Booz Allen Hamilton Holding Corp (BAH) 2019 Q1 法說會逐字稿

Good morning. Thank you for standing by, and welcome to Booz Allen Hamilton's earnings call covering first quarter results for fiscal 2019. (Operator Instructions)

I'd now like to turn the call over to Mr. Nick Veasey.

Thank you, Brian. Good morning, and thank you for joining us for Booz Allen's First Quarter Fiscal '19 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 Nick Veasey, Director 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 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 first quarter fiscal '19 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 first quarter fiscal '19 slides.

It is now my pleasure to turn the call over to our CEO, Horacio Rozanski. We are now on Slide 3.

Thank you, Nick, and good morning, everyone. Thanks for joining the call. We have excellent first quarter results to report this morning, financial performance in line with the multiyear goals we announced at Investor Day in June.

Our latest quarterly performance coming on top of more than 2 years of consistent growth affirms that our investment thesis offers a compelling near- and long-term opportunity for investors.

Today, Lloyd and I will discuss the first quarter results in the context of the full fiscal year and our 3-year financial goals, our expectation for these quarterly calls going forward, because that's where our focus is and will remain.

To recap, the Booz Allen investment thesis has 3 parts. The first is that we are uniquely positioned to capture market upside because of the investments we have made under our Vision 2020 growth strategy. Second, because of this differentiation, we believe we can grow ADEPS by 50% over the next 3 years, from about $2 last fiscal year to about $3 in fiscal year 2021. And third, we believe there is option value over and above the quantifiable 3-year goals we have set. This potential exists because of the new capabilities, markets and business lines that we are developing.

Our first quarter performance reinforces the confidence we have in meeting our expectations for fiscal year 2019 as well as our 3-year objectives.

Industry-leading organic revenue growth continued to drive excellent bottom line performance. We also hit new records since the IPO for both first quarter book-to-bill and total backlog. So while there is room for improvement in cash flow, and we will look to grow headcount in coming months, on virtually every other metric, the business performed very well as 2019 got underway.

As I said last quarter, the market is better than we have seen it in years, and we are positioned where demand is strong and growing. Federal agencies have funding in hand and clients clearly value the unique combination of advanced technology, mission knowledge and consulting expertise that Booz Allen offers.

Across all of our markets, from our core federal business to global commercial, clients trust that our people and solutions will help them tackle their biggest problems and advance their most important missions. That trust generates growing demand for the expertise and capabilities we sell, which in turn produces strong and sustainable top and bottom line performance. Lloyd will take you through the details.

But before we get there, I want to recognize all the hardworking people of our firm. Their success in delivering work to clients and capturing opportunities, both recompetes and new work, is really exceptional. It has produced 10 consecutive quarters of revenue growth as well as record-breaking performance on bookings and backlog. Their skill and ingenuity are also creating new opportunities for Booz Allen, what we described as option value at Investor Day.

I want to highlight just one of our many recent awards, because it's a great example of how our strategic transformation has uniquely positioned us to capture such new opportunities. It shows that we are both continuing to grow our core business and leaning forward to build capabilities for new business lines in the future.

This morning, I am pleased to announce that our firm has been chosen by the Department of Defense to build an Open Systems Architecture and apply machine learning to massive amounts of intelligence data that currently resides across multiple systems. The program is known as eMAPS for Enterprise Machine Learning Analytics and Persistent Services. It is one of the first large-scale operational applications of artificial intelligence and machine learning to multisource data analysis in the federal government. Our ability to win this work is the direct result of our investments in digital solutions, engineering, cyber, analytics and artificial intelligence.

Under this $885 million, 5-year task order from GSA FEDSIM, who will combine all those technologies with our consulting, change management and mission knowledge to deliver powerful new solutions to the Department of Defense.

The market for artificial intelligence is here and Booz Allen is well-prepared to capture it. This is compelling work that motivates our people, helps us attract the right talent and allows us to work at the leading edge of both technology and mission.

In addition, it furthers our aspiration to be a leader in this area, building a large portfolio of AI business. We believe we can create value by pairing smart machines with brilliant people to help our clients protect our country. Constant evolution, looking over the horizon to anticipate where the market is going, what clients will need next and what our firm can achieve, is at the heart of our differentiation and our option value. It's always been part of Booz Allen's value proposition, and we are really proud when it yields successes for the near and long term.

And with that, I'll turn the call over to Lloyd.

