Good morning. Thank you for standing by and welcome to Booz Allen Hamilton's Earnings Call Covering First Quarter Results for Fiscal 2017. At this time, all lines are in a listen-only mode. Later, there will be an opportunity for questions. I'd now like to turn the call over to Mr. Curt Riggle.

Good morning. And thank you all for joining Booz Allen's first quarter fiscal 2017 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 one. I'm Curt Riggle, Vice President, Investor Relations and with me to talk about our business and financial results are Horacio Rozanski, our President and Chief Executive Officer, Lloyd Howell, Executive Vice President and Chief Financial Officer. As shown on the disclaimer on slide two, please keep in mind that some of the items that 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. These risks and uncertainties include among other things general economic conditions, the availability of government funding for our company services and other factors discussed in today's earnings release and set forth under the forward-looking statements disclaimer included in our first quarter fiscal 2017 earnings release 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 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 2017 slides. It is now my pleasure to turn the call over to Horacio Rozanski, our CEO and he will start on slide three.

Thank you, Curt and good morning everyone. Welcome to Booz Allen fiscal 2017. On our last call, Lloyd and I shared our expectations for this year in terms of both strategic priorities and financial performance. Today, we're very pleased to report solid results for the first quarter. In addition to discussing those results and how they fit into our full-year picture, a little later, I will also talk about some of the external partnerships and alliances that we are creating to advance our long-term growth strategy. As we said in May, our plan for fiscal 2017 centers on a few key priorities, all working in tandem: first, aggressively pursue opportunities in a market that continues to signal demand; second, deliver the highest quality work to clients as we execute against our large backlog; third, further operationalize our recent investments in advanced capabilities and talent; and fourth, improve organic revenue growth while operating with agility and efficiency. In the first quarter, we made good progress on all fronts. Revenue grew at a healthy pace. We began ramping up work on contracts won in recent months. We continued to pursue and win opportunities that apply our powerful combination of consulting expertise, domain knowledge and technical capabilities. And we did all that while managing indirect spending more efficiently. As a result, both our top and bottom line results for the first quarter are in line with our plan and expectations. In keeping with our performance and to reflect our continued confidence in the business, the company authorized a regular dividend of $0.15 per share, payable on August 31 to stockholders of record on August 10. The first quarter results underscore that Booz Allen continues its path towards sustainable quality growth. We have a consistent track record of setting a plan and executing against…

Thank you, Horacio. Please turn to slide four. As Horacio said, we are very pleased with our first quarter results and believe that they reflect a tremendous effort by leaders across our business to drive growth in FY17. We opened the year with specific goals about how we would operate and what we would strive to achieve. The first three months of the year have us on track to meet our full year objectives at the strategic and tactical levels. Let me run through the highlights. Revenue grew 5.3% over the first quarter last year, which is our second consecutive quarter of healthy organic revenue growth. In fact, Booz Allen has not reported a decline in revenue in the last five quarters. We are intently focused on executing against our large backlog and deploying people as effectively as possible. At the bottom line, our first quarter results for adjusted EBITDA, ADEPS and adjusted EBITDA margin are in line with our plan for the year and reflect the progress we're making, and will continue to make in managing costs more efficiently. Adjusted EBITDA increased 1.8% from the same quarter last year, adjusted EBITDA margin for the quarter was 10.1%, and adjusted diluted earnings per share was $0.46. Our book-to-bill ratio at 1.14 times is the strongest Q1 performance we have recorded since fiscal year 2012. Total backlog as of June 30 was $12 billion, up nearly 30% from the same time last year. Funded and unfunded backlog both increased year-over-year, 10.5% and 15.2% respectively and priced options which gives us visibility into future years, are 49% above the year-ago level. Our opportunity pipeline remains strong. Average proposal value has increased from year-ago levels and contract durations for submitted proposals and awarded work continues to lengthen. The success we've had in winning…

