Good morning. Thank you for standing by and welcome to Booz Allen Hamilton's Earnings Call Covering Fourth Quarter and Full Year 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.

Thank you, Nicole. Good morning and thank you for joining us for Booz Allen's fourth quarter and full fiscal year 2017 earnings announcement. We hope you've had an opportunity to read the press release that we issued this morning. We have also provided presentation slides on our website and are now on Slide 1. I'm Curt Riggle, Vice President 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 and Chief Financial Officer. As shown on the disclaimer on Slide 2, 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. Those 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 fourth quarter and full year 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 included an explanation of adjustments and other reconciliations of our non-GAAP measures to the most comparable GAAP measures in our fourth quarter and full fiscal 2017 slides. It's now my pleasure to turn the call over to Horacio Rozanski, our CEO, and he will start on Slide 3.

Thank you, Curt, and good morning everyone. Thanks for joining us. Each quarter on this call, Lloyd and I feel privileged to represent the exceptional work of our 23,000 colleagues across Booz Allen and the strong fiscal year of year 2017 results we reported today at point of particular pride because they demonstrate success that has been built by our leaders and our people brick-by-brick and over the last several years. In that time, we designed and operationalized a long-term strategy for growth that has primed our firm for a very bright future. As we saw in our press release this morning, we had a great fourth quarter allowing us to deliver better than expected results for the full year. Our FY '17 performance demonstrates the fundamental strength of our business and confirms Booz Allen’s position as the industries organic growth leader. A record of growth is grounded in a virtual cycle. It begins with our commitment to adding exceptional value to clients at the core of their mission priorities. Because we work so closely with clients, we can identify and invest in innovative capabilities that will be in high demand. This positions us to win additional work and attract the talent, which leads to strong financial performance and the generation of outstanding shareholder value, but in turn allows us to continue to invest in differentiated capabilities and opportunities for our talent and also cycle repeats, Booz Allen capacity to create short-and long-term value for clients, shareholders and our own people continues to expand. For much of the call today, we will talk in depth about our numbers. But the numbers for FY ’17 tell only a part of the story. The other part is the qualitative progress we have made last year operationally, strategically and culturally. First on the…

Thank you, Horacio, and good morning everyone. I’d like to start by thanking the people of Booz Allen. It has been a year now since I transitioned into the role of Chief Financial Officer and a big focus for me with the support from market and functional leaders across the firm has been operational consistency and disciplined while achieving in our financial goals. The results we are reporting today are the fruits of that labor, and I want to acknowledge right upfront the contribution of many, many people across our business who rolled up their sleeves, went to work and achieved the results that we aimed for a year ago. This is a firm that sets a plan and executes relentlessly. We have done that with our year-to-year performance and our long-term strategy for growth. Our latest results demonstrate the fundamental strength of our business and our management team. They are the product of our success operationally and strategically and set us up for another year of accelerated growth for FY ’18. As Horacio pointed out, industry leading revenue growth is an engine for sustainable shareholder value creation. We remain committed to generating near and long-term shareholder value through revenue growth, operational excellence and effective capital deployment. We recognized that the strength of our balance sheet, our business performance and cash generation are meaningful value creation tools. I’ll talk more about that when we get to guidance. First let’s start with the specifics of our FY ’17 full year results. You will find them on Slide 5. Revenue increased 7.4% compared to fiscal year 2016, that’s a great number and is driven by client demand. Throughout the year, we efficiently deployed our people on to contracts and delivered high quality service and solutions to clients. The revenue growth exceeded our…

Great. Thank you, Lloyd, and thank you, Horacio. Nicole, at this point, can you provide instructions for Q&A?

[Operator Instructions] Our first question comes from the line of Ed Caso of Wells Fargo. Your line is now open.

When we were at the Pentagon last week, they said much of the ability to get awards done was not being impacted by the lack of political appointees except for maybe some of the really big deals. I guess, is that what you’re seeing? And how much of your work is not dependent on the whole of the political appointee factor? Thanks.

Sure, thank you, Ed. Horacio, do you want to start?

Sure, I’ll start. We are seeing a robust environment at this moment, the fact that there is a budget passed instead of the continued resolution as Lloyd pointed out. These are clients uncertainty and as you know, a lot of our work happens inside of the structural government below the political appointee level. So, we are seeing good market and taking advantage of it.

And the only thing I would add is, there is actually so -- our pipeline is very robust 15% total backlog growth, strongest fourth quarter since our IPO. I think really based upon how close we are to our clients. We’re also seeing our clients more adapt to managing through budget turbulence. The omnibus spending bill just approved provides certainty through September and I think a combination of all of that has us very optimistic about the opportunities in the market and what our clients want to get done as it's tied to their missions.

