Good morning. Thank you for standing by and welcome to Booz Allen Hamilton's Earnings Call Covering Second Quarter Results for Fiscal Year 2020. At this time, all participants 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. Nick Veasey.Nicholas VeaseyThank you. Good morning and thank you for joining us for Booz Allen's second quarter fiscal 2020 earnings announcement. We hope you've had an opportunity to read the press release that we issued earlier this morning. We've also provided presentation slides on our website and are now on Slide 2.I'm Nick Veasey, 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, Chief Financial Officer and Treasurer.As shown on the disclaimer on Slide 3, please keep in mind that some of the items 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's services and other factors discussed in today's earnings release and set forth under the forward-looking statements disclaimer included in our second quarter fiscal 2020 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 second quarter fiscal year 2020 slides.It is now my pleasure to turn the call over to our CEO, Horacio Rozanski. We are now on Slide 5.

Thank you, Nick, and good morning everyone. Today, we have the pleasure of reporting another quarter of excellent operational and financial performance. Our second quarter numbers demonstrate once again, Booz Allen's institutional strength and our leading position in the market.September 30th marked the midpoint of our current fiscal year and of the 3-ear period of our investment thesis. Lloyd and I are extremely pleased with where we are at this point against both our plan for this year and the multi-year objectives we set 18 months ago.Today, we will summarize the firm's performance operationally and financially and discuss our expectations for the remainder of the year. As always, we will put it all in the context of our investment thesis.Let me start at the strategic level. As you know, over the past 7 years, we have transformed our firm into one that is more technically capable, more innovative, and operating in more mission-critical areas. We are showing clients how to get value from technology adoption at a time when they have the need and the resources to do so.Our aim has been to capture rising demand that's driven by fundamental shift from the hardware economy of the past to the software economy of today and the future. This is our Vision 2020 strategy. And as I have said before, Booz Allen is in the pay-off period.Disciplined execution of our strategy has created powerful differentiation in today's market and, equally important, it has created a position of strength for us as we lean into the future.We have the agility, talent, and investment capacity to evolve our firm to meet the emerging demands in the market; demands driven by things like the fast-changing tech stack and the dynamic global strategic environment.We believe our proven ability to operate at the intersection of consulting,…

Thanks, Horacio. And good morning everyone. I'm excited to take you through the details of an excellent second quarter for Booz Allen. We came into the fiscal year planning for an aggressive first half, and that's exactly what we've delivered.Our ability to plan for potential market uncertainty and execute against a proven strategy gives us confidence that we'll deliver another fantastic year of growth. This confidence is reflected in our decision to increase the narrow full-year guidance for revenue and ADEPS, and to increase full year operating cash guidance.Let's go through the numbers. Please turn to Slide 6. Starting at the top line, revenue and revenue excluding billable expenses, both grew by 12.7% compared to the second quarter last year. The increases were primarily due to sustained client demand, three consecutive quarters of hiring and retaining phenomenal talent, and an extra workday compared to the prior year period. We believe our success and execution in hiring are supported by our unique market position and high quality services.We are very pleased with the breadth and quality of the work we're winning, it's clear that demand for our solutions is diversified and that our strategy to be at the intersection of consulting, mission, and technology has made Booz Allen a valuable partner to an increasingly broad range of clients.Turning to Slide 7. Book-to-bill for the quarter was in line with historical performance at 2.68 times and our trailing 12 month figure is 1.22 times, both excellent outcome supported by a strong award environment and robust proposal activity across all markets.Total backlog as of September 30th was $22.9 billion, 7.2% higher than the end of the prior year period and a new record high for our firm. Funded backlog at $4.4 billion increased by 4,8%. Unfunded backlog at $5.4 billion grew 12.3% and…

Daniel, please open the lines.

[Operator Instructions] Our first question comes from Joseph DeNardi with Stifel. Your line is now open.

Yeah, hey. Good morning.

Good morning.

Horacio, I think when you guys provided the longer-term targets 18 months ago, they were generally more bullish than folks were expecting and you've now shown kind of halfway through an ability to have kind of multi-year visibility into your business.I'm just wondering if you could talk about how that visibility looks over the next few years in the context of a less bullish budget environment. I mean, I think that's the main focus of investors now in terms of can you all sustain this level of growth that you've been delivering. Maybe just talk about that a little bit. Thank you.