Thank you, partner. A year ago on this first quarter call, I spent some time talking about the benefits of our innovation agenda, which is one of the key parts of our overall strategy to create sustainable, quality growth. You may recall that the innovation agenda extends horizontally across our defense, intelligence, civil and global commercial markets. It supports our efforts to tackle the toughest problems in areas that are most urgently needed for solutions. Our goal is to discover and deliver groundbreaking solutions that may start with one client, but then can be scaled across the business. Today, I would like to delve a little deeper on a crucial component of our innovation agenda. The fact that we're establishing a broad network of partnerships and alliances with technology industry leaders, creative start-ups, academic institutions, and other organizations in what is generally referred to as the innovation ecosystem. This is one of the objectives of our Vision 2020 strategy and in fact it complements the others, helping us to move closer to the centers of our clients' missions, increase the technical content of our work, attract and retain the best talent in diverse areas of expertise and deliver complex, differentiated end-to-end solutions. It's important to understand that we've made a deliberate choice more than three years ago to immerse Booz Allen in the innovation ecosystem. Why? Because technology is changing and developing faster than ever and we anticipate that our clients' needs to apply and take advantage of the technological change. For us to do what we have always done, which is stay ahead of the market and deliver the best most advanced solutions, we need to be in the constant flow of ideas. It allows us to connect and at times co-create with other leading-edge companies as we develop…

Great. Thank you, Horacio. Shannon, at this point, can you please provide instructions for the question-and-answer session of the call?

Thank you. Our first question is from Amit Singh with Jefferies. You may begin.

Hi, guys. Thank you for taking my question and great quarter. So, I just want to start off with getting a feel of the end market. I mean, compared to last quarter, have you seen a continued improvement in the end market? And if you could tie that to your current quarter exceptional performance and the reiteration of full-year guidance. So, your revenues beat the current quarter, but you sort of maintained your full-year guidance and the bookings have been strong and the trends seem to be moving in the right direction. So, as you look at your full-year revenue and we look at your wide guidance range, does the midpoint and higher end of that guidance range seems more the likely scenario?

Amit, thanks for the question. Why don't I start, and then let Lloyd back me up? On the end market question, what we are seeing, as I said on the prepared remarks, is that this is a market that continues to signal demand. Our clients have clear priorities. They have funded those priorities. And our people are exceptional at understanding them, figuring out where and how Booz Allen can add unique value in positioning ourselves for those opportunities. And so, I think that's the underlying demand story and revenue story for us, which is why we are confident that we can continue to outpace our competition. At the same time, this is still a challenging market. You still have small business set-asides as an issue, you still have pricing pressure, you still have all of the things that have been in the market for a while and some uncertainties. And so we feel good where we are. We are on track to deliver the year as we said we would. And we're one quarter into it and building momentum and pushing ahead.

Amit, this is Lloyd. In terms of guidance, our first quarter results are in line with our expectations for the full year. And underscore that we continue to make progress toward sustainable and quality growth. To echo Horacio's comments, one quarter doesn't make a whole year. And we're comfortable with the FY17 top and bottom line ranges that we've given previously. We're managing our operations with agility and we continue to invest and drive long-term growth. So overall, we're very comfortable with our guidance and we'll continue to invest for the long-term. I think part of your question also addressed revenue. First quarter's revenue tracks well against our expectations for the full year. Revenue grew at a healthy pace and we'll continue to execute our plan for the year, which is really focusing on managing the business, implementing our strategic priorities, capturing opportunities and ramping up the work on our contracts. On that basis, again we remain confident regarding FY17, particularly around organic growth accelerating. We have a plan for the year and we're on track with that plan as it relates to revenue.

All right. Great, thank you. And just quickly on the billable expenses quarter-over-quarter, they saw a growth again as a percent of revenues, so is that still related to just an increasing focus of the government toward small business set-asides? And as you're looking for the full year, how should we see billable expenses as a percent of revenue trending?

Sure. As we indicated last quarter, we expect some upward pressure on billable expenses over time. But for the year, we anticipate that to be at or very slightly above last year's 28% of revenue, which should not have a significant negative impact on our margins. You're correct. The government is requiring a small business and we compete very effectively in that market and need to be compliant with the government's wishes. But as I just said, we really see it just maybe being slightly above last year's 28% of revenue.

All right, great. Thank you very much.

Thank you. Our next question comes from Edward Caso with Wells Fargo. You may begin.

Good morning. And let me also offer my congratulations. Can you talk a little bit about your fairly stable head count number and what's happening under the covers? Are you squeezing harder on utilization, how much more room do you have in the short run before net head count kicks in? And where are you seeing the most challenges, sort of in the cyber, Intel areas or whatever color you can offer. Thanks.

