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 2018. 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, Chelsey. Good morning and thank you for joining for joining us for Booz Allen's fourth-quarter and full fiscal year 2018 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 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 we will discuss this morning will be, 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 fourth-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 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 fiscal 2018 slides. It's now my pleasure to turn the call over to our CEO, Horacio Rozanski. We are now on Slide 3.

Thank you, Curt. And good morning everyone. Thanks for joining us. Lloyd and I are really excited about the full year results for fiscal year 2018 we are sharing with you today, particularly, because we are reporting record profitability underpinned by a third consecutive year of industry leading organic revenue growth. The results give us a great deal of confidence about the future. They show that the fundamentals of our business are strong, the continuing strategic transformation of our firm successful. And we are now positioned in the market precisely where client demand is greatest and growing at the intersection of technology and mission. All credit for these achievements goes to the people of Booz Allen. So, I will start this morning with the thank you and big congratulations to our more than 24,000 colleagues across the globe. You are living up to the proud legacy of this firm, serving clients with passion and ingenuity and advancing missions in ways that truly changed the world. That's the heart or purpose that motivates our people. And at Booz Allen, we believe there is a straight-line connection between our purpose, our strategy, our operational and financial success and our value to clients and investors. In fiscal year 2018, we met all of our financial objectives and delivered on our commitment to create value for investors. Today, Lloyd and I will focus on the FY'18 results and our outlook for this fiscal year. Next week, we have our Investor Day schedule. There we will introduce a multi-year view into Booz Allen's financial goals and engage in a deeper conversation with investors. And as we do with these quarterly calls, we will make Investor Day available live via audio webcast. Let me summarize the headlines for fiscal 2018. For the first time we exceeded…

Thanks Horacio. I want to echo your comments on fiscal year 2018. It was an excellent year strategically, operationally and financially with record profitability driven by strong organic revenue growth. We finished the year ahead of where we thought we would be at the bottom line and on revenue we were in line with our growth forecast. These results demonstrate that the business is on track, well managed and continues to create value for investors. Today, in addition to discussing our full year performance in some detail I’ll provide an update on the impact of the new tax law on our business. I will also discuss our fiscal year 2019 guidance, which speaks to the continued confidence we have in our business and financial performance. Please turn to slide 4 for a summary of our results. Starting at the top-line in fiscal year 2018 revenue and revenue excluding billable expenses each grew 6.3%. At the beginning of the year, we committed to accelerating growth at the revenue ex-billable line, where most of our profitability is generated and we delivered on that promise. By comparison in fiscal year 2017, growth and revenue excluding billable expenses was 4.1%. Our revenue performance is driven by continued strong demand for Booz Allen services and solutions and a significant increase in headcount to meet that demand. As of March 31st, our headcount was up by more than 1,300 over the prior year buoyed by very strong hiring in the second and third quarters. This increased in headcount helped push us across the $6 billion mark in fiscal year 2018. It also positions us for continued growth in the years ahead at the top and bottom-lines. Total backlog at fiscal year-end was $16 billion, 18% largely than a year ago. Our full year book-to-bill was 1.39…

Thank you, Lloyd. Curt, I will add my personal thanks for all you’ve done as Head of IR. Between my privilege to watch you grow in this role all the way back to our IPO. We’re grateful you’ll be here to help Nick transition into this crucial role. And I look forward to having you contribute in a new way by leading our internal financial education program. As I said in my opening remarks fiscal year 2018 was a year of financial milestones for Booz Allen, record revenue, earnings, backlog and so on. Yet there is another recent milestone, I want to mention before moving to Q&A. Last month, we announced the creation of the Booz Allen Foundation an independent public charity. The foundation is an extension of our firm’s centaury long commitment to community service. The most important and exciting thing about this milestone for us is that the foundation will share Booz Allen's purpose to empower people to change the world. Its areas of focus include those that we care deeply about: veterans and military families, global health, youth and education and community resilience. This is all part of scaling our capacity for social good. The foundation's efforts will complement those, our firm pursues in our community partnerships program. A vibrant program of volunteering and community service that is critically important to attracting and retaining the best talent in today’s competitive environment. Our people want to give back. Our firm wants to give back. That’s the motivation behind the foundation and we could not be more pleased to see it now up and running. And with that Curt, let’s open the lines for Q&A please.

Great. Thank you, Horacio. Chelsea, if you can go ahead and give instructions and open the lines for Q&A, that will be great.

Certainly. [Operator Instructions]. Thank you. And our first question will come from Edward Caso with Wells Fargo. Your line is open.

Great. Thank you and congrats to Curt as well. My question is around access to the people that map up with your positioning of mission and new technology. How are you doing and getting them maybe some thoughts on special efforts you're making to sort of attract and retain. Thanks.

