SEC Filing | Booz Allen Hamilton

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bah-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________

FORM 10-Q

___________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-34972

___________________________________

Booz Allen Hamilton Holding Corporation

(Exact name of registrant as specified in its charter)

___________________________________

Delaware

26-2634160

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

8283 Greensboro Drive,

McLean,

Virginia

22102

(Address of principal executive offices)

(Zip Code)

(703) 902-5000

Registrant’s telephone number, including area code

(Former name, former address, and former fiscal year if changed since last report.)

___________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Class A Common Stock	BAH	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-Accelerated Filer

Smaller Reporting Company

☐

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. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


			Shares Outstanding as of October 26, 2021
Class A Common Stock			133,896,656

TABLE OF CONTENTS


		Page
PART I. Financial Information		1
ITEM 1	Financial Statements	1
ITEM 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	43
ITEM 4	Controls and Procedures	43
PART II. Other Information		44
ITEM 1	Legal Proceedings	44
ITEM 1A	Risk Factors	45
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	46
ITEM 3	Defaults Upon Senior Securities	46
ITEM 4	Mine Safety Disclosures	47
ITEM 5	Other Information	47
ITEM 6	Exhibits	48

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INDEX TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


			Page
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Operations			2
Condensed Consolidated Statements of Comprehensive Income			3
Condensed Consolidated Statements of Cash Flows			4
Condensed Consolidated Statement of Stockholders' Equity			5
Notes to Unaudited Condensed Consolidated Financial Statements
1. Business Overview			7
2. Basis of Presentation			7
3. Revenue			7
4. Earnings Per Share			10
5. Acquisition, Goodwill and Intangible Assets			12

6. Accounts Payable and Other Accrued Expenses			14
7. Accrued Compensation and Benefits			15
8. Debt			15
9. Derivatives			17
10. Income Taxes			18
11. Other Long Term Liabilities			19
12. Employee Benefit Plans			19
13. Accumulated Other Comprehensive Loss			20
14. Stock Based Compensation			20
15. Fair Value Measurements			21
16. Related Party Transactions			23
17. Commitments and Contingencies			23

Table of Contents

BOOZ ALLEN HAMILTON HOLDING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)


	September 30, 2021		March 31, 2021

	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	788,697	$	990,955
Accounts receivable, net	1,511,579		1,411,894
Prepaid expenses and other current assets	119,633		233,323
Total current assets	2,419,909		2,636,172
Property and equipment, net of accumulated depreciation	195,214		204,642
Operating lease right-of-use assets	234,150		239,374
Intangible assets, net of accumulated amortization	682,280		307,128
Goodwill	2,022,830		1,581,160
Other long-term assets	471,409		531,125
Total assets	$	6,025,792	$	5,499,601
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	68,379	$	77,865
Accounts payable and other accrued expenses	858,805		666,971
Accrued compensation and benefits	384,694		425,615
Operating lease liabilities	55,258		54,956
Other current liabilities	70,148		65,698
Total current liabilities	1,437,284		1,291,105
Long-term debt, net of current portion	2,764,083		2,278,731
Operating lease liabilities, net of current portion	254,103		263,144
Deferred tax liabilities	282,344		364,461
Other long-term liabilities	239,880		230,984
Total liabilities	4,977,694		4,428,425
Commitments and contingencies (Note 17)
Stockholders’ equity:
Common stock, Class A — $0.01 par value — authorized, 600,000,000 shares; issued, 163,627,651 shares at September 30, 2021 and 162,950,606 shares at March 31, 2021; outstanding, 134,325,110 shares at September 30, 2021 and 136,246,029 shares at March 31, 2021	1,636		1,629
Treasury stock, at cost — 29,302,541 shares at September 30, 2021 and 26,704,577 shares at March 31, 2021	(1,433,136)		(1,216,163)
Additional paid-in capital	600,930		557,957
Retained earnings	1,902,667		1,757,524
Accumulated other comprehensive loss	(23,999)		(29,771)
Total stockholders’ equity	1,048,098		1,071,176
Total liabilities and stockholders’ equity	$	6,025,792	$	5,499,601

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

BOOZ ALLEN HAMILTON HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(Amounts in thousands, except per share data)


	Three Months Ended September 30,				Six Months Ended September 30,
	2021		2020		2021		2020

