Booz Allen Hamilton Holding Corporation · NYSE:BAH
Booz Allen Hamilton — Investor Day (June 2018)
51 slides from Booz Allen Hamilton's investor day presentation, Jun 6, 2018
Slide 1: Booz Allen Hamilton Investor Day
Booz | Allen | Hamilton BOOZ ALLEN HAMILTON CE INVESTOR DAY 2016 NEW YORK, NEW YORK
Slide 2: Financial Disclaimers
FINANCIAL DISCLAIMERS Forward Looking Safe Harbor Statement Certain statements contained in this presentation and in related comments by our management include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking stateme
Slide 3: Agenda
AGENDA TOPIC PRESENTER Investment Thesis and Overview Horacio Rozanski, President and Chief Executive Officer Chris Bogdan, Senior Vice President, Aerospace Business Leader Perspectives Kristine Martin Anderson, Executive Vice President, Civilian Services Group Lead Multi-Year Financial Outlook Lloy
Slide 4: Horacio Rozanski
HORACIO ROZANSKI President & Chief Executive Officer 4
Slide 5: Investment Thesis: Unique Market Position
INVESTMENT THESIS ~$3 ~$2 FY18 FY21 ADEPS ADEPS UNIQUE STRONG = FINANCIAL RETURNS + OPTION MARKET VALUE POSITION 50% ADEPS Growth (+~2% Dividend Yield) 6–9% 10–30 bps ~$1.4B Annual Revenue Capital Deployment, Margin Expansion Growth Incl Dividends
Slide 6: Horacio Rozanski
HORACIO ROZANSKI President & Chief Executive Officer 6
Slide 7: Booz Allen Overview
BOOZ ALLEN OVERVIEW We bring bold thinking and a desire to be the best in $6.2 billion in FY18 our work in consulting, analytics, digital solutions, engineering, and cyber and with industries ranging from defense to health, energy, and international development. REVENUE Founded in 1914 SINGLE P&L He
Slide 8: Purpose and Values
COLLECTIVE > LJ INGENUITY | =¢5 =u |< ae PURPOSE AND VALUES
Slide 9: Legacy of Innovation
LEGACY OF INNOVATION For more than 100 years, we have been helping our clients achieve the impossible, making it our business to identify and solve the emerging challenges of our time. MANAGEMENT CONSULTING DEFENSE NASA CYBER SPORTS AUTOMOBILES In 1914, we pioneered the In 1940, we assisted the Navy
Slide 10: Our Clients
OUR CLIENTS GLOBAL / COMMERCIAL • Commercial: • International: Financial services, Middle East, North 3% utilities, energy, Africa region, and retail, manufacturing, select Asian markets healthcare 24% 46% INTEL • U.S. Intelligence • Military Intelligence DEFENSE Agencies: Agencies: 27% National Sec
Slide 11: Industries We Serve
INDUSTRIES WE SERVE FINANCIAL SERVICES We are engaged by premier clients across a set of industries, including: • Banking • Hedge Funds FINANCIAL SERVICES • Exchanges • 17 of the Top 25 U.S. Financial Institutions (banks, exchanges, wealth management firms) • Insurance ENERGY ENERGY & CRITICAL • Mul
Slide 12: Our Capabilities
OUR CAPABILITIES CONSULTING DIGITAL SOLUTIONS • Human Capital Planning • Digital Strategy • Strategic Communications • Digital Experience • Wargames and Exercise Design • Cloud & Data Platforms • Modern Software Development ANALYTICS CYBER • Artificial Intelligence • Cyber Risk • Data Science • Cybe
Slide 13: Our People
OUR PEOPLE 24,600+ diverse, passionate, and WHO WE ARE • 28% are Veterans exceptional people driven to excel, • 69% hold a security clearance do right, and realize positive change • 40% have advanced degrees in everything we do. • 65,000+ volunteer hours in FY18 • Social impact focus areas: veterans
Slide 14: History of Revenue Growth