Sure. Thanks for the question. We feel very good about the market that we're in. And, in particular, we feel good about the position that we have in this market. I think I've been consistent in saying that, for us, this is not about the overall size of the budget; it's about our clients who have the desire and the will to advance their missions especially through inserting [ph] technology, have the means and the resources to do so.And they do, and we expect that posture to continue into the future and we expect that our differentiation will continue to carry us to being to leader in organic revenue growth, continue to allow us to then drop that to the bottom line through strong margins in the way that we have been doing it. And we're confident that given the way our business is operating and our team is driving, that we see -- we believe the picture going forward is quite good.

Thank you. And then along those lines, I'm sure there was an assumption around bookings that was embedded in that three-year outlook. Can you just talk about, kind of halfway through, the extent to which bookings you've realized have been better than what you were expecting? Thanks for the questions.

Our booking environment is actually quite strong. As you saw, and as Lloyd mentioned, we have record backlog to report coming out of the first half of this fiscal year. I think, again, at the risk of being boring, we've been very consistent in saying that we don't feel we're demand constraint, that we feel that our continuing challenge is to find the right people with the right skills, to deploy them into clients as quickly as we can to fulfill the backlog that's available.And that we've been doing particularly well certainly this fiscal year and we expect that to continue. So, it's a good picture and, again, we believe that we can operate in this market with quite a bit of confidence, which is why despite some of the current budget scenarios we have raised and narrowed guidance.We declare the $0.04 increase on our dividend off-cycle, our headcount is up 6.5% in the first half, just six months ago we increased the back-end numbers for our investment thesis projection. I think these are all signs of confidence in the market and our capacity to succeed in this market.

Thank you.

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

Hey, good morning everyone. Thank you for the time. And these results are never boring, Horacio. So, you're all good.

Well, these are your headlines, Sheila.

In terms of -- Here's my first question on the headcount growth. It's growing pretty impressively, but still there is a pretty big delta between that and revenue growth. How do we think about -- Is that scope of contracts increased, is that just timing and it ramps in the second half? Can you talk a little bit about that?

Sure. Historically, if we are growing our headcount as planned, both sourcing and deploying the talent, there is a delay in getting those folks deployed and the conversion of what's in our backlog. So, as a rule of thumb, it typically is a few percentage points higher than what we see in terms of our headcount growth percentage, but historically, it's never been a one-to-one.

Okay, thanks. And then just maybe longer term, Horacio, you mentioned the AI adoption and just accelerating processes on that you don't expect any paying clients in the next year, but how do we think about that overall market size, the adoption of it, how quickly do you expect it? Can you just quantify it a little bit more, add a little bit of color on customers that you think are attainable?

So, let me give you some color. We think about AI as both a key component of our traditional business, our labor-based business, and as a huge option-value type opportunity for the future. And we're seeing success on both of them. In the prepared remarks, I talked about our work at the JAIC. But that is one of the many places where we are working with clients to figure out how to both create AI solutions, but most importantly, take them to the field.A few months ago, we talked about a win at HHS on AI. This is a broad-based demand increase that we see across most of our clients who are looking to use these technologies to improve mission effectiveness in intelligence, in operational Intelligence for the military, and in anything that has a big data component, which at this point is [indiscernible] of our federal government.And we're seeing the near-term upside of that in our labor-based business. In parallel with that, we've been looking for different ways to monetize our intellectual capital and to take advantage of the fact that we know both these missions and what the mission needs are beyond what is purely labor-based, and this is what this software platform that we'll announce in more detail on Monday does as it gives our clients access to train models in a way that is in mission, that is secure, that they can actually bring to bear in different ways. That's the piece that has more of a longer-term tail to it. We're still in the pre-release limited access period, where we're working with a few clients to test the proposition to improve the proposition to advance it.And about a year from now, we'll go into more of a full-production mode and then we'll begin to see, hopefully, revenues come from that. That's the path we want to be on. But you don't fit inside of these option value portfolio, which isn't one thing, it's a number of things. And at the right time, we'll come back and talk about what that whole group of initiatives looks like and what the potential financials for them are. It's premature to do that now, but it's certainly in our side.

Thank you. Thanks a lot.

Sure.

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

Terrific, thank you very much. So, your bookings this quarter benefited from the $1 billion VA ITOPS task order protest that cleared. Could you give us some color in terms of how much do you have in protest of your take-away wins, and roughly how much are you protesting contracts that may have been taken away from you?

