Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - Booz Allen Hamilton Holding Corp | bah093017exhibit991.htm |
| 8-K - 8-K - Booz Allen Hamilton Holding Corp | fy2018q28kearningsrelease.htm |
Fiscal Year 2018, Second Quarter
NOVEMBER 6, 2017
EARNINGS CALL
PRESENTATION
HORACIO ROZANSKI
PRESIDENT AND CHIEF EXECUTIVE OFFICER
LLOYD HOWELL
CHIEF FINANCIAL OFFICER AND TREASURER
CURT RIGGLE
VICE PRESIDENT INVESTOR RELATIONS
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CALL
PARTICIPANTS
DISCLAIMER
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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, 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, 2017, 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, 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 (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, 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, 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, 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 2018 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 2018. 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.
FINANCIAL HIGHLIGHTS
Q2 FY18 KEY PERFORMANCE INDICATORS
• Accelerating growth in revenue, excluding billable expenses compared to prior year’s quarter
• Strong year‐over‐year headcount growth of nearly 1,500
• Record backlog, reflecting growth of 22.3% year‐over‐year
• Second highest book‐to‐bill since our IPO
STRATEGIC GROWTH INDICATORS AND OUTLOOK
• Maintaining our position as the government services industry organic revenue growth leader (1)
• Capturing attractive opportunities in every market we serve
• Prevailing in a competitive market for labor
• Differentiated by our consulting heritage, mission knowledge, and advanced technical skills
• Exceptional people, agility, and integration of capabilities driving success
• Confident that we have created the conditions for delivery of sustainable quality growth
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(1) Industry consists of CACI, CSRA, Engility Holdings, Leidos, ManTech, and Science Applications International Corp.
KEY FINANCIAL RESULTS
SECOND QUARTER FISCAL YEAR 2018 PRELIMINARY RESULTS
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S E COND QUART E R ( 1 ) F I R S T HA L F ( 1 )
Revenue $1.5 billion 10.6% Increase $3.0 billion 7.7% Increase
Revenue, Excluding
Billable Expenses
$1.1 billion 7.5% Increase $2.1 billion 6.3% Increase
Net Income $70.9 million 12.9% Increase $150.5 million 15.2% Increase
Adjusted Net Income $71.3 million 3.1% Increase $151.2 million 9.2% Increase
Adjusted EBITDA $142.5 million 5.0% Increase $297.4 million 6.4% Increase
Diluted EPS $0.47 14.6% Increase $1.00 16.3% Increase
Adjusted Diluted EPS $0.48 4.4% Increase $1.01 9.8% Increase
Total Backlog
$16.7 billion
22.3% Increase
(1) Comparisons are to prior fiscal period
CAPITAL ALLOCATION
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WE ARE COMMITTED TO CREATING NEAR‐ AND LONG‐TERM VALUE FOR
INVESTORS THROUGH REVENUE GROWTH, OPERATIONAL EXCELLENCE AND
EFFECTIVE CAPITAL DEPLOYMENT
• Our FY18 plan remains unchanged:
‐ On track to convert approximately 100 percent of Adjusted Net Income to Free Cash Flow
‐ Aim to deploy at least 100 percent of Free Cash Flow to support acquisitions, share
repurchases, and/or incremental dividends as opportunities warrant
• Closed acquisition of cyber firm Morphick, Inc.
• Repurchased approximately 3.5 million shares during the quarter
• Increased our share repurchase authorization by $200 million; we now have the flexibility to
repurchase additional shares in an amount up to approximately $300 million
• Ended Q2 with a healthy cash balance of $330 million
• Deployed approximately $220 million in the form of regular dividends and share repurchases
in Q1 and Q2
FINANCIAL OUTLOOK
REITERATING FULL YEAR GUIDANCE
1) Full Fiscal Year 2018 Estimated Weighted Average Diluted Share Count of 149.5 million shares
2) Assumes an effective tax rate in the range of 37% to 38%
3) FY18 guidance does not reflect any costs we will incur in this period in connection with the previously disclosed US Department of Justice
investigation. At this stage of the investigation, the Company is not able to reasonably estimate such costs
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F I SCAL 2018 FUL L YEAR OUTLOOK ( 3 )
Revenue
Growth in the Range of
Four to Seven Percent
Diluted EPS (1)(2) $1.80 ‐ $1.90
Adjusted Diluted EPS (1)(2) $1.83 ‐ $1.93
APPENDIX
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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, 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 and before certain other items, including transaction costs, fees, losses, and expenses, including fees associated
with debt prepayments. “Adjusted EBITDA Margin” is calculated as Adjusted EBITDA divided by revenue. Booz Allen prepares
Adjusted EBITDA and Adjusted EBITDA Margin 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 acquisition of our Company by The Carlyle Group, (ii) transaction costs, fees, losses, and expenses, including fees
associated with debt prepayments, and (iii) amortization or write‐off of debt issuance costs and write‐off of original issue
discount, 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 taxes, 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 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 condensed consolidated financial statements.