$2,000 $4,000 $6,000 $0 ($ in millions) FY96 FY97 FY98 FY99 FY00 FY01 FY02 HISTORY OF REVENUE GROWTH FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 14
Slide 15: Legacy of Strong Total Shareholder Return
LEGACY OF STRONG TOTAL SHAREHOLDER RETURN BAH TOTAL ANNUAL TSR SINCE IPO VS S&P 500 600% BAH TSR: +499% 500% 400% 300% S&P 500 TSR: +169% 200% 100% 0% (100%) Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 May-18 BAH TSR S&P 500 TSR Note: BAH TSR as of 5/31/2018; Assumes dividend reinvestmen
Slide 16: V2020 Strategy: Invest, Adapt Through Downturn... Accelerate Out of It
V2020 STRATEGY: INVEST, ADAPT THROUGH DOWNTURN... ACCELERATE OUT OF IT 2013 Flashback: THE ANTICIPATED CHALLENGE OUR RESPONSE • Post 9/11 and stimulus spending was not sustainable • Compete on our terms -- quality and differentiation • Pricing pressure in non-differentiated portion of market • Strea
Slide 17: Results Show That V2020 Strategy Has Been Successful
RESULTS SHOW THAT V2020 STRATEGY HAS BEEN SUCCESSFUL ACCELERATING ADJUSTED EBITDA, ADEPS GROWTH ORGANIC REVENUE GROWTH CONSISTENTLY ABOVE MARKET $ in Ms $2.50 $616 10% 7.4% 6.3% $585 5% $588 2.5% $2.30 0.2% $560 0% $547 $2.10 $534 $2.01 (2.3%) $529 -5% (3.4%) $524 $532 (3.7%) (3.9%) $1.90 $506 $1.75
Slide 18: Investment Thesis: Unique Market Position
INVESTMENT THESIS ~$3 ~$2 FY18 FY21 ADEPS ADEPS UNIQUE STRONG = FINANCIAL RETURNS + OPTION MARKET VALUE POSITION 50% ADEPS Growth (+~2% Dividend Yield) 6–9% 10–30 bps ~$1.4B Annual Revenue Capital Deployment, Margin Expansion Growth Incl Dividends
Slide 19: Our Unique Market Position
OUR UNIQUE MARKET POSITION Government Booz Allen Challenges Rising demand Integration of consulting, Proposition for services mission know-how, Growing mission advanced capabilities complexity Unique Investment in Requirement to Value innovation gain efficiencies Top-tier talent Desire to apply Inte
Slide 20: Virtuous Cycle Creates Long Term Shareholder Value
VIRTUOUS CYCLE CREATES LONG TERM SHAREHOLDER VALUE WE ARE CREATING VALUE FROM ACCELERATING GROWTH THROUGH A VIRTUOUS CYCLE Results in high- quality work for clients and Doing work at strong financial the center of performance clients’ missions Positions us to Allows us to win additional identify and
Slide 21: Chris Bogdan
Aerospace & Engineering CHRIS BOGDAN Senior Vice President • Leader in Aerospace Account • Retired as Lieutenant General after a 34 year career in U.S. Air Force as both a test pilot and ultimately an acquisition officer • Program Executive Officer for the F-35 Lightning II Joint Program Office 21
Slide 22: Kristine Martin Anderson
Civilian Services Group KRISTINE MARTIN ANDERSON Executive Vice President & Group Lead • Currently lead Civilian Services Group • Previously led Health Team, transforming business model • Prior to joining Booz Allen, served as Vice President for Operations and Strategy at CareScience 22
Slide 23: Video: Veterans Benefits Management System
VIDEO: VETERANS BENEFITS MANAGEMENT SYSTEM
Slide 24: Health 12 Year Growth Trend
HEALTH 12 YEAR GROWTH TREND Gross Revenue in $M $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 24
Slide 25: Lloyd Howell
LLOYD HOWELL Chief Financial Officer and Treasurer 25
Slide 26: Investment Thesis: Unique Market Position
INVESTMENT THESIS ~$3 ~$2 FY18 FY21 ADEPS ADEPS UNIQUE STRONG = FINANCIAL RETURNS + OPTION MARKET VALUE POSITION 50% ADEPS Growth (+~2% Dividend Yield) 6–9% 10–30 bps ~$1.4B Annual Revenue Capital Deployment, Margin Expansion Growth Incl Dividends
Slide 27: Growth: History of Growing Faster Than Market