Hey good morning. Thanks for the question. As you saw we have the largest headcount growth in 7 years last year at 1,300 net new staff. And so, we feel really good about our overall capacity to attract and retain the right kind of talent. And if you go back a call or two, you will remember that we talked about the fact the bulk of our growth is in fact, the growth of the staff that are more technical in nature outpaces the overall headcount growth in the firm. So, I think those are the proof points that are indeed doing very well. We're gearing up for our summer games program, which is a great attraction to the kinds of the people that we need to hire. We typically get many times more applicants than we can actually bring into the program. We are seeing good numbers of hirers across the board. And in general, I think our value proposition, our own purpose statement attracts the right kind of people, the people that both have the technical skills but frankly have the passion for the mission that makes this firm special. So, we feel good about our overall ability to drive headcount into this year and beyond.

My other question is on margins. If we did our numbers right it looks like you are maybe guiding EBITDA margin down a little bit this year. And can you also talk about the impact of the legal fees around DOJ, the impact on Q4 and the forward outlook. Thanks.

Sure. We are actually seeing -- expect our margins in '19 to still be in the mid-9. As we've discussed in the past, we're looking for margin stability throughout the year with the adoption of the new standard. But we promised that we would finish the year mid-9s and we kept that promise. And if you can repeat the second question? Never mind, I remember. In terms of the DOJ cost and the impact on the margins, in the third quarter we did share some information with everyone. we baked that into our FY'19 guidance. And beyond that we don't have any other comments on legal cost for the foreseeable future.

Thank you.

Thank you. Our next question comes from Carter Copeland with Melius. Your line is open.

Hey good morning gentlemen.

Good morning.

Two questions. One, I realized you're reporting Q4 here, but I'm just trying to tease out the statements you've made around the market. We've now had 2 months almost 2 months go by. It sounds Horacio like your comments imply that April and May have been notably different from what you saw last quarter with the passengers of budget, just wanted to confirm that. And then secondly on capital deployment, I noticed the minimum 350 capital return but I think if you look at least one end of the range on share repo and price around 400 million of share repo which would be clearly an acceleration once you tacked on the dividend of that. So just maybe should we take anything from the levels of capital deployment as a signal of a different level, are you -- is it a wait and see can you help us get some of the mindset around that? Thanks guys.

I’ll take on the first question and Lloyd will take on the second one. I’m not sure -- we run the business for the year and we manage the business on an annual basis, we feel really good about where we are in this year, we feel good about the market, the strength of the market, it’s frankly for my money one of the best markets we’ve seen at least in the last five years and we’re excited about the acceleration of revenue, its billable that we’re guiding to. We’re excited about the level of profitability that we can drive from that which you see in the ADEPS guidance and as the month-to-month discussion, quite frankly our teams run the business as they see and based on what’s in front of them we expect a robust summer selling season like we always do. Its late passage of the budget but there is a budget and we’re going to take full advantage of those opportunities and that’s sort of what we’re seeing and we’re going to let the teams really run each of the markets as they see to maximize overall growth and overall profitability for the year and not for a given quarter.

Carter when it comes to capital deployment we’re always looking for ways to create value for our shareholders and we’re very pleased that we were able to return 373 million in FY’18 and as your question indicates, we do expect to deploy 350 million again greater than a 100% of free cash flow. We’ve got a healthy balance sheet with 287 million on hand and undrawn revolver and we feel that the flexibility with our capital deployment strategy creates shareholder value. We’re also going to look at pursuing acquisitions, maintaining our capability with tuck-ins but frankly as they have presented themselves, they have got evaluated multiples right now and we really haven’t seen assets that meet our standards. Right now, share repurchases is certainly a lever that we’ve been pulling and we’re pleased with the repurchase authorization of additional 300 million just taking us under 500. And we’re going to pull that lever depending upon market conditions, so with 373 million returned to shareholders and the opportunities to continue to invest in our people and our businesses, we couldn’t be happier with our capital deployment strategy.

Okay, thanks for the color guys.

Sure.

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

Yeah, thanks. Given your aggressively hiring, I guess, can you talk about -- there is also mention of a cost management initiative and seems like headcount was down, consultant headcount down sequentially at least. So, I guess what parts of the business is that focused on right now when you’re trying to add so many heads I guess to that?

Thanks Tim. I think we all saw that we had surge in hiring in Q2 and Q3 and we really expect a similar pattern in FY ’19. That being said, in our fourth quarter, we were focused on getting that, those colleagues to utilize and essentially our guidance indicates another year of strong growth. In terms of cost management, we’ve always managed our business, we feel effectively and we manage for the year. And so, we expect that to continue and making sure that, we get our hires utilized and we’re always looking for capabilities that Horacio mentioned in his comments.

