October 29, 2014
Seasonally strong Book-to-Bill of 1.93x
Increases Bottom Line Guidance
Second Quarter revenue of $1.3 billion
Adjusted Diluted Earnings per Share of $0.44
$0.11 quarterly dividend declared, payable
on November 28, 2014
McLean, Va — Booz Allen Hamilton Holding Corporation (NYSE:BAH), the parent company of management and technology consulting firm Booz Allen Hamilton, Inc., today announced preliminary results for the second quarter of fiscal 2015. The Company benefitted from its longstanding client relationships in an improved award environment which resulted in a seasonally strong Book-to-Bill ratio and an increase in funded and unfunded backlog at the close of the federal government's fiscal year on September 30, 2014. Booz Allen's fiscal year runs from April 1 to March 31, with the second quarter of fiscal 2015 ending September 30, 2014.
During the second quarter, revenue declined as expected, primarily as a result of continuing macro challenges in the federal government spending environment and the residual impact of the slower award pace in the months immediately following last October's government shutdown. Revenue for the second quarter of fiscal 2015 was $1.30 billion, compared with $1.38 billion in the prior year period, a decrease of 5.3 percent. Adjusted EBITDA was $137.8 million in the second quarter of fiscal 2015, compared to $153.8 million in the prior year period. Adjusted Net Income was $66.7 million, compared to $70.1 million in the prior year period, while Adjusted Diluted Earnings per Share was $0.44 compared to $0.47.
The Company authorized and declared a regular quarterly cash dividend of $0.11 per share, payable on November 28, 2014, to stockholders of record on November 10, 2014.
Ralph W. Shrader, Booz Allen's Chairman & Chief Executive Officer, said, "Our financial and operational performance in the first half of fiscal 2015 was solid in light of the continued challenges in the federal contracting market, with a modest revenue decline, earnings well on track with our annual forecast, and continued margin improvement. We are particularly pleased with our increase in funded and unfunded backlog, strong Book-to-Bill ratio, and strong cash position at the end of our second quarter, which corresponds to the end of the government fiscal year.
"Even more important is our focus on the future. Throughout this challenging market, Booz Allen has maintained our delivery and selling capability, enabling us to bid and win important procurements, especially those requiring an innovative solution as part of the proposal. We continue to invest significantly in building capabilities in areas such as predictive intelligence, engineering solutions, and advanced analytics, which we believe put Booz Allen in a strong position to serve clients as an essential partner. As a result, we believe that we are positioned to return to top-line growth sooner than others in our market. Additionally, investments in our commercial and international businesses continue to gain traction, and we are seeing continued strong revenue growth rates in these markets," Shrader said.
Second Quarter 2015 – Below is a summary of Booz Allen's results for the fiscal 2015 second quarter and the key factors driving those results:
- Booz Allen's decline in revenue in the second quarter of fiscal 2015 represents the second consecutive quarter in which the rate of revenue declines has slowed year over year. The 5.3 percent decline compared with the prior year period resulted from continued demand-related reductions in headcount, which resulted in fewer billable hours in total. Additionally, the revenue decline was the result of a decline in lower margin billable expenses.
- In the second quarter of fiscal 2015, Operating Income decreased to $122.0 million from $135.7 million in the prior year period, and Adjusted Operating Income decreased to $123.0 million from $137.8 million in the prior year period. The decreases were attributable to revenue declines, mitigated by volume based reductions in compensation costs and related fringe benefits, and to a lesser extent a decrease in depreciation and amortization expense. Adjusted EBITDA decreased to $137.8 million from $153.8 million in the prior year period and was impacted by the same factors as Adjusted Operating Income, excluding the positive impact of the decline in depreciation and amortization expense.
- In the second quarter of fiscal 2015, Net Income decreased to $65.3 million from $67.8 million in the prior year period. Adjusted Net Income decreased to $66.7 million from $70.1 million in the prior year period. These decreases in earnings compared to the prior year period were largely the result of the factors affecting Operating Income and Adjusted Operating Income, partially offset by the benefit of a lower effective tax rate as a result of the Company's qualification during the second quarter of fiscal 2015 for a certain state tax credit.
- In the second quarter of fiscal 2015, diluted EPS decreased to $0.42 from $0.45 in the prior year period; Adjusted Diluted EPS decreased to $0.44 per share as compared to $0.47 in the prior year period. The per share earnings results were driven by the same factors as Net Income and Adjusted Net Income, as well as by an increase in diluted share count.
Funded backlog as of September 30, 2014, was $3.34 billion, compared with $3.22 billion as of September 30, 2013, an increase of 3.6 percent. Unfunded backlog at the close of the quarter was $2.84 billion, compared to $2.76 billion in the prior period, an increase of 3.1 percent. Booz Allen's total backlog, as of September 30, 2014, was $10.9 billion, compared with $11.7 billion as of September 30, 2013, reflecting a decline in priced options. Overall, the Book-to-Bill ratio improved to 1.93 in the second quarter of fiscal 2015 compared to 1.58 in the prior year period.
First Half Fiscal 2015 – Booz Allen's cumulative performance for the first and second quarters of fiscal 2015, driven by the same factors discussed above, has resulted in:
- Revenue of $2.63 billion for the first half of fiscal 2015, compared with $2.81 billion for the prior year period, a decrease of 6.4 percent;
- Adjusted EBITDA for the first half of fiscal 2015 of $295.1 million compared with $311.9 million in the first half of fiscal 2014;
- Net income for the first half of fiscal 2015 of $136.4 million, compared with $138.1 million for the first half of fiscal 2014;
- Adjusted Net Income for the first half of fiscal 2015 of $141.3 million compared with $143.3 million in the prior year period; and
- Diluted EPS of $0.89 and Adjusted Diluted EPS of $0.94 for the first half of fiscal 2015, compared with $0.93 and $0.97, respectively, for the first half of fiscal 2014.
Net cash provided by operating activities for the first half of fiscal 2015 was $200.5 million compared with $139.6 million in the prior year period. Free cash flow in the first half of fiscal 2015 was $191.6 million, compared with $132.9 million in the prior year period. The increase was primarily the result of seasonally strong cash collections at the end of the current government fiscal year in comparison to the slower collection pace in the prior year period leading up to the government shutdown, and a timing-related decrease in cash tax payments as compared to the prior year period.
For our full fiscal year 2015 we are reaffirming the revenue guidance we issued on May 21, 2014, which calls for a mid-single digit percentage decline.
However, we are now forecasting our diluted EPS to be in the range of $1.48 to $1.56, and Adjusted Diluted EPS to be in the range of $1.54 to $1.62 per share, providing a narrowing of our earnings and an increase of 3 cents at the mid-point for both ranges.
These EPS estimates are based on fiscal year 2015 estimated average diluted shares outstanding of approximately 150.5 million shares, and a 39.7 percent effective tax rate, which does not include federal tax credits that have not yet been extended or for which qualification has not yet been established.
Conference Call Information
Booz Allen Hamilton will host a conference call at 8 a.m. EDT on Wednesday, October 29, 2014, to discuss the financial results for its Second Quarter of Fiscal Year 2015 (ended September 30, 2014).
Analysts and institutional investors may participate on the call by dialing (877) 375-9141 International: (253) 237-1151. 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. EDT on October 29, 2014, and continuing for 30 days.