GROWTH: HISTORY OF GROWING FASTER THAN MARKET CUMULATIVE GROWTH RATES OVER TIME SHOW SIGNIFICANT MARKET SHARE GAINS 700% 600% 500% 400% 300% 200% 100% 0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (1) (1) (2) Booz Allen Revenue Discretionary B
Slide 28: Large and Growing Addressable Market
LARGE AND GROWING ADDRESSABLE MARKET U.S. GOVERNMENT 2018 DISCRETIONARY BUDGET (1) Total Contractor-Addressable Services Spending (GFY17-GFY23) ($B) $500 $450 $461 $447 $400 $417 $424 $394 $402 $350 $356 Total Contracted $394B + Intel $300 $250 $200 $150 $100 Addressable $124B Contracted $50 + INTEL
Slide 29: Strategy Aligned with Government Priorities
STRATEGY ALIGNED WITH GOVERNMENT PRIORITIES Addressable Market Projected Growth Booz Allen Positioning • 50+ AI/MI programs, from cutting- edge quantum computing to large agency-wide programs Data Science & DS ($2-$3B) DS (6-8%) • Only consulting firm certified with NVIDIA’s Deep Learning Institute
Slide 30: Ample Backlog Pipeline to Support Growth Expectations
AMPLE BACKLOG PIPELINE TO SUPPORT GROWTH EXPECTATIONS SOLID BACKLOG GROWTH PROVIDES $25B QUALIFIED PIPELINE, +10% YOY STRONG REVENUE VISIBILITY ($B) (60% New Work) +18% $16.0 $15 +15% $13.6 $17B in Opportunities in $11.5 $11.8 Pre-Proposal +26% $10.8 $9.2 $9.8 $10 $9.4 $7.7 $5.2 $6.2 $6.6 $8B in $5.
Slide 31: Goal of 10-30 bps Adjusted EBITDA Margin Improvement Over 3 Years
GOAL OF 10-30 BPS ADJUSTED EBITDA MARGIN IMPROVEMENT OVER 3 YEARS MARGIN LEVERS ACCELERATING ADJUSTED EBITDA AND ABILITY TO DRIVE MARGINS WHEN NEEDED • Mix shift—commercial, international $ in Ms • Fixed-price technology work 12.0% $600 $585 • Emerging businesses $580 11.2% $547 • Operating scale $5
Slide 32: Sufficient Balance Sheet Capacity and Flexibility
SUFFICIENT BALANCE SHEET CAPACITY AND FLEXIBILITY TO EXECUTE CAP ITAL DEPLOYMENT STRATEGY BOOZ ALLEN DEBT MATURITY PROFILE • Accelerating revenue growth to drive EBITDA Current Balances Due as of 3/31/18 ($M) Leverage: 2.6x • Ample room relative to net operating leverage target of ~3.0x-3.5x TLA $1,
Slide 33: Disciplined, Shareholder-Friendly Capital Allocation
PLAN TO MAINTAIN DISCIPLINED, SHAREHOLDER-FRIENDLY CAPITAL ALLOCATION CURRENT CAPITAL ALLOCATION PRIORITIES REPRESENTATIVE 3-YEAR PROJECTED CAPITAL DEPLOYMENT (EXCLUDING M&A) WORKING CAPITAL NEEDS ~10% QUARTERLY DIVIDEND ~15% CAPEX REQUIREMENTS APPROPRIATELY PRICED STRATEGIC ACQUISITIONS ~55% SHARE
Slide 34: Track Record of Deploying Capital to Deliver Shareholder Value
TRACK RECORD OF DEPLOYING CAPITAL TO DELIVER SHAREHOLDER VALUE CAPITAL DEPLOYMENT AND TSR PERFORMANCE SINCE IPO TSR Since IPO: 499%(1) $1,400 600.0% M&A: ~$500M $1,200 500.0% $1,000 Share Repurchases: ~$450M 400.0% $800 300.0% $600 200.0% Special Dividends: $1.5B $400 100.0% $200 0.0% Quarterly Divi
Slide 35: Strong FY18 Performance and Prospects for FY19
STRONG FY18 PERFORMANCE AND PROSPECTS FOR FY19 FY18 FY19 Expected % Revenue Growth 6.3% ~6.0-8.0% $585M Adjusted EBITDA, % Growth Not Guided To (6.9%) ADEPS $2.01 $2.35 – $2.50 ADEPS % Growth 15% 17-24% Capital Deployed (Acquisitions, Dividends, and Share Repurchases) ~$394M $350M+ 35
Slide 36: Investment Thesis: Unique Market Position
INVESTMENT THESIS ~$3 ~$2 FY18 FY21 ADEPS ADEPS UNIQUE STRONG = FINANCIAL RETURNS + OPTION MARKET VALUE POSITION 50% ADEPS Growth (+~2% Dividend Yield) 6–9% 10–30 bps ~$1.4B Annual Revenue Capital Deployment, Margin Expansion Growth Incl Dividends
Slide 37: Questions?