Revenue	$	2,106,038	$	2,019,185	$	4,095,104	$	3,975,638
Operating costs and expenses:
Cost of revenue	947,689		942,597		1,910,408		1,891,499
Billable expenses	640,120		603,652		1,195,665		1,152,729
General and administrative expenses	262,260		244,700		564,060		490,555
Depreciation and amortization	37,602		21,015		65,347		41,747
Total operating costs and expenses	1,887,671		1,811,964		3,735,480		3,576,530
Operating income	218,367		207,221		359,624		399,108
Interest expense	(24,254)		(19,787)		(45,524)		(40,022)
Other income (expense), net	6,848		(12,034)		6,315		(12,870)
Income before income taxes	200,961		175,400		320,415		346,216
Income tax expense	46,127		39,319		73,479		80,806
Net income	$	154,834	$	136,081	$	246,936	$	265,410
Earnings per common share (Note 4):
Basic	$	1.14	$	0.98	$	1.82	$	1.91
Diluted	$	1.14	$	0.98	$	1.81	$	1.90

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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BOOZ ALLEN HAMILTON HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(Amounts in thousands)


	Three Months Ended September 30,				Six Months Ended September 30,
	2021		2020		2021		2020

Net income	$	154,834	$	136,081	$	246,936	$	265,410
Other comprehensive income, net of tax:
Change in unrealized gain on derivatives designated as cash flow hedges	2,739		3,664		5,733		2,225
Change in postretirement plan costs	20		22		39		44
Total other comprehensive income, net of tax	2,759		3,686		5,772		2,269
Comprehensive income	$	157,593	$	139,767	$	252,708	$	267,679

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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BOOZ ALLEN HAMILTON HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Amounts in thousands)


	Six Months Ended September 30,
	2021		2020

Cash flows from operating activities
Net income	$	246,936	$	265,410
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	65,347		41,747
Noncash lease expense	27,664		26,891
Stock-based compensation expense	28,428		25,632
Amortization of debt issuance costs	2,294		2,176
Loss on debt extinguishment	2,515		13,239
(Gains) losses on dispositions, and other	(3,018)		25
Gain on consolidation of equity method investment	(5,666)		—
Changes in assets and liabilities:
Accounts receivable, net	(43,125)		(8,606)
Deferred income taxes and income taxes receivable / payable	59,350		51,846
Prepaid expenses and other current and long-term assets	(27,747)		(13,943)

Accrued compensation and benefits	(25,268)		22,788
Accounts payable and other accrued expenses	149,586		154,140
Other current and long-term liabilities	(17,550)		(15,321)


Net cash provided by operating activities	459,746		566,024
Cash flows from investing activities
Purchases of property, equipment, and software	(29,675)		(38,084)

Cash paid for acquisitions, net of cash acquired	(779,581)		—

Cash paid for cost method investment	(2,000)		—

Net cash used in investing activities	(811,256)		(38,084)
Cash flows from financing activities
Proceeds from issuance of common stock	11,526		9,092
Stock option exercises	3,016		6,492
Repurchases of common stock	(232,381)		(116,291)
Cash dividends paid	(101,869)		(86,836)
Debt extinguishment costs	—		(8,971)
Repayments on revolving credit facility and term loan	(78,067)		(488,933)
Net proceeds from debt issuance	487,027		691,496
Proceeds from revolving credit facility	60,000		—
Other financing activities	—		(700)
Net cash provided by financing activities	149,252		5,349
Net (decrease) increase in cash and cash equivalents	(202,258)		533,289
Cash and cash equivalents––beginning of period	990,955		741,901
Cash and cash equivalents––end of period	$	788,697	$	1,275,190
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest	$	27,658	$	32,282
Income taxes	$	15,249	$	24,451

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents


BOOZ ALLEN HAMILTON HOLDING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(Amounts in thousands, except share data)	Class A Common Stock			Treasury Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance at June 30, 2021	163,464,754	$	1,635	(28,035,397)	$	(1,327,601)	$	577,228	$	1,799,029	$	(26,758)	$	1,023,533
Issuance of common stock	99,738	—		—	—		5,643		—		—		5,643
Stock options exercised	63,159	1		—	—		1,222		—		—		1,223
Repurchase of common stock	—	—		(1,267,144)	(105,535)		–		—		—		(105,535)
Recognition of liability related to future restricted stock units vesting	—	—		—	—		853		—		—		853
Net income	—	—		—	—		—		154,834		—		154,834

