effect (e) | (139 | ) | (199 | ) | (1,576 | ) | (727 | ) | |||||||
Adjusted Net Income | $ | 102,997 | $ | 75,400 | $ | 305,069 | $ | 220,452 | |||||||
Adjusted Diluted Earnings Per Share | |||||||||||||||
Weighted-average number of diluted shares outstanding | 143,056,900 | 146,570,617 | 143,832,886 | 148,447,248 | |||||||||||
Adjusted Net Income Per Diluted Share (f) | $ | 0.72 | $ | 0.51 | $ | 2.12 | $ | 1.49 | |||||||
Free Cash Flow | |||||||||||||||
Net cash provided by operating activities | $ | 8,636 | $ | 68,858 | $ | 283,203 | $ | 246,920 | |||||||
Less: Purchases of property and equipment | (18,404 | ) | (26,078 | ) | (58,076 | ) | (63,067 | ) | |||||||
Free Cash Flow | $ | (9,768 | ) | $ | 42,780 | $ | 225,127 | $ | 183,853 | ||||||
(a) | Reflects debt refinancing costs incurred in connection with the refinancing transaction consummated on July 23, 2018. |
(b) | Reflects the combination of Interest expense and Other income (expense), net from the condensed consolidated statement of operations. |
(c) | Release of pre-acquisition income tax reserves assumed by the Company in connection with the Carlyle Acquisition. |
(d) | Reflects primarily the adjustment made to the provisional income tax benefit associated with the re-measurement of the Company’s deferred tax assets and liabilities as a result of the 2017 Tax Act. |
(e) | Fiscal 2018 reflects the tax effect of adjustments at an assumed effective tax rate of 40%. For fiscal 2019 with the enactment of the 2017 Tax Act, adjustments are reflected using an assumed effective tax rate of 26%, which approximates a blended federal and state tax rate for fiscal 2019, and consistently excludes the impact of other tax credits and incentive benefits realized. |
(f) | Excludes an adjustment of approximately $0.8 million and $2.1 million of net earnings for the three and nine months ended December 31, 2018, respectively, and excludes an adjustment of approximately $0.7 million and $1.9 million of net earnings for the three and nine months ended December 31, 2017, respectively, associated with the application of the two-class method for computing diluted earnings per share. |
Exhibit 5
Booz Allen Hamilton Holding Corporation
Operating Data
As of December 31, | |||||||
(Amounts in millions) | 2018 | 2017 | |||||
Backlog | |||||||
Funded | $ | 3,545 | $ | 2,893 | |||
Unfunded | 4,501 | 4,220 | |||||
Priced Options | 12,408 | 9,558 | |||||
Total Backlog | $ | 20,454 | $ | 16,671 | |||
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||
2018 | 2017 | 2018 | 2017 | ||||
Book-to-Bill * | 0.45 | 0.99 | 1.90 | 1.68 | |||
* | Book-to-bill is calculated as the change in total backlog during the relevant fiscal period plus the relevant fiscal period revenue, all divided by the relevant fiscal period revenue. |
As of December 31, | |||
2018 | 2017 | ||
Headcount | |||
Total Headcount | 25,803 | 24,747 | |
Consulting Staff Headcount | 23,142 | 22,261 | |
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||
2018 | 2017 | 2018 | 2017 | ||||
Percentage of Total Revenue by Contract Type | |||||||
Cost-Reimbursable | 54% | 50% | 53% | 51% | |||
Time-and-Materials | 23% | 26% | 24% | 25% | |||
Fixed-Price | 23% | 24% | 23% | 24% | |||
Three Months Ended December 31, | |||
2018 | 2017 | ||
Days Sales Outstanding ** | 76 | 70 | |
** | Calculated as total accounts receivable divided by revenue per day during the relevant fiscal quarter. |
EARNINGS CALL PRESENTATION Fiscal Year 2019, Third Quarter February 1, 2019
CALL HORACIO ROZANSKI PARTICIPANTS PRESIDENT AND CHIEF EXECUTIVE OFFICER LLOYD HOWELL CHIEF FINANCIAL OFFICER AND TREASURER NICHOLAS VEASEY DIRECTOR INVESTOR RELATIONS 1
