Good morning. Thank you for standing by and welcome to Booz Allen Hamilton's Earnings Call Covering the First Quarter Results for Fiscal 2018. At this time, all lines are in a listen-only mode. Later, there'll be an opportunity for questions. I'd now like to turn the call over to Mr. Curt Riggle.

Thank you. Good morning and thank you for joining us for Booz Allen's first quarter fiscal 2018 earnings announcement. We hope you've had the 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 1. 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; 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 to differ in future periods materially from our 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 release and set forth under the forward-looking statements disclaimer included in our first quarter fiscal 2018 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 use some non-GAAP measures and other metrics, which we believe provide useful information for our investors. We include explanation of adjustments and other reconciliations of our non-GAAP measures to the most comparable GAAP measures in our first quarter fiscal 2018 slides. It's now my pleasure to turn the call over to our CEO, Horacio Rozanski.

Thank you, Mr. Riggle, and good morning, everyone. Thanks for joining us. Today, Lloyd and I will take you through our first quarter results and as always put them into context of our expectations for the full year. We are seeing, shaping, and capturing a lot of opportunity in the market and are very pleased to report another quarter of solid performance by the people of Booz Allen. Our financial success reflects continued focus on three imperatives: creating and maintaining enduring partnerships with clients; managing operations with discipline on foresight; and driving sustainable quality growth by investing in innovation and advanced capabilities, combining them with our consulting and mission expertise and scaling them across our client base. As we highlighted at Investors Day, our fundamental strength is grounded in several key differentiators. First and foremost, our culture and our people, but also our capacity for reinvention, our sales channels, agility, and integration. Each of those dimensions contributes in important ways to meeting the client business and strategic imperatives I just mentioned. Together, they help us prevail in a competitive marketplace and therefore, lead our industry in organic revenue growth. We intend to maintain our position as the organic growth leader in FY 2018. We set in place an ambitious plan for the year and our first quarter results are right in line with it. We delivered growth at the top and bottom lines, expanded our talent base, and achieved excellent book-to-bill and record backlog. Before I go any further, let me address the Department of Justice investigation that we disclosed on June 15. We do not have new information to share today, but I'll underscore that resolution of this matter is of great importance to our institution and of course to our shareholders. We have a talented team dedicated to…

Thank you, Horacio. I'll start by adding just briefly to your comments about our growth trajectory. As most on this call have heard me say before, we manage our business as a portfolio and one of the key tenets of our strategy has been to systematically scale capabilities that are fueling growth across the portfolio. We innovate and incubate solutions in our Strategic Innovation Group and elsewhere. Deploy them first to one or two clients, demonstrate their value and then share them with more and more clients so that additional missions can benefit. That model is working. It created substantial growth in our civil business as we saw and shaped opportunities there, and we are doing the same thing now with great success in the defense and intelligence markets. Our performance in the first quarter is testament to the continued hard work and focus of leaders and teams across our firm. Strategically, we are growing the business and expanding the portfolio as planned. And operationally, we are humming along, executing on contracts, boosting productivity, managing costs, hiring and retaining talent, and securing contract wins. Let me take you through the specifics. Please turn to slide 4. Revenue excluding billable expenses grew 5.2%, and total revenue increased 5% compared to Q1 last year. As you know, we've been focused on growing revenue ex billables where most of our profitability is generated. The growth there reflects another quarter of strong direct labor generation and productivity to meet client demand. Billable expenses were up 4.5%, but as a percentage of revenue, they dipped a bit as expected. Our continued head count growth is helping to drive revenue. As the quarter ended, we had 930 more people on staff than a year ago. And during the quarter, we added just over 150 professionals to…

Great, thanks, Lloyd. And Kaley, if you could give instructions for the Q&A, and open up the line for questions.

Our first question comes from the line of Robert Spingarn with Credit Suisse. Your line is open. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: Good morning. I hope you can hear me.

Good morning.

Yes. We hear you fine. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: Good, I'm calling from the airport. So, nice results. Horacio, I wanted to ask you, now that we're about six months into this new administration, do you have a better sense at this point for their inclination towards funding government services in the markets you're in. Obviously your book-to-bills have been very good and your business is growing. I want to get a sense of, if there are any behavioral changes, positive or negative, that we might see in the not-too-distant future.