Other comprehensive income, net of tax	—	—		—	—		–		—		2,759		2,759
Dividends declared of $0.37 per share of common stock	—	—		—	—		–		(51,196)		—		(51,196)
Stock-based compensation expense	—	—		—	—		15,984		—		—		15,984
Balance at September 30, 2021	163,627,651	$	1,636	(29,302,541)	$	(1,433,136)	$	600,930	$	1,902,667	$	(23,999)	$	1,048,098

Balance at March 31, 2021	162,950,606	$	1,629	(26,704,577)	$	(1,216,163)	$	557,957	$	1,757,524	$	(29,771)	$	1,071,176

Issuance of common stock	558,681	6		—	—		10,317		—		—		10,323
Stock options exercised	118,364	1		—	—		3,015		—		—		3,016
Repurchase of common stock (1)	—	—		(2,597,964)	(216,973)		—		—		—		(216,973)
Recognition of liability related to future restricted stock units vesting	—	—		—	—		1,213		—		—		1,213
Net income	—	—		—	—		—		246,936		—		246,936
Other comprehensive income, net of tax	—	—		—	—		—		—		5,772		5,772
Dividends declared of $0.74 per share of common stock	—	—		—	—		—		(101,793)		—		(101,793)
Stock-based compensation expense	—	—		—	—		28,428				—		28,428
Balance at September 30, 2021	163,627,651	$	1,636	(29,302,541)	$	(1,433,136)	$	600,930	$	1,902,667	$	(23,999)	$	1,048,098

(1) During the six months ended September 30, 2021, the Company purchased 2.4 million shares of the Company’s Class A Common Stock in a series of open market transactions for $203.7 million. Additionally, the Company repurchased shares for $13.3 million during the six months ended September 30, 2021 to cover the minimum statutory withholding taxes on restricted stock units that vested on various dates during the period.

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BOOZ ALLEN HAMILTON HOLDING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) [CONTINUED]
(Amounts in thousands, except share data)	Class A Common Stock			Treasury Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance at June 30, 2020	161,856,727	$	1,618	(23,659,991)	$	(973,601)	$	486,739	$	1,415,129	$	(47,418)	$	882,467
Issuance of common stock	81,482	2		—	—		4,667		—		—		4,669
Stock options exercised	141,125	1		—	—		3,366		—		—		3,367
Repurchase of common stock	—	—		(394,742)	(30,049)		—		—		—		(30,049)
Recognition of liability related to future restricted stock units vesting	—	—		—	—		(59)		—		—		(59)
Net income	—	—		—	—		—		136,081		—		136,081
Other comprehensive income, net of tax	—	—		—	—		—		—		3,686		3,686
Dividends paid of $0.31 per share of common stock	—	—		—	—		—		(43,004)		—		(43,004)
Stock-based compensation expense	—	—		—	—		14,799		—		—		14,799
Balance at September 30, 2020	162,079,334	$	1,621	(24,054,733)	$	(1,003,650)	$	509,512	$	1,508,206	$	(43,732)	$	971,957

Balance at March 31, 2020	161,333,973	$	1,613	(22,614,052)	$	(898,095)	$	468,027	$	1,330,812	$	(46,001)	$	856,356
Topic 326 adoption impact	—	—		—	—		—		(1,180)		—		(1,180)
Issuance of common stock	443,338	5		—	—		9,087				—		9,092
Stock options exercised	302,023	3		—	—		6,489		—		—		6,492
Repurchase of common stock (2)	—	—		(1,440,681)	(105,555)		—		—		—		(105,555)
Recognition of liability related to future restricted stock units vesting	—	—		—	—		280		—		—		280
Net income	—	—		—	—		—		265,410		—		265,410
Other comprehensive income, net of tax	—	—		—	—		—		—		2,269		2,269
Dividends paid of $0.62 per share of common stock	—	—		—	—		—		(86,836)		—		(86,836)
Stock-based compensation expense	—	—		—	—		25,629		—		—		25,629
Balance at September 30, 2020	162,079,334	$	1,621	(24,054,733)	$	(1,003,650)	$	509,512	$	1,508,206	$	(43,732)	$	971,957

(2) During the six months ended September 30, 2020, the Company purchased 1.3 million shares of the Company’s Class A Common Stock in a series of open market transactions for $96.4 million. Additionally, the Company repurchased shares for $9.2 million during the six months ended September 30, 2020 to cover the minimum statutory withholding taxes on restricted stock units that vested on various dates during the period.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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BOOZ ALLEN HAMILTON HOLDING CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in tables in thousands, except share and per share data or unless otherwise noted)

1. BUSINESS OVERVIEW

Booz Allen Hamilton Holding Corporation, including its wholly owned subsidiaries, or the Company, we, us, and our, was incorporated in Delaware in May 2008. The Company provides management and technology consulting, analytics, engineering, digital solutions, mission operations, and cyber services to U.S. and international governments, major corporations, and not-for-profit organizations. The Company reports operating results and financial data in one reportable segment. The Company is headquartered in McLean, Virginia, with approximately 29,200 employees as of September 30, 2021.

2. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission, or SEC, and should be read in conjunction with the information contained in the Company's Annual Report on Form 10-K for the year ended March 31, 2021. The interim period unaudited condensed consolidated financial statements are presented as described below. Certain information and disclosures normally required for annual financial statements have been condensed or omitted pursuant to GAAP and SEC rules and regulations. In the opinion of management, all adjustments considered necessary for fair presentation of the results of the interim period presented have been included. The Company’s fiscal year ends on March 31 and unless otherwise noted, references to fiscal year or fiscal are for fiscal years ended March 31. The results of operations for the six months ended September 30, 2021 are not necessarily indicative of results to be expected for the full fiscal year.

The condensed consolidated financial statements and notes of the Company include its subsidiaries, and the joint ventures and partnerships over which the Company has a controlling financial interest. The Company uses the equity method to account for investments in entities that it does not control if it is otherwise able to exert significant influence over the entities' operating and financial policies.

Certain amounts reported in the Company's prior year condensed consolidated financial statements have been reclassified to conform to the current year presentation.

Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Areas of the financial statements where estimates may have the most significant effect include the provision for claimed indirect costs, valuation and lives of tangible and intangible assets, impairment of long-lived assets, accrued liabilities, revenue recognition, including the accrual of indirect costs, bonus and other incentive compensation, stock-based compensation, reserves for uncertain tax positions and valuation allowances on deferred tax assets, provisions for income taxes, postretirement obligations, collectability of receivables, and loss accruals for litigation. Actual results experienced by the Company may differ materially from management's estimates.

Recent Accounting Pronouncements Not Yet Adopted

In November 2020, the SEC issued Release No. 33-10890, Amendments to Management's Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information, to simplify, modernize and enhance certain financial disclosure requirements in Regulation S-K. This amendment became effective on February 10, 2021. The Company’s adoption is expected to impact fiscal 2022 Form 10-K disclosures.

Other accounting and reporting pronouncements effective after September 30, 2021 and issued through the filing date are not expected to have a material impact on the Company's condensed consolidated financial statements.

3. REVENUE

The Company's revenues from contracts with customers (clients) are derived from offerings that include consulting, analytics, digital solutions, engineering, mission, and cyber services, substantially with the U.S. government and its agencies and, to a lesser extent, subcontractors. The Company also serves foreign governments, as well as domestic and international commercial clients. The Company performs under various types of contracts, which include cost-reimbursable contracts, time-and-materials contracts, and fixed-price contracts.

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BOOZ ALLEN HAMILTON HOLDING CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in tables in thousands, except share and per share data or unless otherwise noted)

Contract Estimates

Many of our contracts recognize revenue under a contract cost-based input method and require an Estimate-at-Completion ("EAC") process, which management uses to review and monitor the progress towards the completion of our performance obligations. Under this process, management considers various inputs and assumptions related to the EAC, including, but not limited to, progress towards completion, labor costs and productivity, material and subcontractor costs, and identified risks. Estimating the total cost at the completion of our performance obligations is subjective and requires management to make assumptions about future activity and cost drivers under the contract. Changes in these estimates can occur for a variety of reasons and, if significant, may impact the revenue and profitability of the Company’s contracts. Changes in estimates related to contracts accounted for under the EAC process are recognized on a cumulative catch-up basis in the period when such changes are determinable and reasonably estimable. If the estimate of contract profitability indicates an anticipated loss on a contract, the Company recognizes the total loss at the time it is identified. For each of the three and six months ended September 30, 2021 and 2020, the aggregate impact of adjustments in contract estimates was not material.

Disaggregation of Revenue

We disaggregate our revenue from contracts with customers by contract type, customer, as well as whether the Company acts as prime contractor or subcontractor, as we believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. The following series of tables presents our revenue disaggregated by these categories.