Sure. As we said previously, we do expect total head count to increase this year, ramping up as the year progresses. Our head count growth will build on the success we've had in Q1 in terms of better utilization of our talent and improving billability. The key here is not, as I said in my opening comments, to hire just for numbers, but to hire the people with the high-demand skill-sets that are aligned with our growth strategy. And those who we can deploy in markets and areas where we see the greatest opportunity based on our clients' needs. And, again, systems development, cyber security, data analytics are the areas that we are seeing in demand, and from a head count perspective, the talent that we are recruiting. As I'm sure you're aware, we and others in the industry are facing a challenge related to the government's pace of approving security clearances. And as a result, we're being more creative in recruiting, retaining, and deploying professionals who already hold clearances. It is a competitive market in terms of talent. We feel that our investments in the areas that we've made are correct, and we're seeing a nice return on that. But it is those areas and those capabilities that we are looking to bring on board.

My other question is around the – you had a very strong awards quarter, and thinking through the pace, obviously, September is historically the industry's big quarter and it's always an extra big quarter for Booz Allen. Is there some change in the pace this year as we go into the Presidential cycle? And do you think the normal pause around administration change might be bigger or smaller than in prior cycles? Thanks.

We are not seeing with our clients and the opportunities that we're pursuing, we are not seeing a slowdown in the demand for our capabilities. I think in the past, as your question alludes to, we have seen events that might delay an award or push it back until the new cabinet and leadership is in place. But, again, we have always focused on our clients' most important missions, which tend to be apolitical. We are closest to that. That's the type of work we want to pursue, and that's largely what comprises our backlog and the opportunity set that we're looking at. So we do not see any significant perturbation in what we're pursuing and feel pretty confident about having a strong rest of the year.

Ed, if I can build on that, just give you a longitudinal perspective. I think there's a positive in this. When you go back four, five years ago, we used to talk about a 12-month selling season, which over the last couple of years, as things get tighter and more complicated with the budget situations, almost became a 12-week selling season, which really was not, in my mind, in the best interest of either the government or industry or anybody. It was just the dynamics of budget uncertainty. We are seeing now back a more regular pace of business, something that I think is hopefully will continue and something that I think is a positive, not just for the industry but for us, because as this continues to spread out, clients have more opportunity to plan, more opportunity to think through their priorities. We have a better opportunity to position ourselves against them and to drive the business in a more consistent fashion. So let's hope that continues, but that seems to be the trend right now.

Thank you.

Thank you. Our next question is from Bill Loomis with Stifel. You may begin.

Hi, thank you. Good results, everyone. Lloyd, what's the new interest rate and the costs that we could lower interest expense that we could expect over the next year?

Hey, Bill. This is Curt. I don't have the numbers in front of me, but that was in the press release that we did laid out all of the interest rates. I mean the big takeaway is it lowered the interest rate; it helped by removing the LIBOR floor on the Term Loan B, and narrowed the spreads on both. But the specific numbers are in the press release. I'm sorry, I don't have them in front of me.

But in terms of the actual LIBOR plus the actual rate you're using, do you have a ballpark of what it is? I know what the percentage is on LIBOR, but...

No, I don't.

And then gross margin had a nice improvement, but we saw the increases in billables as well, operating margin up slightly, EBITDA up slightly. Why is that happening, because usually I would expect that to put some pressure on margins?

Our margin for Q1 is in line with our expectations and really reflects the progress we've made managing our costs more efficiently. We said on last quarter that we expected spending needs to subside and that we expected to see full-year margins trend up for the year, but not likely to get back to FY 2015's level. Our expected margins will be modestly higher in the first half than the second half. And our first quarter results are right on track with the expectations we gave you previously. So bottom line is we're managing our costs better than we did a year ago, and we have a program in place to sustain that throughout the year.

Okay, great. Thank you.

Thank you. Our next question is from Carter Copeland with Barclays. You may begin.

Hey, good morning, gentlemen, and nice quarter. Horacio, I wondered if you could speak to the head count question again and if are there any metrics that you can point to I guess illustrate success you may be having in terms of getting the types of people you want into the organization and keeping them, whether it's cleared personnel or advance-degreed personnel. Is there anything that you can point us to that sort of shows success that you're having there, because clearly the revenues and the head count are a mismatch and reflective of your strategy to move up market. I don't know what data you may have that you can provide.