Another question is on organic growth. How much of that four to seven is organic?

We are saying that all of it is within organic. We have had a very strong year in FY ‘17, largely dependent upon our ability to capitalize on the investments we’ve made in the past, also our ability to bring on the talent to convert our backlog. And so, as we look into FY ‘18, we feel very confident that we will be within that range largely on an organic basis.

But to see the Aquilent acquisition added about a point to that growth rate?

Yes.

Thank you. Our next question comes from the line of Tim McHugh of William Blair. Your line is now open.

I guess I just want to ask, obviously, you've talked about a lot of the long-term things you’ve been doing in the contract awards, but I guess the conversion of that into revenue really seem to accelerate this quarter. Can you elaborate a bit more I guess, was it really just the hiring and finally kicked in, were there any other I guess changes in the behavior or the market that kind of accelerated the growth rate as you got into the fourth quarter?

Thanks, Tim. I think it was a variety of factors. Certainly, hiring the talent that we need to convert the backlog was one contribution. I think our confidence that our clients are experiencing regarding budget certainty as well as the need to get on with executing on their missions was another. Thirdly, I think as we have brought on the talent we need, we are also utilizing that talent at a very high level, and so a combination of factors that are kicked in really over the course of the year pronouncing the fourth quarter, but we see that momentum continuing into FY ’18.

Okay. And then just the billable expenses, how are you thinking about that for 2018?

Really in a range of 29% to 31%, we had thought that they would come down over the course of this fiscal year but they did not, largely due to the small business set aside that the government is requiring as well as equipment purchases that tied to several of our contracts that were elevated over the course of the year. And so looking in FY’18, we really see it again falling between 29% and 31%.

Thank you. Our next question comes from the line of Jon Raviv of Citi. Your line is now open.

On that margin question, what are some of the other drivers in FY ’18 favorable mix from a fixed price versus cost plus suggest that you would have higher margins, commercial growth suggest higher margins, and I'd assume that accelerating net sales growth would suggest some expansion, but the guidance in your commentary suggests perhaps flattish. So can you talk about some of other potential headwinds in the next year? Thank you.

Sure, I mean we still feel that to both in the near-term as well as in the longer term, targeting stable to slightly improving margins in the mid-9s is going to allow us to achieve our objective of growth which is important to us at both the top and the bottom-line. The stability in the margins is fueled for growth. It allows us to generate cash and it also creates near-term shareholder value. Certainly as you alluded to the mixed shift of our work, contract mix, higher margin solutions work and global commercial penetration is going to allow us to expand on the margins, but that’s the direction that we’re headed in. Beyond that, we don’t see the headwinds being different in FY ’18 than what we’ve experienced in FY’17. So, we’re optimistic that we’ll be able to have stable margins and the opportunity to expand upon them.

Got it and then just a follow-up on that point. Is there some sort of timeline one would, we should expect one you might get slightly improving margins or did that happen as early as in the next year? I think in the past, Lloyd, you’ve talked about the mission of getting to more balanced growth I suppose. Right now, we’re accelerating and at what point, do we maybe not accelerate as much as maybe support margin expansion? Thank you.

Over the next couple of years, we see the opportunity expand on the margins and again given my opening comments about revenue ex-billables that’s the metric that when we say acceleration we’re really trying to accelerate. A year ago, we were at less than 1%, this year 4.1% and going into the future we want to accelerate on that. We believe that you know again the mixed shift looking and seeking and developing higher margin solutions work is really going to help us to expand over the next year, two years.

Thank you. Our next question comes from the line of the Brian Ruttenbur of Drexel Hamilton. Your line is now open.

Yes, thank you very much. Couple of questions, first of all on the balance sheet. What are your plans moving forward or do you expect anymore refinancing, and maybe you can just talk about that plans for paying down debt? So that’s number one. And then number two, I want to understand your guidance for ‘18, if you calculate in there a CR for 90 days in that shift and assumed risk in this business these days or if you assume something different a passage of budget on time, if you address both those?

Sure, to your first question, we’re comfortable being at or slightly above our current leverage ratio given the current macroeconomic environment and the strength of our balance sheet and operating performance. That said, we would consider increasing, as I said earlier, if needed, up to 3.5, which is really, primarily a response to the right acquisition opportunity. We are watching the markets. We’re watching the fed as closely as anyone. And as things change, we will adjust accordingly, but today we’re comfortable with our net debt to EBITDA ratio. As it relates to the forecast and the potential for CR, our forecast is for the entirety of the year and, as I mentioned, we feel very strong at the first half of the year because of the approval of the omnibus is looking very strong. Beyond that, there is some uncertainty and we have taken that into account as we put out the range of 4% to 7%. So, from a forecasting standpoint, we’ve looked at our market, our clients and every dimension and feel confident that we’ve captured Booz’s uncertainties in our range.

