Booz Allen Hamilton Holding Corporation

Good morning. Thank you for standing by, and welcome to the Booz Allen Hamilton's earnings call covering first quarter results for fiscal year 2022. At this time, all participants are in a listen-only mode. Later, there will be an opportunity for questions. I now like to turn the call over to Mr. Ruben Day.

Thank you. Good morning, and thank you for joining us for Booz Allen's first quarter fiscal year 2022 earnings announcement. We hope you've had an opportunity to read the press release that we issued earlier this morning. We have also provided presentation slides on our website and are now on slide two. I'm Ruben Day, Head of Investor Relations, and with me to talk about our business and financial results are Horacio Rozanski, our President and Chief Executive Officer, and Lloyd Howell, Executive Vice President, Chief Financial Officer, and Treasurer. As shown on the disclaimer on slide three, please keep in mind that some of the items we will discuss this morning will include statements that may be considered forward-looking, and therefore are subject to known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecasted results. Those risks and uncertainties include, among other things, general economic conditions, the availability of government funding for our company's services, and other factors discussed in today's earnings relief and set forth under the forward-looking statements disclaimer included in our first quarter fiscal year 2022 earnings relief. and in our SEC filings. We caution you not to place undue reliance on any forward-looking statements that we may make today and remind you that we assume no obligation to update or revise the information discussed on this call. During today's call, we will also discuss some non-GAAP financial measures and other metrics, which we believe provide useful information for our investors. We include an explanation of adjustments and other reconciliations of our non-GAAP measures to the most comparable GAAP measures in our first quarter fiscal year 2022 slides. It is now my pleasure to turn the call over to our CEO, Horacio Rosenti. We are now on slide four.

Thank you, Ruben, and good morning, everyone. Thanks for joining the call. As always, Lloyd and I are pleased to share our latest financial results and to represent the great work of the more than 28,000 people of Booz Allen. In addition to discussing our first quarter performance, this morning I will take a little time to talk about the future of work. Our industry, in fact the entire economy, is transitioning to more in-person work as we recover from the COVID-19 pandemic. And at Booz Allen, we're excited about the opportunities this presents to our people and clients. After my remarks, I'll give Lloyd the floor to cover the financials in more depth. Let me start with an overview of the quarter. On our last call in late May, we talked about our near and mid-term priorities and our fiscal year 2022 outlook. We said we expect another year of significant revenue growth with strong earnings growth, continued cash generation, and strategic deployment of capital. At the same time, we noted that the pattern for the year would likely look different from recent years, with slower revenue growth in the first half and significant acceleration in the second half. This pattern is due to several factors, including the recovery from the pandemic, the implementation of a new financial system, and our acquisition of Liberty IT solutions. The results we released this morning are very much in keeping with the expectations we laid out. As such, we are pleased to reaffirm our guidance for the full fiscal year. Operationally, we continue to move back to pre-pandemic business rhythms. In our defense and civil businesses, we are aligned to our government's top priorities, have a robust pipeline, and several great wins in the quarter. These two parts of our portfolio represent three quarters of our revenue, and they continue to deliver solid growth. In our intelligence business, hiring is going well, and the portfolio reshaping we have done has yielded some important wins. The first quarter decline in revenue was largely due to low billable expenses, and we continue to expect a growth year in this business. Global commercial represents 2% of our revenue. Continued declines are tied to our portfolio reshaping and the impact of the pandemic. We do expect to see year-over-year growth in the second half of the fiscal year. Taken together, our entire portfolio of business produced low single-digit revenue growth year-over-year as we expected. The relatively slow growth was driven primarily by a return to more normal staff utilization and PTO trends compared to the first quarter of last fiscal year, when the country was largely in lockdown. At the bottom line, adjusted EBITDA, adjusted EBITDA margin, and adjusted diluted earnings per share were ahead of our expectations. Book-to-bill for the quarter was also strong, and we're excited about the quality, mission-centered work we are winning. Cash flow operations came in light, primarily driven by one-time costs related to the Liberty transactions. Lloyd will discuss all the numbers in detail in a few minutes. As you may remember, on our last call, we spoke about a set of near and midterm priorities that are critical to our success. The main reason for our optimism about the year is the great progress we have made to date. Let me go through them briefly. Our top priority is recruiting. and in the first quarter, we began to see results from our laser focus in this area. We are seeing sequential month-over-month growth and believe momentum will build over the remainder of the year. Second, the reshaping of our intelligence and global commercial portfolios continues. We believe the tactical and strategic moves we are making will yield year-over-year growth. Third, we are very pleased to have completed the Liberty acquisition in mid-June. Our teams are working side by side, and everything we have seen since the closing confirms that this was a great deal for Booz Allen and for Liberty. We are very excited about the strategic opportunities we have to augment each other's strengths. Fourth, the NextGen financial system successfully launched on April 1st and is running very well, to the great credit of the team. After more than three years of preparation, launching the system and executing the first quarter close without any major disruptions were critical milestones. On behalf of the whole firm, I want to extend a big congratulations and thank you to the NextGen team for all their hard work. And fifth, we continue to invest in our people and capabilities as we carefully manage the transition to a post-COVID environment. Consistent with that, creating the best possible experience for our talent is a constant area of focus for us. In that vein, I'd like to take a few minutes today to share with you how Booz Allen is thinking about the future of work. We are cautiously optimistic that the worst of the pandemic is behind us in the United States and most places that Booz Allen operates. As such, we are preparing to fully reopen our offices the day after Labor Day, provided that health and safety allow it. As we move towards that reopening, we intend to take the best of what we've learned over the past 16 months and create ways of working that better serve our talent, our clients, and the critical missions we are a part of. Going forward, our workforce will have three operating models. First, we have always had a small group of employees who are purely remote. And we expect that to continue and for that group to remain relatively small. Second, we have a group of people who work full time at government and our facilities. And that too will continue, although we expect it to proportionately decline from historical levels. Our clients have shown a great deal of creativity over the course of the pandemic. And based on this experience, many are interested in flexible models that better serve their missions while reducing the number of people who are 100% onsite. The third workforce model is a hybrid. And we expect, over time, for this to be a majority of our people. Employees in this group will spend less time in Booz Allen and client offices than previously, and instead have a mix of telework and in-person collaboration. This gives people much more flexibility in their personal and family lives. while at the same time preserving our culture and the close connection to clients, our firm, and each other. What is most exciting about the future of work conversations we've been having internally and externally is the opportunity everyone sees for greater flexibility. In fact, there is an expectation that we need to work in new ways because the technology allows it and the competition for talent simply requires it. To succeed, today and in the future, employers, whether they are in the government or the private sector, must foster a workforce that is more distributed, more digital, and certainly more diverse. Booz Allen is a leader in this area, working with our government clients to help them rethink and reshape the way they accomplish critical missions. Many clients believe that the reality of today's world and the needs of the next decade demand fundamental change in how federal agencies execute their business on behalf of all of us. And consistent with who we are, we will lean into those change opportunities proactively. And so, as we look towards the fall and beyond, our firm has a lot to be optimistic and excited about. We are working very hard to take care of our people, build our business, serve clients, and position Booz Allen for the future. As always, our overriding goal is to continue to create near and long-term value for our investors and all our stakeholders.