In terms of protest, Cai, overall, as I said in the past, the environment is heavily protested environment. Now, that being said, for us, we've got minimal amount tied up in protest and on the other end of the -- other side of the coin, also a minimal amount of protest ourselves.

Okay. And then you continue to look for a $1 billion foreign capital deployment. That looks to me like you've got to spend close to $700 million between now and the end of fiscal '21 on share repurchase or M&A. You didn't buy that much stock in the first half and your stock prices continued to go up. So, how should I think about the priorities you're setting on those two options?

Yeah, I mean, we are committed to returning the $1.4 billion through FY '21 and continue to look at all options; share repurchases, tuck-in M&A, our regular recurring dividend as Horacio mentioned, the fact that we did an off-cycle increase of $0.04 is in alignment with that, and the possibility of a special. But bottom line is, we remain patient, we're going to remain disciplined, we're always looking for what and how to maximize the value for our shareholders in the near, mid and long term, and we're in a great position. If you look at our operating performance and the strength of our balance sheet, which we've been working on for a number of years to make as strong as possible, we feel that being patient and being disciplined is ultimately going to return the $1.4 billion.

Thank you very much.

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

Hey, thanks, good morning. Maybe I'll just follow along there for a moment. The $1.4 billion you said 18 months ago was based on a certain set of numbers over three years. Clearly, those numbers are higher. So, directly asking, why just $1.4 billion higher?

We've never straight-lined our projections. When we put forward the investment thesis, it really was to emphasize the growth in ADEPS over three years, as well as the top-line growth of 6% to 9%. We felt that providing more color around our capital deployment target, that would be good. And as we have also demonstrated in the past, where we see the need to make an adjustment, we'll make that adjustment. So we're not ruling out that it could be or not, but we do feel it's important to stay in alignment with the plan that we have, which we're very excited about this year.

Appreciate that color, Lloyd. And then when you say tuck-in M&A, I understand what that means from a strategic perspective, perhaps. What does that mean from a size perspective, and is there a size on the patient [ph] or what you could call a tuck-in?

Not really. I mean, we have always sort of reacted to what's the market making available to us, what are the broader financial implications of any particular deal. As I mentioned earlier, we're patient and disciplined. We look at over 100 opportunities every year, and given the strength of our organic growth, we don't need to buy revenue. And so, it is very much one of the levers that is at our disposal, just not one to-date that we've pulled a lot.

Thanks very much.

Thank you. Our next question comes from Gavin Parsons with Goldman Sachs. Your line is now open.

Hey, good morning.

Good morning.

I wanted to ask you about just the growth and margin dynamics. Typically, with new contracts coming at a lower margin, faster growth often results in dilution. So can you talk about maybe whether anything has structurally changed, and if you could approach that from maybe a Booz-specific perspective but also from a customer standpoint. Thanks.

Sure. I guess I'll start and then I'm sure Lloyd is jumping out a bit throughout.

Jumping.

The dynamic for us is, our work through Vision 2020 has become increasingly more technical and increasingly more differentiated. And so we're on-boarding work that is at the center of our clients' missions, that is at the center of inserting technology into those missions in a different way, and that affords us actually in many cases better margins if not worst margins than what we have before. That was what we signed up to do through the investment thesis and that's I think what we've seen. That's why margins are up significantly. Frankly, ahead of our own expectations; If you go back 18 months ago what we thought we would do and what we're doing, we're better.I don't know that I can comment on how the rest of the industry behaves. In large part, we've talked in the past about the fact that this industry was bifurcating and that we were looking to occupy this place of differentiation where clients need quality, where quality really matters, and where high-quality and high-impact missions gets rewarded.And I think that's where we are. It allows us to enter this virtuous circle. Because of that, we can invest in new capabilities, we can invest in looking for and retaining the best people in this market, and it then in turn affords us the opportunity to continue to stay ahead.A - Lloyd HowellSo I would just add to that. The 10.5 in Q2, we're ahead of where we were last year and 10.7 for the first half of this year. I think it really points to a couple of things. Certainly, what Horacio mentioned in terms of higher margin, technically focused work being at the center of our clients' mission. And it's working. There is a dynamic that when you look at the percent of our cost-plus increasing, that margin impact, which is typically a little bit lower, has really been offset by our just strong execution on fixed price and time and materials work. And we have been on a mission to operate increasingly at a higher and higher level, and our team and our people have done just that.