Okay. And then just as one quick follow-up on the hiring of talent. You said that you’ve had to pay up. Can you talk a little bit about the cost increase that you’ve seen out there maybe in the last 90 to 120 days? Has there been a dramatic increase on a year-over-year basis, if you just give us some substantial point to its up 3% or something along those lines?

I don’t think, it’s Horacio, I don’t think we talked about an increase cost of talent. We’re in a competitive the market. We have the ability to attract and retain who we believe are the best people, the most skilled, the most mission purpose people in the industry. I think our ability to both do that and work through putting them on our contracts is good and is really successful. We are innovating both on the ways we attract and we bring people in, and we’re feeling good about where we stand on that. I think 700 additional people for the year is the number that Lloyd quoted, which is again, points to the opportunities to grow and positions us well to think about that coming into the new fiscal. So that’s our general sense on talent.

I would just add that with some of the capabilities that we are have been successful in on-boarding, even with expectations, compensation-wise for something commensurate with their skills. We still feel good about and our performance has indicated on-boarding 700 folks with those skills with maybe an elevated compensation expectation we’re able to utilize them very quickly and our clients are rewarding us with that. And so, we expect that since continue in FY ’18.

Thank you. Our next question comes from the line of Ron Epstein of Bank of America. Your line is now open.

Can you say, give us a feel for anyway, what agencies, department in the government are going to be driving the growth going forward?

As we look at the market, it's actually pretty broad based. Every year, we define a plan, every year some parts of the business do a little bit better than the plan, some parts of the business struggle to make their number and overall the portfolio response at or above plan, and you see this year as similar. There is some turbulence in some of the agencies as new leadership comes in place and the priorities come sorted out, but we see broad-based opportunity across all of our markets. And again, I mean when you look at our backlog its broad based growth when you look at the proposal pipeline, its broad based. As you know, we focus more having the right capabilities and being very agile and being able to shift people quickly to where opportunities to present themselves. So, overall I would say it's pretty putting it across the board.

Okay and then maybe as follow-on. In some of the commentary where you guys spoke about going forward, there might be an opportunity for some higher margins. In your business, I guess I trouble understanding how you would actually achieve that? I mean is it in the analytics you mentioned that could potentially bring higher margins? You’re not a manufacturing business right, so when I looked at it, it seems like your entire business structure is variable cost. Where are you going to get the leverage or you could actually get higher margins?

Sure, there the way we see it is, there are three forms of mixed shift. The first is contract site, fixed price contracts tend to have a higher margin to them because of the risk associated in cost plus or time and materials. So as our portfolio, I think if you look at the numbers, we’ve seen a 2% increase in the amounts of fixed price contracts we have. We see the potential to build our margin there. Number two is the type of markets that we have in our portfolio, we see a 2.5 to 3 times improvement with our global commercial margins compared to federal. So, as that business although small part of our overall portfolio today as that business continues to grow, we would expect higher margins to result. And then lastly as Horacio has mentioned, we’re in the fourth year of investing in what we believe our capabilities in the federal sector is going to have high demand for. And what we have seen is that the nature of that work also generates a higher margin than fewer program management type of support. So, as we continue to pursue those three forms of mixed shift, we’re expecting a higher margin result to occur.

Thank you. Our next question comes from the line of Cai von Rumohr of Cowen and Company. Your line is now open.

Yes, thank you very much. So Lloyd, your fourth quarter revenues ex-billables up 9%, I guess, up 8% if we take out acquisition, a huge step up from Q3 and really as we look at your guide for ‘18, it kind of implies a deceleration from that rate. Help us understand why you were quite so strong in this quarter? And kind how that rolls into fiscal ‘18 sort of with some color on the quarterly pattern?

Sure, there are a couple of things that contributed to the fourth quarter. One was our ability to attract the talent that I’ve been referencing this morning, and so we saw a quite bit of a pickup in direct labor and also our billability remained very solid on those new adds. Our indirect spending was also down, we had put in place some controls over the course of the year, both on allowable and unallowable dimensions and the team really did a great job managing the indirect spending. Thirdly, we saw additional revenue coming in the fourth quarter some of our international work contributed to that, and then we had the Aquilent acquisition. So, as we forecast into ‘18, there are a couple of those items, namely we’ve integrated Aquilent, we will maintain our tight control on spending. Billable expense is a bit of a variable. We again believe it will be between 29% and 30%, but I am careful not to expect it to trail off. And I think the combination of all those factors keeps us confident that we’ll end up in the range of 4% to 7%, but also recognizes that there’s a variable or to in there that might control us being out of the gate at the top end of the range.