Carter, that's a good question. I would offer the following. We talked a little bit about some of the metrics and how some of the new skill sets are growing double-digit last quarter. I don't have the numbers right in front of me, but in general, what I would say is we're seeing very good pickup on the areas where we're investing for talent, and those are the areas where our clients have high demand. And a lot of what we try to do and the reason we don't try and track very specific metrics is the power of what we're doing in the market is at the intersection of our consulting expertise, what we know how to do for clients and our understanding of the mission, and both new and old capabilities that we're building. And it's that integrated play that is impossible for anybody else to replicate. And that's where we're seeing, in my mind, the most opportunity and the most success. So when you look inside the business, the hiring for systems development, for cyber, for analytics, as Lloyd said before, is moving at a very healthy clip. And we're feeling good about that. I think Lloyd said it, but in the first quarter, a lot of our focus was on making sure that we ran our billability at the right level and that we ran our team at the right level to make sure we were inside our rates the right way, to make sure we could deliver on our budgets and our commitments. And we expect head count to ramp up throughout the year in order to keep up with demand. So that's where we are. I think as a small indicator but a powerful one of the success that we are having, our summer interim program, which is really if you want to think about it, our firm team for future years and the place where we go look for people with very unique skill sets, people who aren't necessarily just a data scientist or a cyber-professional or a systems developer, people who can do all of those things at once. We were looking for 320 slots this year. We had 6,000 applications. And having met with a number of the folks that are in our summer program, they are truly exceptional. I am glad that I don't have to compete for a job with them, because I don't think Booz Allen would hire me. And so the quality of that talent is extraordinary and then the percentage of those folks that then accept our full-time offers is extremely high. So we feel good about where we are in terms of being able to attract the right kind of talent, not just for the work we need now but for the work we envision ourselves doing three and five years down the road.

Great. Thanks. That's great color. And then one for Lloyd, just kind of housekeeping. Several of the working capital accounts had what I would consider as larger than normal cash outflow this quarter. Just didn't know if there was anything in there to note or that was out of the norm?

No. For the full FY 2017 we expect modest year-over-year improvement in cash from operations, resulting from lower indirect spending and higher revenue. The first quarter's decrease in cash flow generation from the prior year was due to an increase in accounts receivable, tied to the...

Yes.

...residual effect of higher spending on indirect activities in FY 2016. And as we said on our last call, CapEx needs for FY 2017 will remain at roughly the same level as last year and we continue to reconfigure D.C. area facilities. After that CapEx is expected to revert to our long-term average of about 1% of revenue. Now, we also said previously that cash conversion should be in the range of 90% to 100% for the fiscal year. So that's our view on the cash.

Okay. Great. Thanks, sir.

Sure.

Thank you. Our next question is from Robert Spingarn with Credit Suisse. You may begin. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker) Good morning.

Morning, Bob.

Morning. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker) Apologies. I've been jumping between calls. So this may have been asked. But I wanted to ask what the embedded margin is in the guidance. And then I also wanted to ask about the 5% or better than 5% sales growth in the quarter, which, of course, is excellent. How come the guidance for the year is 2% to 5%?

Thank you for the question. There was a previous question that got at this area. Our first quarter performance is in line with our expectations for the full year and really underscores that we're continuing to make progress towards sustainable quality growth. I think it goes without saying one quarter doesn't make for the entire year. We are going to continue to invest in areas that we're providing the return that we expect or exceeding our expectations. And so when you go back to the full-year top line and bottom-line guidance, we feel pretty confident about that and aren't making any adjustments to it at that time. Similarly with the... Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker) Are you saying that the margin carries forward or that it's just that your margins will gradually go down over the year?

I'm saying that our margins over the course of the year are modestly higher in the first half than in the second half. And our first quarter results are on track with the expectations that we gave previously. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker) Okay. Okay. And then on the sales growth, you can't sustain this mid-single digit. It seems like the backlog is up enough. Such a substantial increase over the year, might that not be sustainable at the high end?

Well, our sales growth is also a reflection of what Horacio spoke to in terms of our ability to bring on board the talent. And the talent in the areas that we are investing in and already beginning to see some success there. So when it comes to our forecast, we are again confident with what we've projected. And depending upon how we bring on the talent that's required, we'll kind of govern where we end up within in that range. But at this time there is no reason for us to make any adjustments to that given where we have performed so far in the fiscal year. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker) And this may have been asked as well, but the growth in the indirect versus direct, is it parallel or is one growing more than the other, both in the quarter and in the guidance?