And then Q1 or I guess the comment about more even margins throughout 2019, I guess just so we set expectations right before you report your next quarter I guess the implication being that it negatively impacts the new accounting rules, this is negatively impacts the Q1 margin versus the prior comparison. And so, the earnings will be a little bit more spread out through the other quarters. Just trying to make sure we -- that sets the expectations right. Any sense of the magnitude of that move?

Not really. We’re going to disclose as we get through the quarters. The Q1 will disclose at that point, but you got it right.

Okay.

One of the things that might help just to build on that is, as we’re going through the quarters we are, the statements will adjust the prior year of quarters so you’ll be able to get an apples-to-apples comparison as we go on.

Our next question comes from Tobey Sommer with SunTrust. Your line is open.

I was wondering, if you could talk to us about your plans for kind of, on a percentage basis headcount growth, you just gave some color about the seasonality and expect 2Q, 3Q to be stronger quarters, but if you could speak to that? And then also just give us a little more color on the CapEx taper to I think you described this fiscal year as kind of the peak?

Well, I’ll get started on headcount. The reality of the business is that there are things that we manage against like college hires tend to come in, for example in the fall many of them prefer to take summer off. So, there is natural seasonality to that and we usually start the year, our teams might building a bit of a cushion on availability, start of the year with high availability and then take advantage of the selling season and a growing hiring season in Q2 and Q3. And so that’s the kind of seasonality that Lloyd was talking about before. Having said that, we’re looking at 5% or so headcount growth at the net level year-over-year. And we feel that we have both the pipeline, the capacity to accomplish that. And it’s not just the headcount, because hiring people is easy, hiring the right people, is what we’re all about and we feel like brand in our market and the programs that we’ve been running and the type of outreach that we’re doing give us access to the right kind of people that both have a passion for our purpose and the mission of our clients. And have the right technical skills especially at the leading edge of technology where we’re playing more and more.

When it comes to CapEx, historically we have been around 1% of our revenues and a net '18 primary driver was facility improvements which we talked about for several quarters. In '19, what's contributing to getting out of a peak of $100 million is continuation of improvement in our facilities, but also our infrastructure systems and technology. Several years ago, we in conjunction with Vision 2020 we developed an IT roadmap. We've already moved our email to the cloud, adopted a new HR information system and the continuation of other improvements are really to ensure we've got the infrastructure to support our sustainable quality growth. So, the business is strong, our performance puts us in a position to commit to this investment and to Horacio's previous response, but also allows us to attract and retain the talent that we need and want.

And just one follow up if I could. With respect to the roughly 5% targeted headcount growth. Is that distributed in the DC Metro area and nationally kind of evenly? Or are you hiring in other perhaps lower cost in higher unemployment markets?

We're hiring across the board. And we're going to hire largely a lot of it is demand driven and where our clients are and where our clients are generating demand, we see for example in our defense business significant demand outside of the Washington Metro area and our headcount will match that in our civil and intelligence business we see a lot more demand here in Wash Metro area. And each part of these markets frankly has opportunities in terms of employment levels but also challenges because in the larger areas perhaps it's a little bit more challenging from an overall employment standpoint. But at the same time because we have mass and capacity we can reach deeper into those markets. So, I'm not going to minimize the importance of recruiting because it's obviously critical to our growth, but we feel really good about being able to bring in the kinds of people that we need.

Thank you very much.

Sure.

Thank you. And our next question comes from Cai von Rumohr with Cowen & Company. Your line is open.

Thank you, good job. And again Curt, terrific job over the years. So, you talked of a very strong market, you mentioned the commercial international some specifics. Could you give us some color on the relative strength of each of those markets, defense, intel, civil, commercial, international?

Let me try. I think the truth of the matter is, we're seeing strength across the board. I'm not sure, how to engage the overall market as much as much as the market in which Booz Allen plays in. Maybe that's my little caveat is over the last 5-6 years of Vision 2020, I feel like we have positioned the firm into a very strong unique position in the market really where technology meets mission, where our consulting heritage plays the strongest. And so, we're seeing great demand. And if you look at FY'18 all of our markets actually show growth. As I said before, commercial international grew at 30% combined or close to 30% which is acceleration from the prior couple of years. And we expect more double-digit growth into FY'19 and beyond. On the other ones, I guess that the general color is, we are seeing a great deal of strength. And it's proven by two drivers. One is obviously the budget situation is good, but also many of our largest clients are very focused on mission and are very focused on particular strategies. I'll give you the DoD example perhaps. DoD as in my view, the clearest strategic focus that is had in at least the last few quarters. Whether you listen to Secretary Mattis or whether you listen to SES working in a research lab or a flight officer in a faraway command, they all talk about the same 3 priorities, increasing the war-fighting capability, improving security cooperation with other countries and modernizing. And the money is flowing towards those types of priorities and we have positioned ourselves to be an essential partner to many of those clients in driving there. And that's why we're seeing strength. There are some civilian agencies where that there are leadership changes and perhaps the focus is still coming together, but those tend not to be our largest clients and against our largest clients who we are overseeing is focused and budget against strategic priorities that we can support.