DISCLAIMER Forward Looking Safe Harbor Statement Certain statements contained in this presentation and in related comments by our management include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include information concerning Booz Allen’s preliminary financial results, financial outlook and guidance, including forecasted revenue, Diluted EPS, Adjusted Diluted EPS, free cash flow, future quarterly dividends, and future improvements in operating margins, as well as any other statement that does not directly relate to any historical or current fact. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “forecasts,” “expects,” “intends,” “plans,” “anticipates,” “projects,” “outlook,” “believes,” “estimates,” “predicts,” “potential,” “continue,” “preliminary,” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to have been correct. These forward-looking statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward- looking statements. A number of important factors could cause actual results to differ materially from those contained in or implied by these forward-looking statements, including those factors discussed in our filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the fiscal year ended March 31, 2018, which can be found at the SEC’s website at www.sec.gov. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made and, 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. Note Regarding Non-GAAP Financial Data Information Booz Allen discloses in the following information Revenue, Excluding Billable Expenses, Adjusted Operating Income, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses, Adjusted Net Income, Adjusted Diluted EPS, and Free Cash Flow which are not recognized measurements under GAAP, and when analyzing Booz Allen’s performance or liquidity as applicable, investors should (i) evaluate each adjustment in our reconciliation of revenue to Revenue, Excluding Billable Expenses, operating income to Adjusted Operating Income, net income to Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses, Adjusted Net Income and Adjusted Diluted Earnings Per Share, and net cash provided by operating activities to Free Cash Flow, and the explanatory footnotes regarding those adjustments, each as defined under GAAP, (ii) use Revenue, Excluding Billable Expenses, Adjusted Operating Income, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue Excluding Billable Expenses, Adjusted Net Income, and Adjusted Diluted EPS in addition to, and not as an alternative to revenue, operating income, net income or diluted EPS as measures of operating results, and (iii) use Free Cash Flow in addition to and not as an alternative to net cash provided by operating activities as a measure of liquidity, each as defined under GAAP. The Financial Appendix includes a reconciliation of Revenue, Excluding Billable Expenses, Adjusted Operating Income, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses, Adjusted Net Income, Adjusted Diluted EPS, and Free Cash Flow to the most directly comparable financial measure calculated and presented in accordance with GAAP. Booz Allen presents these supplemental performance measures because it believes that these measures provide investors and securities analysts with important supplemental information with which to evaluate Booz Allen’s performance, long term earnings potential, or liquidity, as applicable and to enable them to assess Booz Allen’s performance on the same basis as management. These supplemental performance and liquidity measurements may vary from and may not be comparable to similarly titled measures by other companies in Booz Allen’s industry. With respect to our expectations under “Fiscal 2019 Full Year Outlook,” reconciliation of Adjusted Diluted EPS guidance to the closest corresponding GAAP measure is not available without unreasonable efforts on a forward-looking basis due to our inability to predict our stock price, equity grants and dividend declarations during the course of fiscal 2019. Projecting future stock price, equity grants and dividends to be declared would be necessary to accurately calculate the difference between Adjusted Diluted EPS and GAAP EPS as a result of the effects of the two-class method and related possible dilution used in the calculation of EPS. Consequently, any attempt to disclose such reconciliation would imply a degree of precision that could be confusing or misleading to investors. We expect the variability of the above charges to have an unpredictable, and potentially significant, impact on our future GAAP financial results. For the same reason, a reconciliation of Adjusted EBITDA Margin on Revenue guidance to the closest corresponding GAAP measure is not available without unreasonable efforts on a forward-looking basis