Thanks, Horacio, and good morning, everyone. As you know, our firm introduced for the first time a set of multiyear financial goals at Investor Day. I was excited then to discuss our multiyear outlook. And today, I'm even more excited to start reporting on our progress toward those goals.

To recap, we set a target of growing adjusted diluted earnings per share by 50% over 3 years and returning $1.4 billion to our investors in the same period. We envisioned a path where these goals as being rooted in 6% to 9% annual revenue growth and cumulative margin expansion of 10 to 30 basis points. And one of Booz Allen's strengths is that we have the strategic and financial flexibility to adjust as needed, based on business and market conditions.

I'm pleased to report that our first quarter financial performance shows that we are off to a strong start toward meeting our fiscal year 2019 guidance and achieving our 3-year financial objectives. We had a very good quarter at both the top and bottom lines. And our record backlog and quarterly book-to-bill demonstrate growing demand for Booz Allen's solutions.

Before getting into the numbers, I want to point out that the firm has adopted 2 accounting standards: ASC 606 and ASU 2017-07, effective April 1. Adoption of these standards is factored into this year's guidance and is not expected to be material to our full year results. We have restated our results for the first quarter of last year for these accounting standards. And additional detail is available on Slides 4 and 5 and disclosed in the 10-Q we filed this morning.

Now let's get into the numbers. Please turn to Slide 6. Starting at the top line, first quarter revenue and revenue excluding billable expenses grew 8.1% and 9.2%, respectively, compared to the prior year. We have committed to above-market growth, and we delivered again on that promise.

As Horacio said, our backlog and book-to-bill performance was outstanding and will continue to provide support for growth in the long term. Book-to-bill was 1.64x and total backlog as of June 30 was just over $17 billion, 21.4% larger than a year ago and the highest since our IPO.

Funded backlog of $2.8 billion is a first quarter high and represents an 11.6% increase over the prior year. Unfunded backlog at $4.1 billion is up 27.7% and priced options increased 21.9% to $10.1 billion.

Headcount is up 4.7% year-over-year, but was down slightly since the end of March. We expect most of our hiring to be done in the second and third quarters of this year. In fact, we are already seeing headcount numbers beginning to grow in the second quarter, and we remain comfortable with our expectations for the full year.

Moving to EBITDA. We continue to translate top line growth into profits. Adjusted EBITDA for the first quarter was $178 million, representing a 25% increase. Adjusted EBITDA margin was 10.8%. The high margin for the quarter was driven by a combination of stronger-than-anticipated contract level performance, solid operating performance, the timing of certain cost recoveries and lower-than-anticipated billable expenses. We do not expect all of these same factors to continue over the course of the year. We are obviously pleased with our profitability to start the year, but after one quarter of performance, we are not changing our view that full year adjusted EBITDA margin will be in the mid-9s.

Net income at $104 million is up 48% and adjusted net income grew 47% to $105 million for the quarter. The increases were due to our revenue growth, improved margins and lower effective tax rate. Those factors, as well as a lower diluted share count, drove the $0.25 increase in the first quarter adjusted diluted earnings per share to $0.72. The decline in our diluted shares outstanding of over 5 million reflects the successful execution of our share repurchase plan over the last 12 months.

I will now turn to the balance sheet. Last week, we announced the transaction to refinance our Term Loan A. The transaction reduces the pricing of our term loan, it extends the maturity of our Term Loan A and revolving credit facility, and it provides added flexibility and liquidity through a delayed draw facility of $400 million. This feature allows us to draw down the additional capital over the next 9 months. This refinancing aligns with our multiyear view of the business and will further support our plans to create long-term value for our shareholders.

First quarter cash from operating activities was negative $27 million, which was a reduction of $31 million compared to the same quarter last year. Our first quarter is typically the lightest for operating cash due to the timing of bonus payments. However, this quarter, our operating cash flow decline was more significant due to 2 negative factors: Lower cash inflow, as seen in our higher accounts receivable balance and DSO levels; and more cash outflow from a decline in our accounts payable.

On our last call, we discussed a cash management strategy intended to improve our operating cash flow position. This strategy includes a focused effort on management and process changes to increase our operating cash results for the full year and with a particular focus on DSO. We continue to execute against that strategy and remain confident that we will generate $380 million to $420 million in operating cash, an 8.4% increase at the midpoint for the full fiscal year.

Capital expenditures for the quarter were $20.5 million. Our expectations for the full year are unchanged, with spending levels up to $100 million. As we mentioned previously, the increase in CapEx is growth oriented and supports the evolution of our business.