That's a great question. As I look at it and as we've been thinking about it, with any administration change comes some changes in the priority set, and we are beginning to see that. The reality for us is that we see more opportunity than challenge as the priorities evolve based on our broad-based positioning across the market and our capacity to move people around and move talent around to meet requirements. We're staying very close to our clients. Our day-to-day clients are really focused on mission and not on the political dynamic. And they have really learned to operate in this environment in a way that it signals demand and opportunity for us. And we're feeling very good, as you can see from Lloyd's guidance and the results for the quarter. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: Okay. And then speaking more for (21:03) the quarter and I think you touched on this or Lloyd touched on this a moment ago, just the earnings cadence for the year. Given the guidance, it sounds like we're going to earn a little more in the first half than the second half. Is that the traditional spending pattern that you're expecting?

Sure. What I said at the end of last year, which I believe is playing out this year, is that we're on track for our full-year guidance. It's seasonally strong because of the certainty or clarity with the budget through the remainder of this government fiscal year. We see that as contributing to our performance over the course of the year. We will, like everyone else, watch what will come in October, but we've factored that into our 4% to 7% forecast for this year. So we remain on track. We're seeing a strong quarter, and we see the rest of the trends also remaining strong. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: And the last thing I would ask you is just how the competitive environment is evolving with regard to pricing, other firms, perhaps reaching into your markets as people do try to broaden their aperture a bit. What are you seeing there?

I'll take that. The client environment is, from our perspective, quite strong. We're spending a fair amount. As you know, we stay very close to our clients. We really try and understand where they are, what they're thinking, and how we can best help with their missions. At a competitive level, pricing is becoming a little more rational. I think there is obviously parts of this market, and we've talked about market bifurcation for a long time, and we are seeing that come through where parts of this market are very price sensitive because the services that are provided are largely commoditized and parts of this market are more differentiated. And through Vision 2020, we've spent really the bulk of the last five years looking to get us positioned for the more differentiated parts of the business. And so from my perspective, we're well positioned. There's people always trying to come into this market because it's a good market. We have built a series of alliances and partnerships through our innovation agenda so that we are also a channel to market for new ideas and really disruption through technology as opposed to being at the receiving end of that and I'm optimistic.

I would just add that with our Vision 2020 strategy, we consciously made a decision to pivot our portfolio to more of a technical solution set of capabilities. And our clients are rewarding us for that. So what we're seeing with the bifurcation is pricing that we had hoped would occur. And with more confidence in the overall budget environment, we believe our organic growth is a reflection of that. So that, make no mistake, remains a highly competitive market, no matter what part of our portfolio, but we believe our strong performance is reflective of how well we're competing.

Thank you. Our next question comes from the line of Cai von Rumohr with Cowen & Company. Your line is open. Cai von Rumohr - Cowen & Company, LLC: Yes. Thank you very much. So you guys have called out defense and intel as two areas where we're seeing growth pick up. Should we expect them to grow faster than civil given it looks to me like Aquilent is predominantly a civil business?

No. I don't think we intended to send that message. Our civil business is excellent and is doing very well. Our global commercial business is excellent, is doing very well, and so is our defense and intelligence business. I think what we're seeing is really opportunity across the board, not necessarily in every little nook and cranny of the federal government or every little aspect of our business, but at the broad range what we're seeing is really a broader range of opportunity. And when we've been talking about acceleration of revenue ex-billables, that's what we were hoping to see, a continued strong performance in our civil business and the opportunity to capture growth in defense and intelligence and the acceleration there. And for the moment that's how it's playing out. And I think what's underneath that, as Lloyd pointed out, is the differentiated capabilities that we build, the innovation agenda we invested in, and the ability to put that together with Booz Allen's traditional strength in mission expertise and historic consulting prowess. And you put all of that together and it creates a set of conditions that allow us to help clients fulfill their missions, in my view, better than anybody.

Cai, I would just add that with Aquilent, though, it is indeed true that it had a primarily civil focus. We are integrating Aquilent to have application across our portfolio, and I'm happy to say that both Aquilent as well as our previous acquisitions are truly integrated into our business and are being applied across the entirety of the portfolio. That's always been our intent in our capability of tuck-ins and we're pleased with the results to-date. Cai von Rumohr - Cowen & Company, LLC: Thank you. Just a quick follow up. You've mentioned that it might take years and not months to settle the DOJ investigation. That seems a little surprising, but maybe you could kind of give some more color on that comment?

As I said in the comments, these are complex topics. It takes a while for an investigation like this to ramp up and get up to speed. Beyond that, DOJ will manage it as they see fit and we will cooperate and assist, and we'll go from there. We would love to see this resolve as quickly as possible, but it'll take however long it takes.