QUESTIONS? 37
Slide 38: Horacio Rozanski
HORACIO ROZANSKI President & Chief Executive Officer 38
Slide 39: Dr. Joshua Sullivan
Artificial Intelligence DR. JOSHUA SULLIVAN Senior Vice President • Currently lead the Analytics Team • Authored best-selling book The Mathematical Corporation • Prior to joining Booz Allen, held leadership roles at software company and engineering roles with the Federal Government
Slide 40: Machines Are Learning How to Perform Like People
MACHINES ARE LEARNING HOW TO PERFORM LIKE PEOPLE Artificial Intelligence Hyperscale Hardware GPUs Machine Learning Quantum Annealing Evolutionary Probabilistic Inductive Kernel ASICs Deep Learning 40
Slide 41: Video: Artificial Intelligence for the Defense and Intelligence Mission
VIDEO: ARTIFICIAL INTELLIGENCE FOR THE DEFENSE AND INTELLIGENCE MISSION
Slide 42: Artificial Intelligence Market Overview
ARTIFICIAL INTELLIGENCE MARKET OVERVIEW $24 B $649 M 3 Addressable Federal Expected current Create margin Market for AI year Federal enhancement by GFY 2018-2025 spending for AI bundling three GFY 2018 offerings, software, services, and hardware resales 42
Slide 43: Case Study: Algorithmic Warfare
CASE STUDY: ALGORITHMIC WARFARE 43
Slide 44: Appendix
APPENDIX
Slide 45: Non-GAAP Financial Information
NON-GAAP FINANCIAL INFORMATION • "Revenue, Excluding Billable Expenses" represents revenue less billable expenses. We use Revenue, Excluding Billable Expenses because it provides management useful information about the Company's operating performance by excluding the impact of costs that are not ind
Slide 46: Non-GAAP Financial Information
NON-GAAP FINANCIAL INFORMATION (a) Reflects amortization of intangible assets resulting from the acquisition of our Company by The Carlyle Group. (b) Reflects debt refinancing costs incurred in connection with the refinancing transaction consummated on July 13, 2016. (c) Reflects the combination of
Slide 47: Financial and Operational Highlights
FINANCIAL AND OPERATIONAL HIGHLIGHTS CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (a) a All interim periods reflect unaudited numbers while annual numbers are audited. b Basic and diluted weighted average shares outstanding and earnings per common share amounts are calculated using the two-class m
Slide 48: Financial and Operational Highlights
FINANCIAL AND OPERATIONAL HIGHLIGHTS UNAUDITED NON-GAAP FINANCIAL INFORMATION (a) a The use and definition of Non-GAAP financial measurements can be found in the Company's public filings. b Reflects amortization of intangible assets resulting from the acquisition of our Company by The Carlyle Group.
Slide 49: Financial and Operational Highlights
FINANCIAL AND OPERATIONAL HIGHLIGHTS UNAUDITED NON-GAAP FINANCIAL INFORMATION (a) a The use and definition of Non-GAAP financial measurements can be found in the company's public filings. b Reflects amortization of intangible assets resulting from the acquisition of our Company by The Carlyle Group.
Slide 50: Financial and Operational Highlights
FINANCIAL AND OPERATIONAL HIGHLIGHTS ADDITIONAL OPERATING DATA (a) a All interim periods reflect unaudited numbers while annual numbers are audited. b Calculated as the change in total backlog during the relevant fiscal period plus the relevant fiscal period revenue, all divided by the relevant fisc
Slide 51: Financial and Operational Highlights
FINANCIAL AND OPERATIONAL HIGHLIGHTS OTHER KEY FINANCIAL METRICS (a) a All interim periods reflect unaudited numbers while annual numbers are audited. b Cash flow numbers are on a year-to-date basis for all periods presented. 51
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