That's great color. And then, Horacio, you talked about the shift to the software economy. Can you talk about how that expands your addressable market? I mean, for example, your approach to the soldier as a platform wouldn't have been possible previously. So, how does that open up new budget areas for you that had maybe previously been reserved for hardware? Thanks.

It's a great question. I think the analogy that I would give; If you look at the car industry, right? I mean, the car I learned to drive on have exactly zero lines of code. It might have had a couple of wires. The car that I drive now is essentially on I-powered wheels. And the same thing is happening across defense, across intelligence. It -- Software is becoming the real source of value added and value creation; whether it's in space, on the ground, under water. And that's what we're seeing. And in that world, protecting that software and cyber security becomes a much bigger deal. Again, not just in the protection of networks, but in the protection of platforms. Analytics changes dramatically the way intelligence, both it gets collective and gets disseminated. And warfighting, changes. And this is the work -- I know, some of you, -- So, what we were doing at AUSA where, for example, we're creating data fabrics that allow multiple components agnostic as to who creates and to talk to each other so that a soldier on a visor can have the information that he or she needs from a satellite, from a drone, from an analyst; all coming into the same place. We're uniquely positioned to create those types of solutions. We're uniquely positioned to create open architectures at the edge and deny [ph] the environment. We believe that this is why we're already winning. This is the pay-off period for Vision 2020. But this is how we're leaning into the future.And I'm just talking now about defense any diligence; I could spend another 20 minutes telling you the same stories around fraud detection in Treasury and the Treasury area, about data and the value of data across the health -- the government health enterprise, about law enforcement, and the importance of all of those things.So, this is a market that, I think, we've been preparing for. This market is here now, and we intend to capture as much opportunity as we can.

Thank you.

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

Hey, good morning, gents.

Good morning, Carter.

So, I was going to tease you for another conference call after a holiday, but then you delivered a treat on Halloween. So, I'll tell you just keep doing what you're doing.

Well, it would have been worse yesterday because all of us match [ph] plans; would have been a lot more tired. So...

Yeah, yeah. I guess it worked out that way, but you did the Super Bowl and that was hard on Lloyd. So, just keep doing what you're doing.

Thank you.

Look, just a couple for me. One, I don't know if you can share the color, but obviously, the civil growth year-to-date has been very strong and I wondered if that was attributable to -- I mean, you hinted at a couple of those things in the response to the last question, Horacio, in terms of law enforcement and treasury and the health enterprise and -- But I wondered if you might show us some colors on particular agencies where you may have seen that strength.And then as a second question, just on the commercial side and the flat growth you talked about there. Is that just standard kind of lumpiness, or are there any geographic influences or particular sizable contracts there that did drive the kind of results you're seeing there? Thanks.

Sure. Let me do the last one first, because otherwise I'll forget. In our global commercial business, we had a few contracts that wound down and that's what's driving the numbers this year. If you remember, back a couple of calls ago when we reported 32% annual growth in commercial, I, to be consistent, answered the same way. On the other side, which is a business of that size and of that maturity, a couple of contract going one way or the other; well, as you called it, lumpiness will drive the short-term performance, but the long-term drivers of that business, especially, our work in cyber remain very strong. We believe we're differentiated, and we're confident that it will continue to be accretive to our overall portfolio.On the civil side, that is the business that has done well for quite some time. The anchor player for that business has been our Health business, which we talked about in some detail on Investor Day, as you'll remember, and which has been growing very well and continues to do so. Cai asked the question about ITOPS. That's again the type of win. It's not just the size of the business and the growth rate inside of it; it's that the business has really moved to the intersection of technology and mission. And whether it is cyber protection of a major health agency, whether it is our ability to do agile development at scale, whether it is helping them do fraud detection in a different way and now beginning to implement AI and Process Automation; ***Part 5***

Those are all the drivers of growth. If you look at this year, again, health is growing very strongly; what we call our FED business, which is really Treasury and the associated agencies, is having a banner year; and our law enforcement and transportation business is also doing very well, which is why you get to the strong double-digit performance, which again, it's exciting in its own right, but it's the underlying drivers of it that have me excited and optimistic.

Great, thanks for the color.

Sure.

Thank you. Our next question comes from Edward Caso with Wells Fargo. Your line is now open.

Hi, good morning, congrats here. I'm a little curious as the market shifting more towards Tech and Solutions, is there a change in philosophy in dollars deployed around iRead? And also, if you could talk about your CapEx budget, the trends, and what the forecast is for this year?

