January 28, 2015
Investing to Create Long Term, Sustainable Quality Growth
Increasing Top Line Guidance
Third Quarter revenue of $1.3 billion
Adjusted Diluted Earnings per Share of $0.36
Quarterly dividend increased by 18 percent
to $0.13 per share, payable
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 third quarter of fiscal 2015. The Company saw improvements in revenue and profitability compared to the prior year period, along with solid award activity and a seasonally strong Book-to-Bill ratio with an increase in funded and unfunded backlog at December 31, 2014. The Company also continued to invest in technological innovation and new markets which is expected to create sustainable quality growth over the long term. Booz Allen’s fiscal year runs from April 1 to March 31, with the third quarter of fiscal 2015 ending December 31, 2014.
During the third quarter, revenue increased 2.5 percent, driven by an improved federal government spending environment as compared to the prior year period, which was impacted by a 16-day government shutdown. Adjusting for the estimated impact of the government shutdown, revenue was roughly flat with the prior year period. Revenue for the third quarter of fiscal 2015 was $1.30 billion, compared with $1.27 billion in the prior year period. Adjusted EBITDA was $120.4 million in the third quarter of fiscal 2015, compared to $115.0 million in the prior year period. Adjusted Net Income was $54.2 million, compared to $49.5 million in the prior year period, while Adjusted Diluted Earnings per Share was $0.36 compared to $0.33.
The Company authorized and declared an 18 percent increase in its regular quarterly dividend, which is now $0.13 per share, payable on February 27, 2015, to stockholders of record on February 10, 2015. The Company also approved an increase to its share repurchase authorization from $30 million to $180 million.
“We have an outstanding team that continues to execute very well, consistent with our long term strategy,” said Horacio Rozanski, Booz Allen’s President and Chief Executive Officer. “Our financial and operational performance in the third quarter of fiscal 2015 was strong, with revenue growth and continued margin improvement when compared to the challenging quarter of a year ago. We saw solid growth in funded and unfunded backlog, which reflects a nascent recovery in the government contracting environment, along with a one-percent sequential increase in consulting staff headcount.
“Looking forward, our focus remains on investing in our Vision 2020 growth platforms, which we believe will create sustainable quality growth. We are seeing encouraging results from our investments in engineering, systems delivery, cyber, data analytics, and our innovation agenda, as well as in the commercial and international markets. Building these capabilities and serving as an essential partner to clients are central to the long-term growth and further margin expansion that will propel us into our second century,” Rozanski said.
Third Quarter 2015 – Below is a summary of Booz Allen’s results for the fiscal 2015 third quarter and the key factors driving those results:
- Booz Allen’s increase in revenue in the third quarter of fiscal 2015 reflected the return of a more normalized pace of contract awards in comparison to the prior year period. The 2.5 percent increase compared with the prior year period resulted from improved staff billability and an increase in billable expenses largely due to declines in those factors in the prior year period due to the effects of the government shutdown.
- In the third quarter of fiscal 2015, Operating Income increased to $105.3 million from $97.0 million in the prior year period, and Adjusted Operating Income increased to $106.3 million from $99.1 million in the prior year period. The increases were attributable to an increase in revenue from fixed price contracts in the quarter, to overall revenue improvements, volume based reductions in compensation costs and related fringe benefits, and to a lesser extent a decrease in depreciation and amortization expense. These improvements in operating income were partially offset by an increase in indirect spending in support of an increased level of bid and proposal activity and continued investments in our growth platforms and expansion in the commercial and international markets. Adjusted EBITDA increased to $120.4 million from $115.0 million in the prior year period and was impacted by the same factors as Adjusted Operating Income.
- In the third quarter of fiscal 2015, Net Income increased to $52.8 million from $47.2 million in the prior year period. Adjusted Net Income increased to $54.2 million from $49.5 million in the prior year period. These increases in earnings compared to the prior year period were largely the result of the factors affecting Operating Income and Adjusted Operating Income.
- In the third quarter of fiscal 2015, diluted EPS increased to $0.35 from $0.31 in the prior year period; Adjusted Diluted EPS increased to $0.36 per share as compared to $0.33 in the prior year period. The per share earnings results were driven by the same factors as Net Income and Adjusted Net Income.
Funded backlog as of December 31, 2014, was $2.67 billion, compared with $2.50 billion as of December 31, 2013, an increase of 7.0 percent. Unfunded backlog at the close of the quarter was $2.67 billion, compared to $2.64 billion in the prior period, an increase of 1.4 percent. Booz Allen’s total backlog, as of December 31, 2014, was $10.1 billion, compared with $10.4 billion as of December 31, 2013, reflecting a decline in priced options.
Nine Months Ended December 31, 2014 – Booz Allen’s cumulative performance for the three quarters of fiscal 2015 has resulted in:
- Revenue of $3.93 billion for the nine months ended December 31, 2014, compared with $4.08 billion for the prior year period, a decrease of 3.6 percent;
- Net income for the nine months ended December 31, 2014 of $189.2 million, compared with $185.3 million for the prior year period;
- Adjusted Net Income for the nine months ended December 31, 2014 of $195.5 million compared with $192.8 million in the prior year period;
- Adjusted EBITDA for the nine months ended December 31, 2014, of $415.5 million compared with $426.8 million for the prior year period; and
- Diluted EPS and Adjusted Diluted EPS for the nine months ended December 31, 2014 of $1.24 and $1.30, respectively remained consistent as compared to the prior year period.
Net cash provided by operating activities for the first three quarters of fiscal 2015 was $228.1 million compared with $292.3 million in the prior year period. Free cash flow for the first three quarters of fiscal 2015 was $210.6 million, compared with $280.0 million in the prior year period. Although collections were strong as reflected in the decrease in Days Sales Outstanding, the volume of collections was down due to a decrease in revenue.
For fiscal year 2015, we are increasing our full year top line guidance and narrowing full year bottom line guidance. We now expect a low-single digit percentage revenue decline. At the bottom line we are forecasting our diluted EPS to be in the range of $1.52 to $1.56 per share, and Adjusted Diluted EPS to be in the range of $1.58 to $1.62 per share, reflecting an increase of 2 cents at the mid-point of both ranges.
These EPS estimates are based on fiscal year 2015 estimated average diluted shares outstanding of approximately 150.1 million shares, and an approximate 39.4 percent effective tax rate, which reflects our qualification for certain federal tax credits.
Conference Call Information
Booz Allen Hamilton will host a conference call at 8 a.m. EDT on Wednesday, January 28, 2015 to discuss the financial results for its Third Quarter of Fiscal Year 2015 (ended December 31, 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. EST on January 28, 2015, and continuing for 30 days.