Indirect or billable expenses? Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker) Well, billable expenses, I suppose.

Okay.

Yes. So, as we indicated last quarter, we do expect some upward pressure on billable expenses over time. But for the year, we anticipate them to be at or very slightly above last year's 28% of revenue. And this is largely the market that we're facing into and the government's requirements around small business, which we are being compliant with. So we should not have any significant negative impacts on margins throughout the year.

Hey, Robert. This is Curt. Let me just add. If you look back over time, the movement from quarter-to-quarter in billable expenses is somewhat driven by the timing of invoices and such. And so I wouldn't put too much weight on the quarter-to-quarter movement. But what we're seeing so far and the look for the whole year is as Lloyd just described. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker) Okay. I was just trying to get really to the growth rate and the direct labor within the context of your overall guidance. And I think that gets us there. Thank you.

You're welcome.

Thank you. Our next question is from Jon Raviv with Citi. You may begin.

Hi. Good morning.

Morning.

You're talking about spending more efficiently on growth. Can you go in a little bit more about what those initiatives are and how does that interact with margin cadence through the year? I know Rob brought it up. I'm just trying to understand what specifically would drive margins lower through the rest of the year versus the first quarter.

Sure. With the first part of your question, as we indicated, as I indicated, FY 2016 our indirect spending was more than what we had planned or what we expected. That being said, in the areas that we defined as growth platforms tied to Vision 2020, we did see a return in performance on that. So the spending going forward is really aimed at focusing it on what our priority investment areas are and what our growth platforms are. At the same time, getting more and more of our workforce more utilized to both act on that investment but also to begin to convert what we have in our pipeline. So over time we expect the spending to be more focused. Where we are not seeing the return, we will appropriately reduce in those areas, and then with our workforce, having it more at a higher utilization than we did in the previous year, both to convert and to realize a return on the investment dollars.

Understood. But can we just explore a little bit what would drive margins down through the rest of the year? I think previously you guys had talked about having a flattish year with fiscal first half slightly or modestly higher than fiscal second half. It would seem...

No...

Yes, sorry, sorry. Go ahead.

No, this is Horacio. What I was going to say is, let me reiterate two things we've said in prior calls. First, we try and manage to a yearly number, not to a quarterly number and I would invite you to keep that in mind. There's a number of things that happen in the nature of our business that move dollars around from quarter-to-quarter that don't have much to do with the underlying performance, like the timing of holidays affects our fringe rate and things like that. And so I think Q1 is historically one that has slightly higher than other years. And so I would invite you to not take one quarter and extrapolate it into the whole year, because it never works out that way. And to really try and understand what we're trying to do this year compared to last year as opposed to this quarter compared to 12 months ago that quarter, I think that would give you a better sense and a better handle for at least how we're thinking about driving the business. And as Lloyd said, this is a year in which we want to continue to invest aggressively against a market that signals demand. It's a year where we believe we can do so but do it more efficiently, because with a year under our belts, we have a better sense of which opportunities are worth doubling down on and which opportunities may not be as rich. We have a better sense of where and how to build the bench of talent ahead of demand and where and how to stay current with demand and so forth. And so those are the small dial adjustments that we're making that will ultimately create the results that are consistent with the guidance that we've given for the year. Quarter-to-quarter I think the situation is more fluid, in part because we are committed to manage the business with agility and really understand what's happening in the market real-time and making decisions about that real-time, which is why our focus is on an annual guidance type look.

Thanks very much for that color, Horacio. Really appreciate it.

Thank you. Our next question is from Lucy Guo with Cowen & Co. You may begin.

Good morning. I'm on for Cai. Horacio or Lloyd, can you provide a little bit more perspective on the record book-to-bill number? Were there a few large awards? Any protests that are counted in there? And any pull-forwards from the next couple quarters?

Sure. As you may or may not be aware, we do not include protests in our backlog. So, we just have a very conservative approach to that. So what's in our backlog is really in three parts, funded, unfunded, and priced options. And what we are seeing is that our funded backlog has increased by 10.5%. Our total backlog increased 29.8%. And the book-to-bill for the quarter was 1.14%, which is exciting to us. The fixed price and time of materials portion, contract types, we've seen a increase in that. And at the same time for the cost reimbursable, we've seen a decrease. So that again gives us confidence regarding the remainder of the year, as well as being on strategy with the type of work that we want to do with our clients.