We continue to do what we do on the front -- I'll take the first half of the question; Lloyd is better positioned to take the second half. On the first half, we continue to do what we began to do in 2012, when we formulated the strategic innovation group, which is to lean forward into capturing positions in these new technologies, where we actually get to understand the technology, get to build partnerships with the external players oftentimes in Silicon Valley and beyond, and then bring that expertise and that knowledge to clients. So, that is an area of high demand and scenario where we intend to continue. if anything, we're -- our ccess allows us to open the upper tier beyond the original things we talked about in 2012 to areas like 5G, later communications and a number of other topics that -- at the right time we'll talk about in more depth.But that's a core element of our play and whether exempt through IRI or through simply deploying seniors into understanding these technologies and being able to more than on our clients, that's the game plan.

And on the CapEx side of it, our CapEx expenditures are really aimed at continuing to support the growth we've been experiencing and to become more tactical, Just as a context we've been improving our facilities that allows us to source and bring on board the talent we want allows us to work in a manner. That's more collaborative innovative and then infrastructurally really upgrade many of our IT systems, Human Capital Financial will be consistent with that .We're likely to be around 120 million that is at a level that we think will be consistent with the objectives around our capital expenditures.

My other question is around the continuing resolution or they're already talking of extending it beyond November 21 at some point, does that change your outlook if we roll on into next year with a CR or fill CR. And then I guess that the flip question which is, if they miraculously get it done on November 21, would you be more bullish about your second half? Thank you.

I'll start. We're very excited to raise in there our guidance this fiscal year and at the very beginning of this year, you'll recall we forecasted that we wanted to come out of the gates very strong aggressively. We did that was the right decision at the same time, we said it was prudent to plan for some uncertainty in the back half. So we had a more conservative approach. So we've already taken into account as indicated at the beginning of the year and then with the raise in there o the (inaudible) said, we believe that demonstrates our confidence this year. So the broader end of your question you know that's we're going to address that when we get to a logical point this year. We're just not at that point, we're very excited about where we are in mid year and we believe that the raising narrowing of our ranges is indicative of that.

Thank you. Our next question comes from Robert Spingarn with Credit Suisse. Your line is now open.

Good morning. So excellent quarter Horacio I wanted to dig into AI a little bit and I wanted to ask if you could be a bit more specific in terms of what you're actually referring to are we talking about I guess machine learning, computer vision. It just seems like a term that could be unpacked a little bit and then maybe you could tie that into what you're going to be announcing within at the NVDIA conference to the extent that you can talk about that. And then I have a question for Lloyd margins.

Sure we are focused on really all aspects of making artificial intelligence,operational inside emission and so they starts with building the correct infrastructure to be able to deploy algorithms in a way that if they work in the mission have often said if you haven't intelligence analysts that has to go way outside of there -- their workflow in order to take advantage of a new tool that may not be fully tested that may not be perfect yet. The chances of adoption are much lower than these that can happen inside their workflow. If you have people working out in (inaudible) environment, where they don't have access to communications, how do you put those, how do you create the infrastructure so that technology can be deployed at the edge.That's one aspect of it, the second aspect the actual creation of both the platforms and the algorithms, but actually improve these mission sets. And the final piece is how do you feel them, how do you actually put them in place, working with the operators, so the algorithms themselves can be train, I mean this is dynamic technology, so it needs to be trained in the place where it's going to have impact to be fully deployed. How do you do that and we're working through that entire chain with a number of clients that are at the leading edge on that. And that's the data more is the breadth of our work in terms of the announcement on Monday, I'll ask you to just tune in on Monday and learn more of them.

Okay and then Lloyd, we talked a lot about the margin momentum that's coming from mix. Today, we talked about the software economy. I guess tied to the what we just talked about a moment ago. Are there also efficiencies dropping through? Or is that just not really the focus point here for margin expansion, just and what I think about is a variable cost business also with the tight labor market. So is it really simply a mix driven margin expansion?

No, I mean you're right, I mean we have been focused on operating as strongly as we can, it's what we're experiencing now, which we also began to experience last fiscal year. As all of our change efforts to operate better and better are kicking in. And so, yes, for sure, there is the mix part of the business and what we do as Horacio has talked about. But our business right now is operating very strongly.

Okay, thank you.

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

Thank you. Could you give us some color on your commercial business and to the extent that we would make sense to we have been in your comments on AI, I appreciate that. Thank you.