At Investor Day, you'll recall I talked at some length about our capital deployment strategy. It is central to our value proposition to shareholders, with an expectation that we will deploy $1.4 billion over the next 3 years, including our quarterly dividend.

Please turn to Slide 7. During the first quarter, we returned $76 million to shareholders through dividends and share repurchases, progress toward our goal of deploying $350 million this year, subject to market conditions. Given the fundamental strength of our business, our strong start to the year and our continued confidence going forward, the company announced today that it has authorized a regular dividend of $0.19 per share, payable on August 31 to stockholders of record on August 14.

Before moving to Q&A, I'll reiterate our fiscal year 2019 guidance, which is on Slide 8. We continue to expect revenue growth in the 6% to 8% range. At the bottom line, we expect adjusted diluted earnings per share to be $2.35 to $2.50. I am very pleased with our performance in the first quarter and excited about the foundation it gives us to deliver for this year.

Furthermore, the strong performance illustrates that the business is set up to achieve the multiyear financial goals we outlined last month. As we continue to grow and evolve our firm, we are fully focused on delivering both near and long-term value for our shareholders.

I'll conclude there. Nick, let's open the lines up for questions.

Thanks, Lloyd. Brian, could you give us the instructions, please, for our Q&A period?

(Operator Instructions) And our first question will come from the line of Carter Copeland with Melius Research.

Just a couple of quick ones. One, Lloyd, on the margin in the quarter, was there anything related to the 606 adoption that caused those discrete items that were benefits to be particularly pronounced in the quarter? And then one for Horacio. Just on this eMAPS contract win, how should we think about what that represents as a portion of the addressable market or what that can grow into? And could you give us a sense of -- are the economics of that contract any different than what we've come to understand over the years on prior work?

Sure. Carter, regarding 606, there is no impact on the margins. We expect to see relatively flatter quarterly margins throughout the year due to seasonal spending patterns, but there is no material impact on our full year financials.

Let me take on your second question. It's great that you asked them both at once, because it gives us an opportunity -- it gives me an opportunity to think. So on eMAPS, first of all, we're very excited about the win itself, because it is, as I said on the prepared remarks, one of the largest, most significant operational AI applications. And so we see this as the beginning of something. As we look at procurements in general, especially coming out of DoD, it is clear that artificial intelligence is an area of focus and an area of investment. Our clients have been wanting to do that for quite some time. And frankly, they haven't had the funding to do that, but the funding is now available and they're investing. We've been investing on our end ahead of the curve to be ready when they're ready, and that's what we're seeing. And so I don't know that we'll see identical things to eMAPS in the future, but this concept of artificial intelligence, algorithmic warfare, is going to be part of the equation for DoD for quite some time, and we're very excited to be part of it. The economics have 2 parts. One part is the more traditional types of vehicles like eMAPS, and this is a cost plus vehicle. It has good economics, consistent with our portfolio, and we're very pleased with that. As important, this is where we get to both test and apply and develop the intellectual capital that we can monetize. If you remember, when we talked at Investor Day about option value, into new business lines, new ways of capturing value and we view opportunities like eMAPS as the places where we're really going to have the opportunity to get ahead of that curve.

Horacio, did the win teach you anything particularly important about the competitive landscape in that arena?

I would say this...

And your positioning within it?

So I'll give you my opinion more broadly than just about this win. Everybody expected this to happen at some level, but they expected things like this to happen much later in the cycle, 3, 4 years from now. And the fact that they're coming now, I don't know many companies or any companies that are as well-positioned as Booz Allen to take advantage of this opportunity.

And our next question will come from the line of Sheila Kahyaoglu with Jefferies.

I guess any way to think about market growth versus market share growth in the quarter? And then as it relates to the backlog, any particular areas that are growing faster than others?

So I'll start, Lloyd, if you want to add. We're obviously very happy. 9.2% growth of revenue ex billables is a great number even for us. And it signals strong demand, together with the backlog numbers and everything else, for us to be at record numbers. We believe that this -- there's some underlying market growth, but a lot of this is our unique positioning in the market. And being there where technology meets mission and where all these transformations are being invested in is what ultimately, if you look at the market at large, we believe allows us to capture share. In terms of the business, it is actually pretty much across the board where we're seeing opportunities. I was -- just to give you an example, I was in Colorado a couple of weeks ago. I was in Denver talking to our clients around the Rec.gov program and they see tremendous opportunity there. I was then in Colorado Springs talking about the evolution of space as a war-fighting domain. And we see, again, a need for real transformation in a place where Booz Allen, given the work that we're doing and the capabilities we bring, can make a difference. And that's just one trip out of many. So really, the market and the business are signaling strong demand.