Revenue by Contract Type:

We generate revenue under the following three basic types of contracts:

•Cost-Reimbursable Contracts: Cost-reimbursable contracts provide for the payment of allowable costs incurred during performance of the contract, up to a ceiling based on the amount that has been funded, plus a fixed fee or award fee.

•Time-and-Materials Contracts: Under contracts in this category, we are paid a fixed hourly rate for each direct labor hour expended, and we are reimbursed for billable material costs and billable out-of-pocket expenses inclusive of allocable indirect costs. We assume the financial risk on time-and-materials contracts because our costs of performance may exceed negotiated hourly rates.

•Fixed-Price Contracts: Under a fixed-price contract, we agree to perform the specified work for a predetermined price. To the extent our actual direct and allocated indirect costs decrease or increase from the estimates upon which the price was negotiated, we will generate more or less profit, respectively, or could incur a loss.

The table below presents the total revenue for each type of contract:


	Three Months Ended September 30,								Six Months Ended September 30,
	2021				2020				2021				2020
Cost-reimbursable	$	1,127,189	53	%	$	1,138,501	56	%	$	2,242,614	55	%	$	2,230,549	56	%
Time-and-materials	500,263		24	%	504,663		25	%	997,713		24	%	1,007,209		25	%
Fixed-price	478,586		23	%	376,021		19	%	854,777		21	%	737,880		19	%
Total Revenue	$	2,106,038	100	%	$	2,019,185	100	%	$	4,095,104	100	%	$	3,975,638	100	%

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BOOZ ALLEN HAMILTON HOLDING CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in tables in thousands, except share and per share data or unless otherwise noted)

Revenue by Customer Type:


	Three Months Ended September 30,								Six Months Ended September 30,
	2021				2020				2021				2020
U.S. government(1):
Defense Clients	$	999,174	48	%	$	1,005,555	50	%	$	1,975,101	48	%	$	1,940,170	49	%
Intelligence Clients	393,569		19	%	390,383		19	%	770,325		19	%	793,052		20	%
Civil Clients	662,261		31	%	569,125		28	%	1,255,156		31	%	1,128,327		28	%
Total U.S. government	2,055,004		98	%	1,965,063		97	%	4,000,582		98	%	3,861,549		97	%
Global Commercial Clients	51,034		2	%	54,122		3	%	94,522		2	%	114,089		3	%
Total Revenue	$	2,106,038	100	%	$	2,019,185	100	%	$	4,095,104	100	%	$	3,975,638	100	%

(1) Certain contracts were reassigned between the various verticals of our U.S. government business shown in the table above to better align our operations to the customers we serve within each market. Prior year revenue by customer type has been recast to reflect the changes.

Revenue by Whether the Company Acts as a Prime Contractor or a Subcontractor:


	Three Months Ended September 30,								Six Months Ended September 30,
	2021				2020				2021				2020
Prime Contractor	$	1,978,216	94	%	$	1,880,778	93	%	$	3,839,939	94	%	$	3,684,382	93	%
Subcontractor	127,822		6	%	138,407		7	%	255,165		6	%	291,256		7	%
Total Revenue	$	2,106,038	100	%	$	2,019,185	100	%	$	4,095,104	100	%	$	3,975,638	100	%

Performance Obligations

Remaining performance obligations represent the transaction price of exercised contracts for which work has not yet been performed, irrespective of whether funding has or has not been authorized and appropriated as of the date of exercise. Remaining performance obligations exclude negotiated but unexercised options, the unfunded value of expired contracts, and certain variable consideration which the Company does not expect to recognize as revenue.

As of September 30, 2021 and March 31, 2021, the Company had $8.1 billion and $6.7 billion of remaining performance obligations, respectively. We expect to recognize approximately 70% of the remaining performance obligations at September 30, 2021 as revenue over the next 12 months, and approximately 85% over the next 24 months. The remainder is expected to be recognized thereafter.

