January 27, 2016
Strong Book-to-Bill and Backlog
Third Quarter Revenue of $1.31 billion
Adjusted EBITDA of $121 million
Adjusted Diluted Earnings per Share of $0.41
Quarterly dividend increased by 15 percent to $0.15 per share, payable on February 29, 2016
McLean, Virginia — Booz Allen Hamilton Holding Corporation (NYSE:BAH), the parent company of management and technology consulting and engineering services firm Booz Allen Hamilton Inc., today announced preliminary results for the third quarter of fiscal 2016.
The Company’s continued emphasis on innovation and business development, as well as a renewed focus on hiring in the third quarter, contributed to a seasonally strong book-to-bill ratio of 0.64, a 20 percent increase in total backlog year-over-year, and an increase in headcount.
“Booz Allen remains on a steady path toward sustainable, quality growth,” said Horacio Rozanski, President and Chief Executive Officer. “Our third quarter performance keeps us on track for organic revenue growth this fiscal year. We are fully focused on building momentum that will carry over into our next fiscal year and delivering the highest quality work to our clients as we execute on the large number of contracts we have recently won.”
The Company authorized and declared a 15 percent increase to its regular quarterly dividend, to $0.15 per share, which is payable on February 29, 2016, to stockholders of record on February 10, 2016.
Third Quarter 2016 – Below is a summary of results for the fiscal 2016 third quarter and the key factors driving those results.
- Gross Revenue of $1.31 billion was flat from the prior year period. Revenue results reflected the impact on cost reimbursable contracts from higher indirect spending and the release of certain provisions for the potential recovery of allowable expenses, offset by a modest decline in billable expenses and direct labor. Increased indirect spending focused primarily on bid and proposal, marketing, recruiting and administrative activities.
- Adjusted Operating Income of $106.2 million was relatively flat compared to the prior year period. The result was attributable to the revenue factors discussed above.
- Adjusted Net Income increased to $61.8 million from $54.2 million in the prior year period. The increase was driven by the same factors as Adjusted Operating Income, as well as the benefits of certain tax credits realized in the quarter. The increase in Net Income to $108.1 million from $52.8 million in the prior year period was attributable to the same factors as Adjusted Net Income, as well as the release of certain income tax reserves relating to the acquisition of the Company by The Carlyle Group in July 2008.
- Adjusted EBITDA of $121.3 million and Adjusted EBITDA margin of 9.3 percent each were relatively flat compared to the prior year period.
- Diluted EPS increased to $0.71 from $0.35 and Adjusted Diluted EPS increased to $0.41 from $0.36 in the prior year period. The increase in Diluted EPS and Adjusted Diluted EPS was primarily due to the increase in Net Income and Adjusted Net Income, respectively, and a decrease in the Company’s diluted share count.
Booz Allen’s total backlog as of December 31, 2015, increased 20 percent to $12.07 billion, compared to $10.06 billion as of December 31, 2014. Book-to-bill was 0.64 for the third quarter of fiscal 2016, compared to 0.36 in the prior year period. Headcount increased by approximately 380, including approximately 270 staff from the acquisition of the software services unit of SPARC, LLC in the quarter.
Nine Months Ended December 31, 2015 – Booz Allen’s cumulative performance for the first three quarters of fiscal 2016 has resulted in:
- Revenue of $3.98 billion for the nine months ended December 31, 2015, compared with $3.93 billion for the prior year period, an increase of 1.3 percent;
- Adjusted Operating Income of $343.2 million for the nine months ended December 31, 2015, compared with $371.5 million for the prior year period;
- Adjusted Net Income for the nine months ended December 31, 2015, of $185.2 million compared with $195.5 million in the prior year period, and Net Income for the nine months ended December 31, 2015, of $228.6 million, compared with $189.2 million for the prior year period. The increase in Net Income was primarily driven by the release of certain income tax reserves, as referenced above;
- Adjusted EBITDA for the nine months ended December 31, 2015, of $386.7 million compared with $415.5 million for the prior year period; and
- Diluted EPS and Adjusted Diluted EPS for the nine months ended December 31, 2015, of $1.51 and $1.24, respectively, compared to $1.24 and $1.30, respectively, for the prior year period.
Net cash provided by operating activities for the first three quarters of fiscal 2016 was $181.0 million compared with $228.1 million in the prior year period. Free cash flow in the first three quarters of fiscal 2016 was $135.2 million, compared with $210.6 million in the prior year period. The decline in operating cash flow was driven primarily by the significant reduction in accounts receivable achieved in the prior year period. The decline in free cash flow was driven by those same factors, as well as an increase in capital expenditures, primarily related to the reconfiguration of the Company’s facilities footprint in the metropolitan Washington, D.C. area.
For our full fiscal year 2016 we are narrowing the guidance we issued on May 21, 2015. We now expect revenue growth to be in the range of zero to two percent. At the bottom line, for the full year, we are narrowing our guidance for Adjusted Diluted EPS, which is expected to be in the range of $1.61 to $1.67, to reflect increased levels of investment in bid and proposal and hiring activities in order to position the Company for growth in the next fiscal year. This Adjusted Diluted EPS range is based on fiscal year 2016 estimated average diluted shares outstanding of approximately 149.6 million shares, and a 38 percent effective tax rate, which includes qualification in the third quarter for certain federal and state tax credits.
Additionally, we are increasing our diluted EPS guidance, which is now expected to be in the range of $1.87 to $1.93. The increase to the diluted EPS forecast is due to the items mentioned above and the release of certain income tax reserves in the third quarter. The effective tax rate for the calculation of full-year Net Income is 26 percent.
Conference Call Information
Booz Allen Hamilton will host a conference call at 8 a.m. EST on Wednesday, January 27, 2016, to discuss the financial results for its Third Quarter Fiscal Year 2016 (ended December 31, 2015).
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 27, 2016, and continuing for 30 days.