Sheila, I don't have much more to add other than the growth in our backlog is across the entirety of our portfolio. As Horacio said previously, it's one of the best markets we've seen in 5 years. On a trailing 12-month book-to-bill ratio, we're at 1.48x, which is also a strong signal to us that the demand is there.

And our next question will come from the line of Edward Caso with Wells Fargo.

There was an announcement on one of the newswires that you guys have won a $1 billion contract with Homeland Security to -- that's called CDM DEFEND. Can we assume that, that's not in the bookings that you've given us this morning? And the second part of my question is, is this really strong book-to-bill in the June quarter a pull forward? Or do you expect your normal extremely strong September quarter book-to-bill?

CDM is not in our current book-to-bill performance. And in terms of our seasonality, we expect to follow the same pattern that we have in the previous years with regard to our backlog and book-to-bill performance.

And I think from a color standpoint, the -- first of all, we're very pleased with CDM. It is -- part of that work is recompete, and so it is in the forecast. But the thing I would say is this current fiscal year, Congress finishes work a couple of months earlier than the year prior. And so we're seeing an extended selling season that started in the first quarter as opposed to it all rushed to the end. But we're seeing strength through -- as Lloyd said, through the summer months and real opportunity throughout.

And our next question will come from the line of Robert Spingarn with Crédit Suisse.

Again, great numbers. There's really not a lot to poke at here other than the cash timing. So Lloyd, I was going to ask you to elaborate a little bit more on that. And then from a higher level, Horacio, again going back to your comment that this is such a strong environment, the strongest in years and this follows on a couple of the other questions, how much of this is the omnibus change in trends toward outsourcing or possibly just a -- a change in funding behavior? They're just more confident, so they're letting more funding go earlier. And then I have just a quick follow-up for Lloyd.

Sure. As it relates to cash, and this is an area that we're continuing to focus on and address. The 2 factors that are contributing, DSO and CapEx. Again, with DSO, we have a plan that we're executing against. We're implementing process changes to enhance our efficiency regarding processing of invoices. And secondly, we've got more active engagement with the payment offices to mitigate collection delays. Our CapEx is growth oriented. And as we said on Investor Day, we expect it to peak at $100 million and stay elevated over a period of time. We're still focused on operating cash flow. And in my prepared comments, we're confident that we're going to be in the $380 million to $420 million in terms of guidance. It's very consistent with our investment thesis. And when you consider the debt refi we just completed, we're in a great position to execute on that thesis, with the savings of 50 basis points and then also maintaining to about a 2.8x net leverage.

Robert, on your question for me, I don't know that there's a one size that fits all. Each agency has its own funding pattern. Each agency has its own budget, opportunities and challenges. And so we almost have to have a discussion at an agency-by-agency level. If I was going to try to extrapolate up to sort of the market level, overall, I would say this. As I said last quarter, this is one of the best markets we've seen, certainly in the last 5 years, and that is a source of opportunity. For us, more importantly, as we discussed on Investor Day, we believe we're uniquely positioned to capture market upside because of the capabilities that we've built and because we positioned ourselves in this place where technology meets mission and where we can really drive strategic transformations for our clients. So the application of new technologies, the ways of prosecuting either existing missions or new missions, that's where our upside comes from in the market and that's why we believe it is sustainable beyond just the fact that this is currently a very good market.

Okay. And then -- and just, Lloyd, back to you. Just on what you just said, timing wise, was there a push on sales or were there -- were sales back-end weighted and this is part of the reason that receivables are higher at the end of the quarter? And the other thing I wanted to ask you was just on the relationship between headcount growth and sales growth, 4.7% versus 8.1%, is productivity improving or pricing? Maybe I'll ask it this way, if sales is to rise about 7% for the year, how much should headcount be up for the year?