Contract Balances

The Company's performance obligations are typically satisfied over time and revenue is generally recognized using a cost-based input method. Fixed-price contracts are typically billed to the customer using milestone or fixed monthly payments, while cost-reimbursable-plus-fee and time-and-material contracts are typically billed to the customer at periodic intervals (e.g. monthly or weekly) as indicated by the terms of the contract. Disparities between the timing of revenue recognition and customer billings and cash collections result in net contract assets or liabilities being recognized at the end of each reporting period.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in tables in thousands, except share and per share data or unless otherwise noted)

Contract assets primarily consist of unbilled receivables typically resulting from revenue recognized exceeding the amount billed to the customer and right to payment is not just subject to the passage of time. Unbilled amounts represent revenues for which billings have not been presented to customers at quarter-end or year-end. These amounts are generally billed and collected within one year subject to various conditions including, without limitation, appropriated and available funding. Long-term unbilled receivables not anticipated to be billed and collected within one year, which are primarily related to retainage, holdbacks, and long-term rate settlements to be billed at contract closeout, are included in other long-term assets in the accompanying condensed consolidated balance sheets. Contract liabilities primarily consist of advance payments, billings in excess of costs incurred and deferred revenue. Contract assets and liabilities are reported on a net contract basis at the end of each reporting period. The Company maintains an allowance for credit losses to provide for an estimate of uncollectible receivables. Provision for credit losses recognized was not material for the three and six months ended September 30, 2021 and 2020.

The following table summarizes the contract assets and liabilities, and accounts receivable, net of allowance recognized on the Company’s condensed consolidated balance sheets:


	Contract Balances	September 30, 2021		March 31, 2021
Current assets
Accounts receivable–billed		$	426,571	$	375,383
Accounts receivable–unbilled	Contract assets	1,085,008		1,037,968
Allowance for credit losses		—		(1,457)
Accounts receivable, net		1,511,579		1,411,894
Other long-term assets
Accounts receivable–unbilled	Contract assets	64,084		63,869
Total accounts receivable, net		$	1,575,663	$	1,475,763
Other current liabilities
Advance payments, billings in excess of costs incurred and deferred revenue	Contract liabilities	$	14,878	$	15,906

Changes in contract assets and contract liabilities are primarily due to the timing difference between the Company’s performance of services and billings to customers. For the three months ended September 30, 2021 and 2020, we recognized revenue of $2.3 million and $2.5 million, respectively, and for the six months ended September 30, 2021 and 2020, we recognized revenue of $14.2 million and $22.0 million, respectively, related to our contract liabilities on April 1, 2021 and 2020, respectively. To determine revenue recognized from contract liabilities during the reporting periods, the Company allocates revenue to individual contract liability balances and applies revenue recognized during the reporting periods first to the beginning balances of contract liabilities until the revenue exceeds the balances.

4. EARNINGS PER SHARE

The Company computes basic and diluted earnings per share amounts based on net income for the periods presented. The Company uses the weighted-average number of common shares outstanding during the period to calculate basic earnings per share, or EPS. Diluted EPS adjusts the weighted average number of shares outstanding to include the dilutive effect of outstanding common stock options and other stock-based awards.

The Company currently has outstanding shares of Class A Common Stock. Unvested Class A Restricted Common Stock holders are entitled to participate in non-forfeitable dividends or other distributions. These unvested restricted shares participated in the Company's dividends declared and were paid in the first and second quarters of fiscal 2022 and 2021. As such, EPS is calculated using the two-class method whereby earnings are reduced by distributed earnings as well as any available undistributed earnings allocable to holders of unvested restricted shares. A reconciliation of the income used to compute basic and diluted EPS for the periods presented are as follows:

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in tables in thousands, except share and per share data or unless otherwise noted)


	Three Months Ended September 30,				Six Months Ended September 30,
	2021		2020		2021		2020
Earnings for basic computations (1)	$	153,742	$	135,283	$	245,418	$	263,951
Weighted-average common shares outstanding for basic computations	134,759,240		137,882,906		135,158,270		138,017,120
Earnings for diluted computations (1)	$	153,745	$	135,286	$	245,422	$	263,958
Dilutive stock options and restricted stock	557,189		864,734		689,278		987,262
Weighted-average common shares outstanding for diluted computations	135,316,429		138,747,640		135,847,548		139,004,382
Earnings per common share
Basic	$	1.14	$	0.98	$	1.82	$	1.91
Diluted	$	1.14	$	0.98	$	1.81	$	1.90

(1) During the three months ended September 30, 2021 and 2020, approximately 1.0 million and 0.8 million participating securities were paid dividends totaling $0.4 million and $0.3 million, respectively. During the six months ended September 30, 2021 and 2020, approximately 0.8 million and 0.8 million participating securities were paid dividends totaling $0.6 million and $0.5 million, respectively. For the three months ended September 30, 2021 and 2020, there were undistributed earnings of $0.7 million and $0.5 million, respectively, allocated to the participating class of securities in both basic and diluted EPS. For the six months ended September 30, 2021 and 2020, there were undistributed earnings of $0.9 million and $1.0 million, respectively, allocated to the participating class of securities in both basic and diluted EPS. The allocated undistributed earnings and the dividends paid comprise the difference between net income presented on the condensed consolidated statements of operations and earnings for basic and diluted computations for the three and six months ended September 30, 2021 and 2020.