Our global commercial business I have you know, it's about 30% of total revenue. As you know, it has two significant components one here in the US, one more focused in the Middle East, North Africa region. The core of that business on the core of our strength is taking our cyber expertise and know-how and deploying that to help especially private sector clients address the near and longer-term issues that they face. Unfortunately, that is the business that has seen rising demand and I say importantly because it's driven by the threat. In the environment, which continue to increase and it's driven by adversaries who are more and more sophisticated. So the people that our clients need helping that need to be equally increasingly sophisticated and Booz Allen, I believe it's at the top tier of that stack. And so that's the business that we're building work continuously evolving it. We're looking for places where cyber intersects with all the technologies like 5G like AI like everything else, and I think that is going to be the continued source of differentiation for us?

Could you expand what performance was like in the quarter and then also maybe touch on in your headcount growth. Is there anything meaningful difference in the pace of headcount growth, or sort of junior staff out of school versus more senior lateral hires? Thanks.

So, we obviously very pleased with their performance in the first half across the entirety of the business and very pleased with the hiring and the retention in the first half of the year. This is -- Again, we have a playbook, which we shared with you earlier that our team has executed so far through perfection, which aims to try and get ahead of any potential uncertainty around the federal budget by hiring aggressively in the first half, by putting lots of people to work in the first half. And then that gives us the breathing room to then operate the second half as we see the environment evolve, while at the same time not just meeting our early commitments for the year about narrowing and raising.

I would just add that we have probably four generations of folks at Booz Allen, certainly at the more junior level. Summer internship programs, the changes that we've made there has really improve the yield of the candidates. We see, but we have a tremendous effort and always well with sourcing and hiring at more senior levels is really driven by the requirements and needs of our clients. And at more senior levels we also have an active recruitment underway. Just given their understanding of the various markets and the decision makers in the relationships they have.

Thank you. Our next question comes from Matt Akers with Barclays. Your line is now open.

Hey, good morning guys. Thanks for the question.

Good morning.

I wanted to touch on cloud briefly. So kind of with the jet I am moving forward, I mean, number one, when could that open up opportunities for you guys to build more stuff on top of the cloud? And then kind of on the flip side, are you seeing any indications that like the Amazons and the Microsoft of the world could use this to compete more directly with your business? like, are they hiring or competing for cleared personnel, for example?

Let me answer the question holistically, which is cloud adoption is one of the major trends across that federal government, not in DoD. we expect that to accelerate, and I think these contract vehicles are in some ways, catching up to that demand as opposed to sort of being ahead of it. We work closely with all of the major cloud providers , because what they do. We cannot do and vice versa. What we do is unique is differentiated and it allows cloud to be deployed into mission in a way that is successful and effective. And we believe that at least for the medium term, those are the positions in the value chain that we and they we will occupy.So we're bullish about the ability, again a lot of what we talked about, we spend a lot of time talking about AI on this call. You need a robust modern cloud infrastructure to deploy those kinds of capabilities. So we see how the strong cloud adoption across the government benefit Booz Allen and it's another I think proofpoint on why we feel we're in the right place in the market at the right time.

Got it, thanks. And then I guess just going back to the long-term guidance, I mean the 56% [ph] EDAPS growth you're already kind of in the low threes this year feels kind of conservative, how do you guys feel about that and could we get an update to that in the near future?

Yeah, I mean we're very excited about our performance to date and we never have straight lined our performance. But we have adjusted as it makes sense halfway through this year, which is tracking exactly as we had planned, we've raised and narrowed our guidance and we're on track for another very strong year. As we get closer to the end of this year will assess an update if we feel that there are any other metrics that need to be adjusted.

Okay, thanks guys.

Thank you. Our next question comes from Sean Christopher Meakim with JPMorgan. Your line is now open.

Okay, thanks very much and good morning what I wanted to ask a little bit about the contract types and I definitely appreciate that it's not contract type that dictates profitability but the fixed price was kind of flattish year-on-year in the first half and up only kind of mid-single digits on a two year basis. So what kind of accounts for the mix shift in contract as type as this growth has accelerated?

It's fundamentally driven by the markets in the clients we support as well as their preference as to what contract site they would like to engage Booz Allen. The increase in cost-plus is really driven by our defense market, it's been growing fantastically that is the contract site that they typically turn toward and we've been responding appropriately as it relates to the fixed price, we typically see that in our billion market and obviously in our commercial markets. We have a very conservative approach to the federal fixed price contracts . And so I don't think there is really anything to read into it other than we're responding to our clients based upon their needs.