Thank you. Our next question comes from the line of Tim McHugh with William Blair. Your line is open. Tim J. McHugh - William Blair & Co. LLC: Just a quick follow-up on that. You mentioned the guidance doesn't include costs associated with this. Are there operating costs in terms of the legal fees or any internal investigation you've done that's any significance or are you – I guess I'll leave it there?

Thanks, Tim, for the question. We're at such an early stage in the investigation that I'm just not able to reasonably estimate the expected amount or a range of the cost. We're working very closely with the government and once our legal team has more information, we certainly intend to reflect that appropriately with the cost for FY 2018. But at this point, we're just at such an early stage that it would be inappropriate for me to kind of put something in place. Tim J. McHugh - William Blair & Co. LLC: Okay. Thanks. And then can you elaborate a little on funded? I know you mentioned the timing of when, I guess, the continuing or the budget got pushed through this year. But is there anything else you're seeing that's influencing that and how long until you expect that to start to improve?

Sure. The short answer is no. As you are aware, we have a very conservative approach to what we put into our backlog. It's approximately $400 million or so of protest that is also contributing to the dip, but over the remainder of the year, we expect that to normalize. And beyond that, there's no other dynamic in the market that we're seeing with our clients so far.

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

Hi. Good morning. Lloyd, could you just talk a little bit on margin cadence and sustainability? I know you mentioned some first half heaviness versus second half lightness, but then also longer term you've talked about near-term flattish margin, mid long-term margin expansion opportunity. Is there anything you can do to accelerate that timeframe or to what extent is that in your control?

Sure. We are certainly comfortable with our organic growth given that we see margins being in the mid-9s. Now, we are working through three forms of mix shift to get that margin expansion, global commercial, the fixed price contracts, capabilities that we have invested in. And we think that those three forms of mix shift are going to allow us to expand margin while achieving the growth and the return to our shareholders. So, we are working as aggressively as we can, but given the previous comments that we had around competition, the improvement in the pricing environment, we think in the mid to long-term that we will get there. And overall, our business remains very strong.

And is there a way to think about any kind of long-term financial goals, multiyear financial goals and how is management being incentivized towards those goals, and are there any changes that have gone through recently or any changes on tax there in order to align to that mid- to long-term margin expansion.

We're always looking to increase the value of Booz Allen. And we're looking to leverage all of the aspects of our capital deployment as well as investments in the business going forward to achieve that. In terms of margins, as I just commented on, we do see a mid- to long-term expansion based on the three forms of mix shift. Our previous investments in our capabilities have proven to be the right thing. And we still believe that with strong demand focused on our clients' missions that we're going to be able to achieve those longer-term goals.

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

Hi. Thanks for taking my questions. So, last quarter, you bought back, I think, $39 million in shares. This quarter you bought back another $48 million. Can you just talk about how much of that is opportunistic as opposed to just the balanced capital deployment plan you've laid out and maybe you can expect to do this steady amount of buybacks going forward.

Sure. Thanks for the question. Our capital deployment strategy has always been based on flexibility with opportunity. And we intend to deploy at least 100% of our free cash flow going forward. Share repurchases is certainly one of several levers that we have at our disposal, but certainly acquisitions and dividends are there as well. We are going to look at what lever to pull at the right time and that has always been a part of our capital deployment strategy. And so, at this point, it remains one of our levers and we intend to apply the appropriate lever going forward.

Let me try and connect with part of what you're asking to the last question from Jon. We're looking at a business that has already strong TSR and it's on track to accelerate its TSR. And that is the combination of all three of the factors that Lloyd has been talking about. Our accelerating organic revenue growth is a source of value for shareholders. For sure, in the medium term as our mix continues to shift margin expansion, we'll then add to that. And more in the near term, we are looking for ways to deploy free cash flow in order to generate value for shareholders now. So when you put it all together, we're actually quite bullish about our ability to generate value for shareholders now, in the midterm, and certainly many years out.

Okay. And then on SG&A, it was quite low, 12.6% of sales this quarter. That's like 200 basis points below where it normally is. Can you just talk about what's driving that and what can we expect for operating cost going forward?

We from time-to-time see changes in our SG&A. We had lower spending in this quarter. We've applied starting last year into this year more discipline around spending. And so, what we're seeing in terms of that performance is a reflection of that.

Thank you. Our next question comes from the line of Sheila Kahyaoglu with Jefferies. Your line is open.

Hey, good morning, everyone.

Good morning.

Just have a follow-up on Bob's question from earlier. I was wondering if you've seen any change with the new administration just on emphasis in particular markets, if you could comment on that?