The EPS calculation for the three months ended September 30, 2021 and 2020 excludes 0.1 million and 0.3 million options, respectively, as their impact was anti-dilutive. The EPS calculation for the six months ended September 30, 2021 and 2020 excludes 0.1 million and 0.2 million options, respectively, as their impact was anti-dilutive.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in tables in thousands, except share and per share data or unless otherwise noted)

5. ACQUISITION, GOODWILL AND INTANGIBLE ASSETS

Acquisitions

Tracepoint Holdings, LLC

On September 10, 2021, the Company acquired the remaining 60% equity interest in Tracepoint Holdings, LLC ("Tracepoint"), an industry-leading digital forensics and incident response company serving public and private sector clients, for cash consideration of approximately $120.0 million, net of adjustments (the "Tracepoint Transaction"). As a result of the transaction, Tracepoint and Tracepoint, LLC became wholly owned subsidiaries of Booz Allen Hamilton Inc. The acquisition complements the Company’s existing cybersecurity portfolio and expands its position in the private sector cyber market.

Prior to the closing of the Tracepoint Transaction, the Company held a 40% interest in Tracepoint, which was accounted for as an equity method investment. The equity method investment associated with Tracepoint was remeasured at fair value on the closing date of the Tracepoint Transaction, resulting in a gain of $5.7 million. This gain is presented as a component of Other Income on the Condensed Consolidated Statement of Operations for the three and six months ended September 30, 2021. The fair value of the previously held equity method investment was determined based upon valuations of the Tracepoint business and future business outlook using projected future cash flows.

Under the terms of the purchase agreement, the Company has 120 days after closing to provide proposed post-closing working capital adjustments to the sellers which are subject to dispute. The final purchase price allocations will be completed after the underlying information has been finalized and agreed upon by the sellers and the Company.

The Company recognized $90.5 million of intangible assets which primarily consists of channel relationships. Channel relationships were valued using the excess earnings method discounted cash flow approach, incorporating Level 3 inputs as described under the fair value hierarchy of Accounting Standards Codification (ASC) No. 820, Fair Value Measurement (Topic 820). These unobservable inputs reflect the Company's own judgment about which assumptions market participants would use in pricing an asset on a non-recurring basis. The intangible asset is expected to be amortized over the estimated useful life of 10 years. The goodwill of $95.2 million is largely attributable to Tracepoint's specialized workforce.

Liberty IT Solutions, LLC

On June 11, 2021, the Company acquired Liberty IT Solutions, LLC ("Liberty") for cash consideration of approximately $669.1 million, net of adjustments related to working capital, and transaction costs incurred as part of the acquisition, including compensation expenses paid by the Company that were associated with employee retention. As a result of the transaction, Liberty became a wholly owned subsidiary of Booz Allen Hamilton Inc. Liberty is a leading digital partner driving transformation across the federal IT ecosystem. The acquisition complements the Company’s digital transformation portfolio resulting in a deeper range of advanced technology solutions.

The Company recognized $309.0 million of intangible assets which consist of programs and contracts assets, and were valued using the excess earnings method discounted cash flow approach, incorporating Level 3 inputs as described under the fair value hierarchy of Topic 820. These unobservable inputs reflect the Company's own judgment about which assumptions market participants would use in pricing an asset on a non-recurring basis. The intangible assets are expected to be amortized over the estimated useful life of 12 years. The goodwill of $346.5 million is primarily attributable to Liberty's specialized workforce and the expected synergies between the Company and Liberty.

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BOOZ ALLEN HAMILTON HOLDING CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in tables in thousands, except share and per share data or unless otherwise noted)

Purchase Price Allocation

The following table summarizes the cumulative consideration paid and the preliminary allocation of the purchase price paid for Tracepoint and Liberty:


Cash consideration (gross of cash acquired and including net adjustments)	$	789,108
Fair value of non-controlling interest	79,997