Terrific and one quick follow up. So, margins, you said adjusted EBITDA margins basically still in the mid-9s relatively flat. And yet with the more normalized hiring you won't have the $5 million hit you have last year. Your mix is going towards higher margin commercial international, your billables ratio is not up and you’re moving towards more higher tech applications. All of those factors would suggest higher margins in fiscal '19. Are they flat? Is that either a conservative number or should we be concerned that maybe the legal expenses are increased, are creeping up as a percent of the total. Thanks.

Sure. Look, we've included the legal cost in our forecast for '19. As you know we do manage the business conservatively and we feel that maintaining the growth that we're seeing at the bottom line with mid-9s allows us to do that. At our Investor Day we're actually going to talk beyond '19. And what we expect to achieve going forward. But I don’t want to steal our thunder on this call with that. But in '19 we can expect that we'll be around mid-9.

Thank you.

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

Yeah thank you very much. The first question I have is on capital deployment. You have been primarily buying back stock. And I want to understand what is the breakpoint is -- maybe this is to Lloyd on when you start paying down debt aggressively, where do interest rates need to go in order for you to switch your capital deployment strategy. And then I have a follow up.

Sure. We are reacting to what we feel is the best in the interest of our shareholders. And frankly share repurchases has been the lever that we felt was the best to pull in '18. With the increase in authorization, I think it's definitely a lever that we're going to continue to do. We're not close to the breakpoint at this point when it comes to our debt, but we are actively looking at that, as you would expect over the course of every year. And watching what the Fed does with interest rate. At the moment, we’re happy with our debt structure, I think 43% of it is fixed. But again, we’re always looking at that, but, we don’t believe that we are close to our breakpoint at this point.

Okay. So as a follow-up number one, what is the breakpoint, is it 6% is, give me a number please, if you could. And then number two, if you could talk give an update on the status of the criminal and civil investigation, is it expected to wrap up this fiscal year in your opinion and what status, if any that you could give us on that?

Let me start with the back question first. We don’t have anything new to report on the investigation on this call. We continue to cooperate with the government in their process and that’s pretty much where we are.

And on the breakpoint. We feel again Brian, we’re in a good position, we’re in a good place. We don’t really see a breakpoint at this point in our year-end. Again, as we get into the fiscal year we’re going to look and do what's been the best interest of our debt and equity investments.

And our next question comes from Greg Konrad with Jefferies. Your line is open.

To comment at some of these questions a bit of a different way. I mean, when you look at the 2019 outlook of 6% to 8% revenue growth, is there any way parse growth from upsized of existing contracts versus new contract wins? I guess, what I’m trying to get at when we think about the fiscal year ’18 budget coming through you mentioned kind of the busy selling season. Do we see some of those new opportunities in 2019 or we’ll take some time for those new contracts to come through maybe in your fiscal year ’20?

We see the continuation of our growth really on 4 reasons. One is clients, two, the backlog. In ’18, we had a near record backlog, the highest book-to-bill since the IPO. Our pipeline, we’re seeing a period of performance on some of the proposals we are lengthening and the bid process, up. And as you can appreciate, we’ve got a very diverse portfolio. There is no one contract that’s individually significant. We’re seeing experience and we’re seeing growth across all of our markets going forward. And with our backlog of 18% in ’18, we feel that, we’re looking at definitely being within the range that we provided. That’s it.

And just one follow-up on backlog, I mean funded was down year-over-year. Is there maybe been a change in structure contract? Or how should be that versus the unfunded and priced options?

No. I mean, it really reflects the seasonality and likely as we’ve said in our prepared comments the timing of appropriations. Historically our funded backlog increases in a month or two after final appropriations are enacted. Our second quarter which aligns the government fiscal year is the high point and it drops down the third quarter and then we start rebuilding again for the next year's second quarter. So, we don’t see this anything more than just a seasonality we experience year-over-year.

Thank you.

Thank you. And this ends the Q&A session. And I now like to turn the call back to Horacio Rozanski for closing remarks.

Alright. Thank you very much. Thanks again everyone for joining us and thank you for your questions. Lloyd and I look forward to continuing this conversation and to seeing many of you at our investor day next week. As you can probably tell both from our upfront remarks and from our answers, we're very optimistic about the future. And we are very eager to share the longer-term story with you next Wednesday. And until then, have a great week.

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