• "Free Cash Flow" represents the net cash generated from operating activities less the impact of purchases of property and
equipment.
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NON-GAAP FINANCIAL INFORMATION
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(a) Reflects amortization of
intangible assets resulting
from the Acquisition of our
Company by the Carlyle
group for the three and six
months ended
September 30, 2016.
(b) Reflects debt
refinancing costs incurred
in connection with the
refinancing transaction
consummated on July 13,
2016.
(c) Reflects the combination
of Interest expense and
Other income (expense),
net from the condensed
consolidated statement of
operations
(d) Reflects tax effect of
adjustments at an assumed
effective tax rate of 40%.
(e) Excludes an adjustment
of approximately $0.7
million and $1.3 million of
net earnings for the three
and six months ended
September 30, 2017 and
2016, respectively,
associated with the
application of the two‐class
method for computing
diluted earnings per share.
FINANCIAL RESULTS – KEY DRIVERS
Second Quarter 2018 – Below is a summary of Booz Allen’s results for the fiscal 2018 second quarter and the key factors driving
those results as compared to the second quarter of fiscal 2017:
• Revenue increased by 10.6% to $1.54 billion primarily due to increased client demand which led to increased client staff
headcount, and therefore direct labor. Headcount increased approximately 770 as compared to the first quarter of fiscal year
2018 and nearly 1,500 over the prior year period. Revenue growth also benefitted from an 18% increase in billable expenses as
compared to the prior year period.
• Revenue Excluding Billable Expenses increased 7.5% to $1.06 billion primarily due to increased client demand which led to
increased client staff headcount, and therefore direct labor.
• Operating Income increased 7.5% to $126.5 million and Adjusted Operating Income increased 3.7% to $126.5 million. Increases
in both were primarily driven by the same factors driving revenue growth and improved contract profitability partially offset by
increased spending as compared to the prior year period. Adjusted Operating Income in the second quarter of fiscal 2017
included the benefit of a $3.4 million addback in costs related to debt refinancing transactions that did not occur in fiscal year
2018.
• Net income increased 12.9% to $70.9 million. Adjusted Net Income increased 3.1% to $71.3 million. These increases were
primarily driven by the same factors as Operating Income and Adjusted Operating Income, as well as a decrease in our income
tax expense due to the adoption of a new accounting standard, ASU 2016‐09, that resulted in an additional income tax benefit
of $2.4 million during the second quarter of fiscal 2018.
• EBITDA increased 7.7% to $142.5 million and Adjusted EBITDA increased 5.0% to $142.5 due to the same factors as Operating
Income and Adjusted Operating Income, respectively.
• Diluted EPS increased to $0.47 from $0.41 in the prior year period and Adjusted Diluted EPS increased to $0.48 from $0.46 in
the prior year period. The increases were primarily driven by the same factors as Net Income and Adjusted Net Income,
respectively.
• As of September 30, 2017, total backlog was $16.7 billion, an increase of 22.3 percent compared to September 30, 2016. This
reflects continuing backlog improvement across all categories, with total backlog at record levels. Funded backlog increased
7.7%, while unfunded backlog and priced options increased 17.1% and 31.6%, respectively.
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FINANCIAL RESULTS – KEY DRIVERS
Six Months Ended September 30, 2017 – Booz Allen’s cumulative performance for the first two quarters of fiscal 2018 has
resulted in:
• Net cash provided by operating activities was $178.1 million as compared to $217.1 million in the prior year period. The
decrease in cash from operations is primarily the result of higher cash taxes paid during fiscal 2018. As mentioned last
quarter, we continue to experience temporary payment delays at one of the Company’s customer payment centers. We
are seeing improvements and expect such delays to be mitigated by the end of the fiscal year. Free Cash Flow declined
$60.9 million from the prior year period due to the same factors affecting cash provided by operations, as well as an
increase of $21.8 million in capital expenditures due to the expected amount and the timing of leasehold improvements
to update existing office space.
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