Sure. Let me walk through these questions. On the first one, we certainly are seeing a great environment in terms of sales. It's contributing, we think, to some degree to the mismatch between receivables and payables. But as I maintain, we're confident we're going to meet our operating cash objectives in terms of $380 million to $420 million. As it relates to the connection between revenue and headcount, we're up about 5% year-over-year, which basically means that we added about 1,100 folks to the business. And we expect most of our hiring to occur in Q2 and Q3. And when we look at some of the numbers that are coming in now, we're already seeing movement in that direction. So it makes us very comfortable with our full year expectations. Our revenue, very strong demand, very strong contract performance, as we have been working our bench down since last year, that is also contributing to the performance of gross revenue and revenue ex billable.

And our next question will come from the line of Cai Von Rumohr with Cowen and Company.

So this is, depending on how you look at it, about the third quarter where billables as a percent of sales has gone down. Does that just reflect the high sales level, that there's a lag in getting those billables? And what should we look for, for billables as a percent of sales for the year?

Cai, we are still maintaining 29% to 31% for the year. You are correct. It was down a little bit outside that range. We expect with some of the awards that have come through or are coming through, that will tick up back into the range. So from our perspective, 29% to 31% is still valid.

Cai, I'll build on that. When we talked at Investor Day about 6% to 9% revenue ex billables growth for the next 10 years, we focus on that metric because, a, that's the metric that drives most of our profit. But b, that is the more systemic metric to understand how our business is doing. I recognize and we -- obviously, we track gross revenue as well, but the timing of some of these billables, they happen when they happen during the year. And that's why we don't try to predict quarterly performance there, that there's no real opportunity to do that with any precision.

Got it. So in the first quarter, your commercial sales grew 49%, everything else was about 7%. Is that a beginning trend that, that should accelerate and is it 3x more profitable still than the rest of your business?

So I'll start. I think Lloyd will probably want to add, but last year, our commercial business grew close to 30%. That's the third year of above 20% growth. We feel really good that the trend there is strong. I think 49% is great for one quarter, but it's one quarter. But I think what's important is that business is both growing faster than the -- our federal business and thus have better economics overall. So we're very pleased with that and certainly want to see it continue.

And Cai, we are still seeing 2.5 to 3x better margin than in the federal side of our portfolio.

And our next question will come from the line of Jon Raviv with Citi.

Just some perspective, Horacio and Lloyd, perhaps, just on CapEx staying $100 million elevated as you talked about at Investor Day. To what extent do you think this business is becoming, maybe not more capital intensive, but sort of shifting the investments required in order to play in this sort of space? And to what extent do you think that can drive better margins for those that are making those investments? I know -- by better margins, I mean, sort of structurally over time versus what we've seen historically in services.

Sure. As we said, our CapEx is really growth oriented, and we believe it supports the evolution of our business. The CapEx currently is focused on our facility upgrades that we've been making for some time as well as improving and enhancing our IT infrastructure. At this point, it'd be premature for me to say exactly where it's going to go. We certainly are thinking about investing in our best business, thinking about augmenting what is now primarily a 100% labor-based model to consider solutions, products, things of that sort. But I'm not prepared today to speak exactly what -- where that will go. I think in the not-so-distant future, we will certainly take that into account. But today, it's where we are.

Okay, great. And then just a follow-up. In your -- I fully understand and appreciate that the market is the best you've seen in 5 years and that's good to hear. There seems to always be some concern, some risk out in the future, as is always the case. To what extent are customers worried about continuing resolutions, the president threatening shutdowns, deficits getting a lot bigger or do you feel like the value offer is able to kind of skate over those issues because you're essentially able to help people save a lot of money and make things more efficient over the very long term?

I think it's all of the above, to tell you the truth. To some degree, our clients have become more sophisticated at managing through turbulent budgetary processes. My understanding is, at least for the moment, the way things are progressing through the Hill, it's actually quite orderly and very good. And one would hope that, that will continue. And our clients are, obviously, monitoring that and they understand it. But they're -- they know how to manage around these kinds of things. My sense of the market is our clients have been looking to invest in the future, have been looking to modernize and upgrade a number of things and in some places take a lead past adversaries and global competitors. And that's what the focus is -- where the focus is right now.

And our next question will come from the line of Krishna Sinha with Vertical Research.

A couple of questions on margin and cash flow. So on the margin, I think Lloyd mentioned a few of the factors, including some contract adjustments, lower billables. Can you just disaggregate the impact of those several factors? And then on the full year cadence, you reiterated the sort of 9.5% EBITDA margin for the full year. So is that implying that you're expecting margins to be materially lower in the next 3 quarters? And I thought the point of this ASC 606 was that you would be able to smooth the margins over that time. So I'm just trying to figure out what the moving pieces are there.