Cai, we manage the business for the full year, and so in any given quarter, you’re going to see small perturbations up or down that are driven by some would happen that quarter but also would happen the quarter a year ago, that’s the winter quarter. You can get a couple of more snow days will change the number. So, I think that when you look at the totality of the year, you look at the 4% and you look at acceleration from that number, that’s what we're focused on. I think Lloyd talked about the fact that the first half feels very solid with a budget in place. The second half, we’re going to have to see the budget situation as it evolves. So you put it all together and the 4% to 7% for the year is what we’re focused on more than the actual quarterly result, but we feel that, that combined with our targeting margins in the mid-9s, combined with strong both cash generation and cash deployment creates great opportunities for shareholder value creation in the near term as we continue to accelerate towards the long term.

Thank you. One quick follow-on, if you look at your mix, Intel was down for a couple of years through ’16, you had strong growth in commercial international. Help us understand going forward, what are the key end market drivers, should we still look for international to grow faster and is Intel starting to grow?

Commercial international is going to grow, continue to grow fast. We are confident of that, that’s shown double-digit growth for a while. We expect that to continue, and as I said before, as we look across the portfolio, we see broad-based opportunity across really all major parts of the federal market with, and it will vary throughout the year. And as you know the reason we don’t try and give guidance for the different piece parts is because we want to be agile and have the ability to fully respond and capture both opportunities financially, but also opportunities in right work for clients as that presents itself and that’s really more of our focus.

Thank you. Our next question comes from the line of Rayna Kumar of Evercore. Your line is now open.

Can you quantify pricing trends in the fourth quarter and your expectations for pricing in FY ’18?

We are seeing pricing not as significant an issue as it has been in the most recent past. More and more government awards decisions are occurring on a value, best value basis. And so, we are seeing abatement in the pricing dynamic that we have been encountering over the past three to four years.

Thank you. And you just mentioned some additional revenue from international work in the fourth quarter. Is that the work that you expect will repeat in FY ’18? Or should we think about as more of a one-time?

No, it is part of a longer term contract and client relationship that we have. So, I would characterize the nature of that relationship was getting going in FY ’17. Now that we are more than off to the rates as we expect that to continue into FY ’18.

Thank you. Our next question comes from the line of Krishna Sinha of Vertical Research. Your line is now open.

Hi, thank you. So looking at your net revenues, so ex-billable expenses, I think Cai mentioned it was up I think 9.2% in the quarter. As you guys integrate more commercial worker or pursue more commercial work, you know you’ve mentioned it's 2.5 to 3 times more margin. How do you think about how billable expenses will trend? So I guess my question is, are there less billable expenses tied to commercial work and therefore you can keep billable expenses flat and yet grow margins if you pursue more commercial work?

Sure. I don’t want to sound like absolute. There is some billable expenses, but it's such a small percent on the commercial international that it's not really as significant a factor is with the federal work that we conducted in our portfolio. So said another way more that revenue drops to the bottom line, so then we’re able to generate higher margin type of performance with that part of the portfolio?

Is it the same dynamic with international work?

Yes, I mean there is again small, very small percentage tied to the international work, but what we are experiencing in many ways is more analogous to commercial whether it's a public sector to true commercial in nature. So again, what we’re seeing in our global commercial business, the international component included is a higher margin performance than what we would see in the U.S. federal market.

And then on G&A expense, I know your book-to-bill has been strong on a trailing 12 month basis, G&A kind of ticked up a little bit in the fourth quarter. How much of that was bid and proposal expense and what do you guys predicting for bid and proposal expense going forward?

Very little, if any was really due to bid and proposal expense, so we’re not seeing an uptick in G&A going forward.

Thank you. Our next question comes from the line of Rob Spingarn of Credit Suisse. Your line is now open.

Two things, I wanted to go first back to the question on best value versus LPTA. Are you clearly finding that Booz is heading one of the best value directions? Do you think there’s a bifurcation? Are the LPTA guys settling for more LPTA work and you guys and your direct peers more best value? Are we bifurcating here were some people are just going to get lower in margins and the others are going to get higher? That's the first question. And then I have a question as well on the backlog.