due to our inability to predict specific quantifications of the amounts that would be required to reconcile such measures. All financial information for the full fiscal years ended March 31, 2017 and March 31, 2018 and the fourth quarter of fiscal year 2018 ended March 31, 2018 presented herein is as previously reported in our Annual Report on Form 10-K for the fiscal year ended March 31, 2018. Booz Allen is not required to retroactively recast any such financial information for the effects of ASC 606 and ASU 2017-07 until its Annual Report on Form 10-K for the fiscal year ended March 31, 2019. As such, the financial information presented herein for full fiscal years ended March 31, 2017 and March 31, 2018 and the fourth quarter of fiscal year 2018 ended March 31, 2018 does not reflect any impact of ASC 606 and ASU 2017-07. Unless otherwise specified, all references to "record" results are with respect to the period since Booz Allen's initial public offering. 2
KEY FINANCIAL RESULTS THIRD QUARTER FISCAL YEAR 2019 PRELIMINARY RESULTS THIRD QUARTER (1) YEAR TO DATE (12/31/18) (1) Revenue $1.7 billion 13.1% Increase $4.9 billion 8.5% Increase Revenue, Excluding Billable Expenses $1.2 billion 12.2% Increase $3.5 billion 9.5% Increase Adjusted EBITDA $180 million 23.8% Increase $521 million 19.5% Increase Adjusted EBITDA Margin on Revenue 10.8% 9.5% Increase 10.6% 10.1% Increase Net Income $132 million 76.2% Increase $329 million 50.1% Increase Adjusted Net Income $103 million 36.6% Increase $305 million 38.4% Increase Diluted EPS $0.92 80.4% Increase $2.27 55.5% Increase Adjusted Diluted EPS $0.72 41.2% Increase $2.12 42.3% Increase Net Cash Provided by Operating $9 million (87.5)% Decrease $283 million 14.7% Increase Activities 1) Comparisons are to prior fiscal year periods 3
Q3 FY19 Performance: Aligned with Investment Thesis Investment Thesis Unique Market Position Strong Financial Returns Option Value 50% ADEPS Growth + Investments in innovation, talent, and ~2% Dividend Yield Continued investment in new capabilities position us to help clients adopt current and new technologies = 6 - 9% Annual Revenue Growth + business lines and solutions First mover advantage enhanced by our 10 - 30 bps Margin Expansion that will drive future growth ability to combine mission knowledge, consulting heritage and technical depth ~$1.4B in Capital Deployment Creating value for critical missions and top priorities • Growth in revenue ex-billables driving earnings growth – 12% growth year-over-year Industry Leading Growth • Expanding talent base plus near-record total backlog to catalyze strong future growth • Strong margin performance ahead of expectation for 2019; Adj. EBITDA Margin on Revenue of 10.8% Margin Expansion Supports • Strong contract performance was the primary contributor to margin strength Increase in Guidance Range • Guidance of Adj. EBITDA Margin on Revenue now a range of 10% to 10.5%, an increase from approximately 10% previously • $83 million in share repurchases; $172 million through December 31, 2018 Prudent Capital Deployment • $27 million in quarterly dividends; $82 million through December 31, 2018 • Increasing quarterly dividend by $0.04 per share (vs. prior increases of $0.02 per share) 4
HISTORICAL BACKLOG & BOOK-TO-BILL Backlog (1) $25 $21.4 $20.5$20.4 $20 $12.4 $17.0 $12.4 $16.7 $16.7 $16.1 s n $13.6 $13.5 $13.6 $14.0 $9.2 $9.6 $10.1 o $15 $9.2 i l $11.8 $12.0 l $8.3 i $7.0 $7.5 $7.7 b $10 $6.6 $6.5 n i $4.8 $3.9 $4.5 $5 $3.3 $4.2 $4.2 $4.1 $2.5 $2.9 $3.2 $3.1 $3.2 $3.6 $4.2 $3.5 $2.7 $2.6 $3.3 $2.8 $2.8 $2.9 $2.7 $2.8 $0 $2.5 Q4'16 (2) Q1'17 (2) Q2'17 (2) Q3'17 (2) Q4'17 (2) Q1'18 (3) Q2'18 (3) Q3'18 (3) Q4'18 (2) Q1'19 (4) Q2'19(4) Q3'19 (4) Funded Unfunded Priced Options Book-to-Bill Trends 4.0x 3.66x 3.0x 2.7x 2.17x 2.0x 1.64x 1.31x 1.14x 1.04x 0.82x 0.92x 0.99x 1.0x 0.6x 0.45x 0.0x Q4'16 (2) Q1'17 (2) Q2'17 (2) Q3'17 (2) Q4'17 (2) Q1'18 (3) Q2'18 (3) Q3'18 (3) Q4'18 (2) Q1'19 (4) Q2'19 (4) Q3'19 (4) Quarterly Book-to-Bill LTM Book-to-Bill 1) For more information on the components of backlog, and the differences between backlog 2) Revenue as reported under ASC 605 and remaining performance obligations, please see the Company's Form 10-Q for the fiscal 3) Revenue as adjusted from previously reported to reflect ASC 606 and ASU 2017-07 quarter ending 12/31/18 4) Revenue as reported, reflecting ASC 606 and ASU 2017-07 5