Okay, thanks. And then as a follow-up, as you think about sort of moving to your next set of targets and capital deployment, do you still think of yield as kind of the right metric to look at, if you saw the dividend increase today, if we saw another dividend increase early next year, it could still be kind of below the 2%, which is kind of a high-class problem to have, because it's the increase in the stock prices that's driving it. But as you think longer term is yields kind of the right target for your cash return strategy.

Yeah, I mean when we put out our investment thesis originally the 2% was really over time. So we think we are deploying our capital and a prudent patient disciplined way we're pulling the levers that I mentioned earlier in the call. We feel that this is one that really, to your point is a somewhat of a high-class problem. But really speaks to the confidence that we have in our business and the returns that we can provide to our shareholders.

Okay, thank you very much.

Thank you. Our next question comes from Louis DePalma [ph] with William Blair. Your line is now open.

Good morning Horacio, Lloyd and Nick. Cyber security, commercial and 5G wireless networks is a big steam right now since those networks are currently at the peak days of build out in the US and around the world. Is that a new growth driver for you or is the government leaving protection for those networks up to the wireless carriers themselves?

I wouldn't put it off a single thing that we're focused on, but rather as again part of this overall trend where technology accelerating where these platforms are changing rapidly and we're securing these platforms is becoming essential is broadly based and broadly known the theft of intellectual property that our clients are dealing with Asians around run somewhere that our clients are dealing with the issues that our clients face in terms of protecting defensive and often to weapons platforms space and second tested domain cyber a second domain. To me, these are all of the kind and they all speak to both and for us opportunities to serve opportunities to our value to our clients and opportunities to continue to hone our skills and drive certainly 5G is in that mix. But it is not at least at this point a single or area of focus, as I said, these part of these overall picture.

Okay. So it's not disproportionate above, and in the other types of platforms that you're protecting?

Not at the moment.

Got you. And one final one. I'm digging deeper into your 12% top line growth roughly how much of that growth is coming from like price inflation from your existing contracts as your existing contracts increase in scope versus new work that you're winning?

Probably be a challenge getting added that specifically, but our win rate in Q2 62% for new work and 85% for a recompete, and that is up from the beginning of year and so that coupled with how we typically [indiscernible] proposals with rate, wage increases high to our more focus for taking to account, pricing as we see it at the time when we make submission.So at this level, of my level I am very excited about our win rate performance and the topline growth of that’s been able to generate.

Okay, Lloyd, and when you’re renewing contracts, is there a general like price inflation upon that renwal/

You know, is varies based upon the circumstances, we obviously take that into account as we’re putting our pricing submissions and the government has been receptive to that.

Sounds good. Thanks.

Welcome.

Thank you. Ladies and gentlemen, that concludes today’s Q&A. I’ll now turn it back to Horacio for closing remarks.

Thank you. And thanks everyone. This is been a very robust Q&A session. Feel a lot to close this morning on a different note, I’d like to shift gears and call attention to something that we at Booz Allen are very proud of. Because earlier this month at a special event, we celebrated the 20th anniversary of Globe. Our internal business recourse group for LGVTQ colloquies and allies. Its easy forget, given the significant stride towards the quality that our country has made in the past decade, how rate it was in the late in 1990s for company’s to provide benefits to domestic partners under children or to establish an affinity group for employees under allies. But that is exactly what Booz Allen did. And so then we’ve consistory build on our record to support to quality which is why our firm has scored the hundred on the human rights campaign corporate quality index since 2010Our commitment to having every person on our firm come to work as their true authentic sales matters. It matters a great deal. It matter to those we are recruiting, those who are new to Booz Allen and those who been here since the earliest days. And its also one of the most powerful demonstrations of purpose and our values. We firmly believe that the 105 record of success for this institution comes down to people, to purpose and to passion. We take care of our people. We empower them to their best sales and reach their full potential. That’s where our focus was years ago hen a courageous group of colleagues found a globe and its absolutely where our focus will remain.So I didn’t want to let this anniversary past without publicly acknowledging that Globe members and all dimensions of our diversity, our central to who we are and critical to our continued success. And on that note, thanks again, for being with us on the call and have a great day.

Ladies and gentlemen, this concludes today’s conference. Thank you for participating. You may now disconnect.+