Sure. We're very pleased with our Q1 margin performance. On the contributions on the fundamental side, we did have strong contract performance, strong operating performance. But there are also some timing factors in terms of contract closeouts, certain cost recoveries and then also lower-than-anticipated billable expenses. Overall, we're very happy with our underlying profitability, but we got to keep in mind that not every quarter is going to be like this. As Horacio said in the past, this is what it looks like when certain things line up. So from that standpoint, we're off to a strong start, but we manage to the full year, not on a quarterly basis. And if you could repeat your second question?

Just trying to get some sense of the cadence for the rest of the year, just given that you're 130 basis points above the range this quarter, but you reiterated the full year guide of sort of 9.5% EBITDA margin. So does that mean the next 3 quarters should just be down a lot compared to this quarter?

No, our guidance reflects the full year expectations, not a single quarter. 606 isn't going to have a material impact and will smooth out, we expect, the margin performance over the course of the year, but our full year guidance remains we expect to be in the mid-9s. And as some of these factors that I previously mentioned either come into play or not, will really drive quarter-to-quarter. But again, we got our eyes set on the full year, not a single quarter.

Okay, and then just one follow-up. You mentioned the DSOs and how you're focused on improving that. Can you just give some timing around how you expect that to play out? I mean, is that a sort of 12-month plan to get DSOs down? And yes, just kind of trying to figure out what's your range of DSOs you expect to get to once you've run your improvements through?

We expect it to play out over a period of time. At this point, we're still focused on our operating cash being between $380 million to $420 million, which is in alignment with our investment thesis and capital deployment.

And our next question will come from the line of Tim McHugh with William Blair.

Most of my questions have been answered, but just -- maybe if you could talk a little bit more about the civil side, I guess. The 8% there is a little stronger than I might have thought, given some of the choppiness within some of the different agencies. So any color would be helpful.

It's a strong market overall. And across the board, there may be individual agencies that are more turbulent than others, and I'm not sure that that's -- this is the time to discuss it at that level. When you look at it overall, our business in civil around Health continues to do extraordinarily well. And then our business in Treasury and DHS and other departments is also -- had a strong quarter. So we're pleased with the performance overall. But again, more importantly, this is part of what we look at as a market trend, and we see the same type of upside in all our markets right now.

And our next question will come from the line of Joseph DeNardi with Stifel.

Horacio, just on, kind of, if you're seeing any trends, given how strong bookings were, in terms of what's allowing you to win some of this business? It seems like the factors that go into the customer adjudicating some of this, that price is becoming maybe less important, past performance and technical capabilities becoming more important. I'm wondering if you are seeing any trends in that regard?

Sure. We've seen over the last couple of years a migration away from the pure -- absolutely pure LPTA mindset to more of a best value mindset. But best value, in the full sense of the word, where price does matter, is not the only factor. And that is a trend that we're seeing across many of our clients and that's the trend that, frankly, helps us. We are competitive on price as we need to be, but we differentiate ourselves by finding opportunities really at the core mission level where quality is the overriding concern and we deliver outstanding quality in terms of the people that we bring, in terms of our ability to pull from all of the institutions with our single P&L and bring unique capabilities to bear. And then on -- in terms of our innovation agenda, which allows us to engage with clients about their needs in new ways and different ways, in ways that, frankly, differentiate us from our competitors.

And I'm showing no further questions in the queue at this time. So now it is my pleasure to hand the conference back over to Mr. Horacio Rozanski, President and Chief Executive Officer, for some closing comments and remarks.

Thank you everyone for your questions. Really appreciate the time today. Since Investor Day, we've gotten a lot of positive feedback about our multiyear outlook and we hope that today's call has given you the information you need to put our most recent quarter into broader context of the investment thesis. The leaders of Booz Allen are strategically managing the business and our financial performance for both near- and long-term success. That's in keeping with our industry and with our purpose and values. We aim to strengthen this asset that we have built under our Vision 2020 growth strategy. And our overriding objective is to create additional opportunities on value for our shareholders, for our people and for our clients. Thanks to the people of Booz Allen, we're on an exciting path forward, with a lot of optimism about our market position, our financial goals and most importantly, our aspirations for the future. So again, thank you for joining us on the call today, and have a great rest of the summer.

Ladies and gentlemen, thank you for your participation on today's conference. This will conclude our program, and we may all disconnect. Everybody, have a wonderful day.