CAPITAL ALLOCATION DELIVERING STRONG CAPITAL RETURNS THROUGH EFFICIENT CAPITAL DEPLOYMENT STRATEGY • Increasing our quarterly dividend by $0.04 per share (vs. prior increases of $0.02 per share) • Investor day yield target a priority, as is continuing our track record of quarterly dividend growth • Our FY19 and multi-year capital deployment plans remain on track, subject to market conditions • Aim to deploy $350 million this fiscal year • Aim to deploy $1.4 billion over the next three fiscal years • We returned $110 million to shareholders in dividends and share repurchases during the quarter, equating to ~$254 million year to date and ~$362 million over the last twelve months • Approximately $330 million of share repurchase authorization remained as of December 31, 2018 Quarterly Capital Deployment ($ in Millions) LTM Capital Deployment ($ in Millions) $373.0 $384.5 $340.1 $362.1 $110.1 $269.6 $279.1 $307.3 $108.2 $238.7 $252.6 $80.5 $83.0 $200.1 $75.5 $68.3 $55.4 $48.1 $41.1 $30.5 $103.4 $24.9 $27.7 $27.4 $27.2 $27.1 $101.4 $105.4 $107.2 $109.5 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Quarterly Dividends Share Repurchases Quarterly Dividends Share Repurchases 6
FINANCIAL OUTLOOK - FULL YEAR FY19 GUIDANCE INCREASING MARGIN AND ADEPS GUIDANCE Current Prior (Q2 Announcement) Revenue Growth 7.0 - 8.0% 6.0 - 8.0% Adjusted EBITDA Margin on Revenue 10.0% - 10.5% ~10% Adjusted Diluted EPS (1) $2.65 - $2.75 $2.55 - $2.65 Net Cash Provided by Operating Activities $360 - $500 million $460 - $500 million Assumptions for ADEPS Guidance Tax Rate 24 - 26% 24 - 26% Share Count 141 - 144 million 141 - 144 million 1) Adjusted Diluted EPS guidance is based on fiscal 2019 estimated average diluted shares outstanding in the range of 141 million to 144 million shares and assumes an effective tax rate in the range of 24 - 26%, which excludes any re-measurements of our deferred taxes related to the 2017 tax law, including the approved tax accounting method change in 7 October 2018
APPENDIX 8
NON-GAAP FINANCIAL INFORMATION • "Revenue, Excluding Billable Expenses" represents revenue less billable expenses. We use Revenue, Excluding Billable Expenses because it provides management useful information about the Company's operating performance by excluding the impact of costs that are not indicative of the level of productivity of our consulting staff headcount and our overall direct labor, which management believes provides useful information to our investors about our core operations. • "Adjusted Operating Income" represents operating income before: (i) adjustments related to the amortization of intangible assets resulting from the acquisition of our Company by The Carlyle Group (the “Carlyle Acquisition”), and (ii) transaction costs, fees, losses, and expenses, including fees associated with debt prepayments. We prepare Adjusted Operating Income to eliminate the impact of items we do not consider indicative of ongoing operating performance due to their inherent unusual, extraordinary, or non-recurring nature or because they result from an event of a similar nature. • "Adjusted EBITDA" represents net income before income taxes, net interest and other expense and depreciation and amortization and before certain other items, including transaction costs, fees, losses, and expenses, including fees associated with debt prepayments. “Adjusted EBITDA Margin on Revenue” is calculated as Adjusted EBITDA divided by revenue. Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses is calculated as Adjusted EBITDA divided by Revenue, Excluding Billable Expenses. The Company prepares Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, and Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses to eliminate the impact of items it does not consider indicative of ongoing operating performance due to their inherent unusual, extraordinary or non-recurring nature or because they result from an event of a similar nature. • "Adjusted Net Income" represents net income before: (i) adjustments related to the amortization of intangible assets resulting from the Carlyle Acquisition, (ii) transaction costs, fees, losses, and expenses, including fees associated with debt prepayments, (iii) amortization or write-off of debt issuance costs and write-off of original issue discount, (iv) release of income tax reserves, and (v) re-measurement of deferred tax assets and liabilities as a result of the 2017 Tax Act in each case net of the tax effect where appropriate calculated using an assumed effective tax rate. We prepare Adjusted Net Income to eliminate the impact of items, net of tax, we do not consider indicative of ongoing operating performance due to their inherent unusual, extraordinary, or non-recurring nature or because they result from an event of a similar nature. We view net income excluding the impact of the re-measurement of the Company's deferred tax assets and liabilities as a result of the 2017 Tax Act as an important indicator of performance consistent with the manner in which management measures and forecasts the Company's performance and the way in which management is incentivized to perform. • "Adjusted Diluted EPS" represents diluted EPS calculated using Adjusted Net Income as opposed to net income. Additionally, Adjusted Diluted EPS does not contemplate any adjustments to net income as required under the two-class method as disclosed in the footnotes to the consolidated financial statements. • "Free Cash Flow" represents the net cash generated from operating activities less the impact of purchases of property and equipment. 9
NON-GAAP FINANCIAL INFORMATION Three Months Ended Nine Months Ended December 31, December 31, (In thousands, except share and per share data) 2018 2017 2018 2017 (a) Reflects debt refinancing costs incurred in (Unaudited) (Unaudited) connection with the refinancing transaction Revenue, Excluding Billable Expenses consummated on July 23, 2018. Revenue $ 1,663,112 $ 1,470,709 $ 4,923,957 $ 4,536,524 Billable expenses 510,047 443,015 1,465,831 1,378,235 (b) Reflects the combination of Interest expense Revenue, Excluding Billable Expenses $ 1,153,065 $ 1,027,694 $ 3,458,126 $ 3,158,289 and Other income (expense), net from the Adjusted Operating Income condensed consolidated statement of operations. Operating Income $ 161,932 $ 128,473 $ 467,295 $ 388,027 (c) Release of pre-acquisition income tax reserves Transaction expenses (a) — — 3,660 — assumed by the Company in connection with the Adjusted Operating Income $ 161,932 $ 128,473 $ 470,955 $ 388,027 Carlyle Acquisition. EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue & Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses (d) Reflects primarily the adjustment made to the Net income $ 132,037 $ 74,927 $ 328,954 $ 219,186 provisional income tax benefit associated with the Income tax expense 8,232 31,572 68,569 104,683 re-measurement of the Company’s deferred tax Interest and other, net (b) 21,663 21,974 69,772 64,158 assets and liabilities as a result of the 2017 Tax Depreciation and amortization 17,780 16,701 50,359 48,196 Act. EBITDA 179,712 145,174 517,654 436,223 (e) Fiscal 2018 reflects the tax effect of Transaction expenses (a) — — 3,660 — adjustments at an assumed effective tax rate of Adjusted EBITDA $ 179,712 $ 145,174 $ 521,314 $ 436,223 40%. For fiscal 2019 with the enactment of the Adjusted EBITDA Margin on Revenue 10.8% 9.9% 10.6% 9.6% 2017 Tax Act, adjustments are reflected using an Adjusted EBITDA Margin on Revenue, Excluding Billable assumed effective tax rate of 26%, which 15.6% 14.1% 15.1% 13.8% Expenses approximates a blended federal and state tax rate Adjusted Net Income for fiscal 2019, and consistently excludes the Net income $ 132,037 $ 74,927 $ 328,954 $ 219,186 impact of other tax credits and incentive benefits Transaction expenses (a) — — 3,660 — realized. Release of income tax reserves (c) (462) — (462) — (f) Excludes an adjustment of approximately $0.8 Re-measurement of deferred tax assets/liabilities (d) (28,972) — (27,908) — million and $2.1 million of net earnings for the Amortization or write-off of debt issuance costs and write-off of three and nine months ended December 31, 2018, 533 672 2,401 1,993 original issue discount respectively, and excludes