Okay. I was thinking more specifically on a JSF support contract and the separate contract for missile defense that are currently under protest, not huge ones. But those would be accounted for in your book-to-bill going forward, is that correct?

Well, as I said, we don't include protested contracts in our backlog. Obviously I'm aware of those under protest. But the government follows its own adjudication process and we remain patient and optimistic about it coming our way. But that being said, it's about as far as we get with trying to crystal ball or conjecture as to where these will end up. But we don't include them, as a rule of thumb, in our backlog calculations.

That's helpful. And follow-up is on just maybe asking the question on receivables in another way. Has there been any changes in the collection patterns of your customers, maybe based on contract mix? And do you expect going forward throughout the year that receivables would come down as a source of cash?

We don't expect a fundamental change, but the change that we are seeing is attributable in large part to the indirect spending that accommodated our indirect rates in FY16. The government did change its policy on approval of revised rates, which means we're likely unable to bill and collect excess indirect spending, prior to final negotiation. But this is expected and we are adjusting accordingly.

Great. Thanks.

Thank you. Our next question is from Ron Epstein with Bank of America. You may begin.

Hey, good morning, guys.

Good morning.

Maybe a couple of big-picture questions. Can you give us a view on some commentary around how the move into the commercial business is going, particularly into the commercial cyber? And I know one area you guys have been trying to grow is into the financial services arena. If you can give us a feel for how that's going?

Sure. I'll start and I'm sure Horacio want to jump in as well. Our investment into commercial and international is going as planned. We appreciated that strategically what we had a right to compete at and a right to win was in the cyber security-related areas. And as such our portfolio of work is in alignment with that, as you mentioned financial services, energy, life sciences are industries that emerged as clients who really were seeking out the type of support we provide. As everyone is also may be aware, this space has a lot of different types of players. We feel that given our federal experience, it's actually what the commercial market is demanding and we have evidence of that given our performance up to this point. So we continue to invest in a variety of offerings from strategic in nature to incident response to contesting and so forth. And because of again our federal experience, it has been a nice differentiator in the commercial market. We as I mentioned continue to invest in that both in terms of talent and the conversion of capabilities into the commercial market, and it is in alignment with our plans for this fiscal year and beyond. Horacio, anything to add?

No. I think that about covers. The only other connection that I would make is our position in this global commercial arena is actually becoming a real asset back into our government business, as well in terms of credibility we have with clients on issues of importance to them, and of our understanding of commercial best practices. And most importantly, if we can fully unlock it, the ability to offer our talent, the unique proposition, which is the ability to work across federal clients, international clients, U.S. commercial clients and have a fulsome and unique career that you couldn't have somewhere else. This is actually something of great importance, especially in areas like cyber or data science, areas in very high demand, where we have, as a result of our participation in all these markets, a unique value proposition that attracts people that may be we wouldn't be able to get otherwise.

Okay. Okay. And then maybe just quickly another big picture follow-on question, if you can even answer this. Do you expect anything, any disruption to your markets around the election or anything like that? I mean, do you have a view on what could change in these markets?

We've been having this conversation internally. I think we are in some ways where everybody is which is that this is the most unexpected election cycle perhaps in our lifetimes. So to try and become very predictive is really not the way to go, so our focus is twofold. First of all, if you look at the impact on the business, in the medium to long-term we are confident that the because we, as Lloyd said, we're close to our clients' missions and we can pivot quickly, this is regardless of which way the country chooses to go. We are in a strong position to capture opportunities related to the next administration's agenda. In the very near-term how will that affect Q4, that question came up before and we have not seen or sensed anything that alarms us and at the same time we can't rule anything out because like I said it is a unique election cycle. More importantly rather than predict, we are continuing to double down on this notion of agility. And we are continuing to focus on how can we make sure that we can make our business turn on a dime, recognizing not just the election, but the nature of the world and what you read on the paper everyday may require our clients to turn on a dime. And we want to be right there with them and for them. And so that's really more of our effort rather than predict what we'll read in the paper tomorrow is to make sure that whatever happens tomorrow we can be our client's essential partner. And that's really the approach that we've taken over the last few years, which is why I think we both foresaw the downturn a little earlier but frankly adjusted faster than anyone else and I think that's what we expect to do in the future. I think maybe we'll be capable of reading the tea leaves a little better than everybody else and maybe we won't, but at the end of the day we are confident that whatever the tea leaves say we will adjust faster to them than anybody else. And that's how we're trying to pick this up.

