Letter to Stockholders

Dear Colleagues and Fellow Stockholders,

As a company in business for more than a century, Booz Allen Hamilton prides itself on anticipating the future and doing work that makes the biggest difference. We are committed to empowering people to change the world, which means taking on our clients’ most complex problems and applying the best talent and technology to solve them. In doing so, we transform missions and organizations and position both our firm and our clients for long-term success.

In fiscal year 2018, we solidified our standing as the company that works at the intersection of technology and mission, a nexus where we can create the most value for clients. As our core U.S. government market improved, particularly in defense and intelligence, we pushed forward with our Vision 2020 growth strategy and achieved record revenue and earnings.

Throughout the year, we continued to build our talent base in size and skill, a critical priority as the pace of technological change accelerates and puts new demands on our clients. We also remained focused on innovation so that we always press the boundaries of what is possible—from artificial intelligence to platform cyber to directed energy.

Booz Allen is clearly differentiated in the market because of our long-standing relationships with clients, deep knowledge of their priorities, and ability to integrate advanced capabilities in consulting, digital solutions, analytics, cyber, and engineering. We believe this differentiation, grounded in a culture of collaboration and passionate service, sets us apart. We successfully set a strategic path and have been executing against it since 2013, and we believe this has primed our firm for continued quality growth in the years ahead. 

In the year ending March 31, 2018, Booz Allen again delivered outstanding financial results, with record profitability underpinned by a third-consecutive year of industry-leading organic revenue growth¹:    

• Gross revenue increased 6.3 percent to a record $6.2 billion 
  
• Revenue, excluding billable expenses², grew 6.3 percent to $4.3 billion 
  
• Net income increased 21 percent to $305 million 
  
• Adjusted EBITDA² grew 6.9 percent to $585 million, the highest level since our initial public offering 
• Adjusted net income² increased 13.5 percent to $298 million 
  
• Adjusted diluted earnings per share² (ADEPS) were $2.01, up from $1.75 in fiscal 2017 
• We returned $373 million to shareholders through regular dividends and share repurchases 
• Total backlog at fiscal-year end was $16.0 billion, up 18 percent after hitting an all-time high of $16.7 billion at the end of the second quarter 
  
• Headcount grew by more than 1,300 to 24,639 
  

The people of Booz Allen are delivering high-quality work to clients and winning new business across U.S. defense, intelligence, and civil agencies, as well as the global commercial market. Global commercial remains the smallest but fastest-growing part of our business, with revenue increasing nearly 30 percent in fiscal 2018. In October, we purchased Cincinnati-based Morphick Inc., a leader in cyber detection and response services, to bolster our successful cyber-focused strategy in commercial. Over the course of the year, we also greatly expanded our work for U.S. allied governments and commercial clients in the Middle East, while continuing to expand our footprint and capabilities in Asia. 

As fiscal year 2019 begins, Booz Allen’s Board of Directors and Leadership Team are confident about the future. We believe that our firm is at a pivotal point—unified by shared purpose and values, energized by our strategic progress and position in the market, and growing strongly as we expand our offerings and client base. 

We also continue to earn external accolades. Fortune named Booz Allen as one of the World’s Most Admired Companies and Forbes selected us as one of the Top Employers for Veterans and one of the Best Management Consulting Firms for 2017. We also have been honored with industry awards that showcase our employer brand, including One of the 9 Best Management Consulting Firms by Business Insider, a Top Company for People with Disabilities by DiversityInc, Best for Vets by Military Times, a Top Company of 2017 by LinkedIn, and have again been named to Working Mother magazine’s list of 100 Best Companies. 

These positive dynamics are in play just as rising federal budgets, demand for technology solutions, accelerating technological change, and a healthy global economy are creating even more opportunity for our firm. We believe we are well positioned to capture market upside as clients across our business embrace new technologies. And our unique business model, based on our partnership culture and single P&L, gives us ample scale, range, and flexibility to anticipate and rapidly react to growing demand in the areas where we have built our most differentiated technical solutions. 

As a result, our goal is to drive an increase in ADEPS of 50 percent over the next three years through: 

• Annual revenue growth of 6–9 percent
  
• Margin expansion of 10 to 30 basis points over three years     
  
• And about $1.4 billion in capital deployment, including dividends, over three years, as market conditions allow  
  

We aim to deliver on these financial objectives while also continuing to invest in innovation and new business lines that we believe could fuel additional growth and profitability over the longer term. 

As always, the talent and dedication of the people of Booz Allen are the foundation of our success. Their desire to empower people to change the world animates all we do for clients, our communities, and each other. It is a privilege to represent their transformational work and strong financial performance year after year. We look forward to reaching our aspirations in fiscal 2019 and beyond. 

Footnotes:

1. Industry consists of CACI International, Engility Holdings, Leidos Holdings, ManTech International, and Science Applications International Corp.    
   
2. These measures are non-GAAP financial measures. For a reconciliation of these measures to GAAP, please see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measures” in Part II Item 7 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2018.