an adjustment of Adjustments for tax effect (e) (139) (199) (1,576) (727) approximately $0.7 million and $1.9 million of net Adjusted Net Income $ 102,997 $ 75,400 $ 305,069 $ 220,452 earnings for the three and nine months ended Adjusted Diluted Earnings Per Share December 31, 2017, respectively, associated with Weighted-average number of diluted shares outstanding 143,056,900 146,570,617 143,832,886 148,447,248 the application of the two-class method for Adjusted Net Income Per Diluted Share (f) $ 0.72 $ 0.51 $ 2.12 $ 1.49 computing diluted earnings per share. Free Cash Flow Net cash provided by operating activities $ 8,636 $ 68,858 $ 283,203 $ 246,920 Less: Purchases of property and equipment (18,404) (26,078) (58,076) (63,067) Free Cash Flow $ (9,768) $ 42,780 $ 225,127 $ 183,853 10
FINANCIAL RESULTS – KEY DRIVERS Third Quarter Fiscal 2019 – Below is a summary of the key factors driving results for the fiscal 2019 third quarter ended December 31, 2018 as compared to the prior year: • Revenue increased by 13.1% to $1.7 billion driven primarily by continued strength in client demand, which led to a total headcount increase of more than 1,000 and an increase in direct client staff labor, as well as improved contract performance. • Revenue, Excluding Billable Expenses increased 12.2% to $1.2 billion due to increased client demand which led to increased client staff headcount, an increase in direct client staff labor, and improved contract performance. • Operating Income and Adjusted Operating Income both increased 26.0% to $161.9 million. Increases in both were primarily driven by the same factors driving revenue growth, as well as improved contract performance. The Company also benefited from an $11.2 million reduction in expense as a result of an amendment and re-valuation of its long term disability plan liability • Net income increased 76.2% to $132.0 million and Adjusted Net Income increased 36.6% to $103.0 million. These increases were primarily driven by the same factors as Operating Income and Adjusted Operating Income. Net income and Adjusted Net Income also benefited from the Company’s recognition of an income tax benefit driven by the lower federal corporate tax rate of approximately $20.6 million, which is $10.0 million higher than the benefit recognized in the prior year period. Additionally, Net income benefited from an additional income tax benefit of approximately $29.0 million related to the re-measurement of the Company's deferred tax assets and liabilities related to the tax method change for unbilled receivables approved by the Internal Revenue Service in the third quarter of fiscal 2019. • EBITDA increased 23.8% to $179.7 million and Adjusted EBITDA increased 23.8% to $179.7 million. These increases were due to the same factors as Operating Income and Adjusted Operating Income. • Diluted EPS increased to $0.92 from $0.51 and Adjusted Diluted EPS increased to $0.72 from $0.51. The increases were primarily driven by the same factors as Net Income and Adjusted Net Income, as well as a lower share count in the third quarter of fiscal 2019. • As of December 31, 2018, total backlog was $20.5 billion, an increase of 22.7% . Funded backlog was $3.5 billion, an increase of 22.5%. 11
FINANCIAL RESULTS – KEY DRIVERS Nine Months Ended December 31, 2018 – Booz Allen's cumulative performance for the first three quarters of fiscal 2019 has resulted in: • Net cash proved by operating activities was $283.2 million as of December 31, 2018 as compared to $246.9 million in the prior year period. Delays in the billing and collection of our revenue growth, including administrative delays in client processing, resulted in decreases to operating cash. However, increased efficiencies related to working capital during the year partially offset those decreases in operating cash, resulting in an overall improvement in operating cash over the prior year period. Free Cash Flow was $225.1 million as of December 31, 2018 as compared to $183.9 million as of December 31, 2017. Free Cash Flow was affected by the same factors affecting cash provided by operating activities as well as a decrease in capital expenditures year over year related to infrastructure investments. 12