Okay. Great. Thank you.

Sure.

Thank you. Our next question is from Michael French with Drexel Hamilton. You may begin.

Good morning, gentlemen. Congratulations on the strong performance.

Thank you.

I have a question on capital deployment. You've laid out the priorities which remain the same and I want to talk about this in the context of your debt lease finance, which as you said, frees up cash for other uses. Since two of the top three priories are dividends, and the third one is M&A and you guys have a cautious history in M&A. It seems like we should be expecting an increase in the dividend from where it is now. So, is that a reasonable way to think about this or is there an alternate view that makes more sense? Thank you.

Thank you for the question. I would encourage you and the other listeners that we shouldn't think about in terms of it going right to a dividend or things of that sort. And the reason for that is as I and Horacio said, we're going to continue to look to invest in the business. And to the extent that one of our priorities has merit for investment in that particular area, we're going to take advantage of that. Again, we're looking at the long-term and we're looking at accelerating our sustainable growth. And we feel that taking advantage of investment opportunities which the refinance certainly will afford us, is in keeping with both our cash deployment strategy as well as the expectations of the leaders in the business.

Very well. Thank you. That answers my question.

Thank you. Our next question is from Jon Raviv with Citi. You may begin.

Hey, thanks so much for the follow-up. Just on end market drivers, what is your new sort of business approach to combine the consulting and the engineering? Where do you find that's getting most traction, is it civil, intel, defense or would you say it's pretty broad-based?

You know the beauty of what we are seeing is in all of the above. I think the idea that we can – as you know, our history is one of being the premier consulting firm in this market. And we combine that with deeply rooted relationships and understanding our client's missions and then you bring in these new capabilities, which aren't really all that new, are capabilities we've had for a while, but we're scaling significantly, systems development engineering, cyber, advanced analytics, are the fullness of our innovation agenda. When you combine all of that, there's a relevant opportunity, just about in every client set that we serve. So we are seeing broad and exciting uptake of these concepts, really everywhere. So, it's a great story. That doesn't say every piece of every end market growth at the same speed, they don't all have the same funding, they don't all have – we don't have the same position everywhere. We're not along the road the same everywhere, but everywhere that we are bringing this approach to taking on our clients problems and helping them solve them, we are seeing not just initial success, but differentiated success that brings new opportunities. And frankly in lots of cases changes the conversation. This has been a labor of love, there's been a fair amount of work at some clients, where we bring in a new proposition. And the client simply isn't ready, sometimes for good and valid reasons, sometimes who knows, but what happens is that opens the door to a dialogue that we weren't having before and over time that has opened the door to opportunities and to repositioning ourselves inside some of those client organizations in ways that a few years ago would have been really impossible and as a result, this notion of sustainable quality growth. That sort of what underpins our conversation of sustainable quality growth is that we go into a client with one of these new propositions and it allows us to expand what we do for that client and expand it in a way that it isn't, okay, we solve a problem and we're gone, expand it in a way that it deepens and lengthens the relationship and then that's why last year you saw the growth that we had. This year we expect to do better and so on in subsequent years, because we are looking to expand this footprint throughout. I am personally very optimistic and very excited about that because as I go out and travel and see clients, I hear a lot of good things and a lot of uniqueness in what we're doing along the lines of what they want.

Thank you. This concludes the Q&A session, and now I'd like to turn the call back over to Horacio Rozanski for closing remarks.

Thank you. Everyone thank you for the questions. This was a great give-and-take and for taking the time to join us this morning. These quarterly calls are a great privilege for Lloyd and me to represent the exceptional work of our colleagues. This is an opportunity for us to really brag about them, about their skills, their dedication, their agility and their energy which ultimately propels Booz Allen forward year-after-year. So, great job Booz Allen team, keep up the good work and to the rest of you, have a great rest of the summer and we'll talk soon. Thank you.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. Have a wonderful day.