Let me take the first question and then Lloyd can tell you all things backlog. Our thesis, and as people talked about it a lot about on this calls over the years, is that the market is indeed bifurcating and that there’s an opportunity to define a differentiated market presence around work that is centered to the mission that has a high differentiated component around the technical work, for us, it's integrated closely through with our consulting and mission focus. And so, that’s the environment where we play. Over time, we expect more of that portfolio, therefore, to trend towards best value whereas other elements -- other services will tend more towards LPTA. As you know, this is not a fewer thing because the government often buys in bundles, but I think we view that as the general trend, and we have, on that the strategy done the things we’ve done, invested in where we've invested, made the acquisitions that we made and so forth. So, that’s really I think that you’ve called what we’ve been seeing and what we’ve been delivering for quite some time?

Okay. And then on the backlog side and maybe there’s a margin element to this question. But there seems to be a lot of, call it, surprisingly large amounts of funding in the final 2017 omnibus for things like counter-ISIL training and equipment, which is $1.5 billion type number. You’ve got the European reassurance initiatives, $3.5 billion, growing to $5 billion in ‘18. How is Booz accessing this extra money? What kind of work is it relative to your answer to my prior question? And just overall, how are you accessing the extra $15 billion in the 2017 fundamental of which half was OEM?

I guess, I’ll start, our approach to this is our general approach, we're working very closely to our clients to understand their priorities as they are revolving, we have overbroad these presence across DoD. But I think your question is more related to the DoD, I think is be extended to entire federal government. And we’re working with each and every client to understand first their mission priorities on how those are evolving. And then from there, the budget expectations and where both money for them to accomplish mission and opportunity for us will flow. But it’s that sequence as we see it and again, the combination of very broad-based footprint and the ability to move resources very fast to where the opportunities present themselves, and a quite a bit of contract ceiling across a very large number of contracts is what gives us the opportunity to continue to be the organic growth leader as we talk about before and give us the opportunity to that we're talking about in general in the market.

The only thing I would add is that when you look at the three categories of backlog that we have, you see a continued increase in the priced option percentage which by our accounting really is an indicator as to our client’s confidence level in wanting to engage us and continue the relationship going forward and their confidence level in the overall environment that we find ourselves in. So, as we have seen that continue to grow, we are working to Horacio’s point as closely as we can with our client even closer to their missions and as a result we’ve seen a nice increase in our backlog particularly in the priced options.

But most of what I was talking about is guess is future money, how well positioned are you for some of what I was talking about that 5 or 6 billion or so that’s coming? And can that drive another backlog expansion to the year in ’18 much like ’17?

You know we don’t give guidance on backlog, but I think as you see our revenue guidance we are obviously -- we feel we’re well positioned against the budget that was passed against the opportunities that we’re seeing in the market and against where our clients want us to go.

Thank you. And that’s all the time we have for questions, I’d now like to turn the call back over to Mr. Horacio for any closing remarks.

Thank you very much everyone for your questions. As I close the year today, I want to return for the reasons of our success in FY ’17 in addition to the progress we made operationally and strategically and the numbers that accompany it, which were the vast conversations of this call. We thought it was culture actually played a crucial role. It’s always been the fundamental driver of our performance as a firm, and actually it’s an investment as well. Those of you who are familiar with our story know that we prosecute the market differently, and we operate with a unique business model that grants us both speed and agility. Our clients often remark that people are fully committed to their success and that sets them apart and is we owned a simple execution of the contract. It sometimes have to explain how we do it, but the consistently of our performance says that there is something unique in who we are. So this past year, we took the time to put those intangibles into words so they can continue to propel us as our size, market presence and diversity of portfolio expand. I am proud to share with you a brief synthesis. Put simply, Booz Allen’s purpose is to empower people to change the world and I think that perfectly captures the motivation and mission focus of our people. Our firm's values and our ferocious integrity, passionate service and collective ingenuity, unflinching courage and a champion’s heart and they are much more than words. They set the standards and demand action. They involve things like speaking truth to power, harnessing the power of diversity and finding problems and solving them. These words matter tremendously to the people of Booz Allen. The journey to write to them down over the past year has created connection, unity and energy. And they matter to our clients because they speak of the ethics and integrity that ground the virtuous cycle I described before. So for those reasons, we also believe they mattered to our investors. Our purpose and our values command Booz Allen to never standstill, never be satisfied, never cut corners and never settle and whether it’s to retain the best people, to solve the toughest problems or to drive the up-market TCR, we are committed to simply being the best. We have a great record in doing so and intend to do even better going forward. So, once again, thanks for joining us on the call. We wish you a great start to the summer and have a great day.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You all disconnect. Everyone, have a great day.