May 21, 2014
Annual results consistent with or exceeding guidance
Full-year revenue of $5.48 billion
Full-year Adjusted EBITDA of $534 million
Full-year Adjusted Diluted Earnings per Share of $1.63
Quarterly dividend increased to $0.11 per share, payable on June 30, 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 fourth quarter and full year fiscal 2014. The Company saw revenue declines for the full year and the quarter as a result of uncertainties in the government contracting environment, including the October 2013 government shutdown. Despite these uncertainties, fiscal 2014 net income improved over the prior year period, while the Company returned significant value to shareholders through both regular and special dividends. The Company’s full-year financial results met revised revenue guidance, while exceeding revised guidance for Adjusted Diluted Earnings per Share. Booz Allen’s fiscal year runs from April 1 to March 31, with the fourth quarter of fiscal 2014 ending March 31, 2014.
Revenue for fiscal year 2014 was $5.48 billion, compared with $5.76 billion in the prior year period, a decrease of 4.9 percent. Revenue in the fourth quarter was $1.40 billion, compared with $1.55 billion in the prior year period, a decrease of 9.4 percent. In fiscal year 2014, Adjusted EBITDA increased by 1.0 percent, as Adjusted EBITDA margins increased from 9.2 percent in fiscal 2013 to 9.7 percent in fiscal 2014. Adjusted Net Income increased by 1.0 percent in fiscal 2014 and Adjusted Diluted Earnings per Share was $1.63 for fiscal year 2014, compared with $1.65 in the prior fiscal year.
The Company authorized and declared a 10 percent increase in its regular quarterly cash dividend, which is now $0.11 per share, payable on June 30, 2014, to stockholders of record on June 10, 2014.
Ralph W. Shrader, Booz Allen’s Chairman & Chief Executive Officer, said, “Last spring, we provided revenue and earnings guidance for fiscal year 2014, and reiterated our margin improvement goals. I’m proud to report that, even with the uncertainties faced by our industry, we delivered on our bottom line guidance – and exceeded our margin goals. Despite challenging market conditions which have affected every company in our sector, Booz Allen has performed well – serving our clients in their core missions and delivering strong returns to our investors.
“For fiscal year 2015, we are forecasting continued margin improvement and solid earnings with an expected modest decrease in revenue. We believe our federal clients have funds to spend as the end of the government fiscal year approaches, and based on recent contract wins, believe that Booz Allen will take share.
“Our focus and commitment reaches well beyond the current fiscal year. We continue to invest in the future – in promising market areas in commercial and international, and in building deeper capabilities in engineering, advanced analytics, cyber, predictive intelligence, enterprise integration, and software development. As we celebrate our 100thanniversary in business in 2014, we’re putting in place growth platforms that will position us to thrive in Booz Allen’s second century.”
Full Fiscal Year 2014 – Below is a summary of Booz Allen’s results for fiscal year 2014, and the key factors driving those results:
- Booz Allen’s 4.9 percent decrease in revenue in fiscal 2014 compared with the prior year resulted from reductions in headcount due to lower demand in an uncertain federal budget environment, and a reduction in billable expenses. Revenue in fiscal 2014 was additionally impacted by the October 2013 government shutdown and weather-related closures. While lower headcount led to fewer billable hours in total, we experienced continued improvement in productivity of consulting staff over the prior year which helped reduce the impact of such reduced billable hours.
- In fiscal 2014, operating income increased to $460.6 million from $446.2 million in fiscal 2013, and Adjusted Operating Income increased to $470.2 million from $467.3 million in fiscal 2013. The increase in fiscal 2014 operating income was driven by improved contract profitability and effective management of indirect costs in comparison to the prior year period, which was partially offset by the impact of the October 2013 government shutdown. Adjusted EBITDA increased to $534.0 million in fiscal 2014 compared with $528.8 million in fiscal 2013, primarily as a result of the growth in Adjusted Operating Income.
- In fiscal 2014, net income increased to $232.2 million from $219.1 million in fiscal 2013. The increase was driven by the same factors affecting operating income, plus the benefit of a lower effective tax rate as a result of the Company’s qualification during the fourth quarter of fiscal 2014 for federal and state tax credits. These benefits were partially offset by an increase in interest expense. Adjusted Net Income increased to $241.9 million from $239.5 million in fiscal 2013. This increase was primarily a result of the increase in Adjusted Operating Income.