I'm sorry you broke up when you made reference to a specific market. Could you repeat the question?

Just on any change in what areas that they're requesting, what sort of demand signals are they sending out, this administration versus the last one?

We're still in early days. As know, many of the roles and positions have not yet been filled. At the working level by our clients, I would say the majority of our clients are seeing sort of robust increases, requests and requirements for missions certainly around defense and intelligence. We're seeing strength there. The VA, we're seeing strength there. The Health accounts, in general, as we describe them, Homeland Security, there are some of the regulatory agencies, maybe Department of Agriculture, Education, Labor and so forth are seeing some constraints as we have referenced in prior calls though we don't have significant positions there or the state department. So, when we look at its totality, I guess, our summary continues to be more opportunity than challenge. And our ability to move resources and talent from places where the mission is getting deemphasized to places where the mission is growing is at the core of our success. That agility has allowed Booz Allen to stay the organic growth leader in our industry through thick and thin and continues to fuel opportunity today.

I will just add that what we have seen building in the previous administration carried on into this one, it's still strong demand around cybersecurity, digital, systems development, engineering, all of the capabilities that as a part of our Vision 2020 strategy, we have been investing in, hiring against and you can see in our head count growth a reflection of that. So, many of the people that we're bringing on board have capabilities and expertise and experience in those areas and we're seeing the strong demand by the government a reflection of that.

Okay. And then just to pick-up on that comment about digital solutions. Is there any way you could size that business today or where it stands? And sort of what are the growth drivers? Is that within the civil business? Is that within commercial, if you could comment there?

Yeah. The demand signals are across the entirety of our portfolio. Several of our most recent acquisitions are a reflection of that. We have not broken out by capability, what the percentages of our portfolio or the growth of that. But suffice it to say that, that is one of the areas that we have been growing. The folks that we're bringing on board have many of the capabilities that we're looking for, especially in light of a solutions-based approach to the market. So, digital is one of several capabilities that have been growing nicely for us.

You know, just to build on that, we're talking about agile development which is growing across the government. We are talking about cloud and mobile and the ability to also move data science and analytics to the cloud. We are talking about finding ways to protect us from a cyber security standpoint. And I think the differentiating point and the reason that we don't break out numbers is that, what makes Booz Allen unique is we couple those skill-sets with our expertise in consulting and with our deep understanding of the mission. And so we actually can get, we talk about digital solutions, let me emphasize the solutions point. We get to places where we believe our clients are really getting results for their money, which is driving more demand and keeps us coming back.

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

Yes. Thank you very much. Just a couple questions. First of all on the investigation, have you been excluded from any bidding activity during this process. I know we're early on and I didn't know if any customers have come to you and said, you're down selected, but we can't pick you because of investigation. Can you talk a little bit about that and then I have a follow-up?

We're staying very close to our clients as we always do. At this point we have not seen any impact from the investigation on our ability to bid or be selected for contracts.

Okay. Thank you. And then as a follow-up. Can you talk about your reserves for any investigations or investigator relative cost, and just talk about that if you have any accounting reserves and how you could access those along the way, and have you had anything like this in the past in Booz Allen history, where you've had several investigations where you've had to pay out?

I'll take that Brian. It is really premature. We can't estimate at this time, so we're just not there. There are certainly a broad range of possible outcomes. The accounting rules are clear on when to reserve and we will be in compliance with that, but at this point we're at just such an early of the investigation it's really premature.

Thank you. And we have a follow-up from the line of Jon Raviv with Citi. Your line is open.

Hi. Thanks so much for taking the follow-up. Sorry of follow-up on the investigations, wanted to get some idea. Is it possible for you to at all cordon off or draw a circle around where some of the issues might be; is it company-wide, a particular office, a particular group? Just to get a sense for how broad or not broad this might be?

We're at the early stages of the investigation. We are in dialogue with the Department of Justice, but we are not in a position at this point to go beyond what we've already shared in the 8-K and on this call.

All right. Thanks so much. I appreciate it.

Thank you. And at this time, I'd like to turn the call back to Mr. Rozanski for closing comments.

Well, thank you, everyone, for your time and for your questions this morning. Booz Allen has opened the year with a solid performance and we're moving forward with a lot of energy and confidence about the state of the market and especially about the value that we bring to clients. Passionate service to clients and a desire to change the world for the better are what motivate our people. Lloyd and I are honored to represent them quarter-after-quarter and we, along with every other leader in this firm, are committed to making this institution stronger for the future. Thank you once again for joining the call and I hope you enjoy the rest of your summer.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone have a wonderful day.