- In fiscal 2014, diluted EPS increased to $1.54 from $1.45 in fiscal 2013. In fiscal 2014, Adjusted Diluted EPS decreased to $1.63 from $1.65 in fiscal 2013. The per share earnings were positively driven by the same factors as net income and Adjusted Net Income, which was partially offset by an increase in the Company’s diluted share count.
Cash flow generation continued to be a source of significant strength for the Company. Net cash provided by operating activities in fiscal 2014 was $332.7 million, or 138 percent of Adjusted Net Income, with Free Cash Flow of $311.8 million, or 129 percent of Adjusted Net Income. As a result of this cash flow generation and the strength of Booz Allen’s balance sheet, the Company was able to declare and pay a total of $2.40 per share in dividends during fiscal 2014.
Funded backlog as of March 31, 2014, was $2.29 billion, compared to $2.51 billion as of March 31, 2013. Booz Allen’s total backlog as of March 31, 2014, was $9.84 billion, compared to $11.54 billion as of March 31, 2013. The decline in backlog is due in part to shorter periods of performance, with the fourth quarter of fiscal 2014 average period of performance for active contracts and task orders down 10 percent over the prior year period.
Fourth Quarter 2014 – Below is a summary of Booz Allen’s results for the fiscal 2014 fourth quarter and the key factors driving those results:
- Booz Allen’s 9.4 percent decline in revenue in the fourth quarter of fiscal 2014 compared with the prior year period resulted from reductions in headcount due to lower demand in an uncertain federal budget environment. In addition, there were two fewer work days in the quarter compared to the prior year period, as well as the additional impact of three full and two partial weather-related government closures and a reduction in billable expenses. Lower headcount led to fewer billable hours in total.
- In the fourth quarter of fiscal 2014, operating income decreased to $89.2 million from $112.9 million in the prior year period and Adjusted Operating Income decreased to $91.4 million from $116.9 million in the prior year period. The declines in operating income and Adjusted Operating Income were driven by reduced revenue and the timing of indirect expenditures, as the Company manages its significant level of investments in people, capabilities, and business development on an annual, rather than a quarterly basis. Adjusted EBITDA decreased to $107.2 million from $133.6 million in the prior year period. These metrics were impacted by the same factors as Adjusted Operating Income.
- In the fourth quarter of fiscal 2014, Net Income decreased to $46.9 million from $54.8 million in the prior year period. Adjusted Net Income decreased to $49.2 million from $58.2 million in the prior year period. These reductions in earnings compared to the prior year period were largely the result of the factors affecting Adjusted Operating Income and Operating income and were partially offset by the benefit of tax credits realized during the quarter.
- In the fourth quarter of fiscal 2014, diluted EPS decreased to $0.30 from $0.37 in the prior year period; Adjusted Diluted EPS decreased to $0.33 per share from $0.40 in the prior year period. The declines in per share earnings were driven by the same factors as net income and Adjusted Net Income, as well as an increase in share count.
The fourth quarter of fiscal 2014 saw seasonally strong award activity as reflected in a book to bill of 0.62 for the quarter, which was stronger than the 0.49 book to bill for the entire second half of fiscal 2013. While not reflected in backlog until the award of defined work, we also received award of several large IDIQ contract vehicles since January 1, 2014. These facts combined with a significant increase in total value of submitted proposals for defined work provide us confidence as we enter our fiscal 2015. For fiscal 2015, we expect a mid-single digit percentage decline in revenue. At the bottom line, for the full year, we are forecasting diluted EPS to be in the range of $1.44 to $1.54, and Adjusted Diluted EPS to be on the order of $1.50 to $1.60 per share.
These EPS estimates are based on fiscal year 2015 estimated average diluted shares outstanding of approximately 151.3 million shares, and a 40.5 percent effective tax rate, which does not include federal and state 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, May 21, 2014, to discuss the financial results for its Fourth Quarter and full Fiscal Year 2014 (ending March 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. EDT on May 21, 2014, and continuing for 30 days.