Booz Allen sees 2019 contract activity 'spread out over the year'

The fact that many federal agencies started their collective fiscal year on Oct. 1 with a budget in place for the full 12-month period certainly is different than in past years of constant short-term spending bills to avoid government shutdowns.

And that certainty for at least the current 2019 fiscal year may lead to a more normalized spending pattern for agencies as they obligate funds for contracts, Booz Allen Hamilton CEO Horacio Rozanski said Monday during his company’s fiscal second quarter earnings call.

“We may actually see some of the activity spread out over the year more than… landing in the fourth quarter of the government fiscal year like it has been in the last few years,” Rozanski said.

But Rozanski added he is “not entirely certain that it will play out exactly that way, logically it should and it might. We’re seeing good activity on awards, we’re seeing good activity on proposals, and we’re bullish about the next few months.”

Most of the publicly-traded government IT and professional services companies are reporting quarterly financial results this week.

Leidos kicked off the latest round of statements Thursday with commentary from executives and a guidance cut that indicated how to a certain extent, this year’s July-September period for the government’s fiscal fourth quarter may not have seen a spending spree as in previous years.

But as far as Booz Allen is concerned, the most recent government fiscal fourth quarter gave them a boon on the awards and sales front. The firm posted a 3.66 book-to-bill, which measures contracts going into the backlog versus drawdowns to recognize revenue. Any number more than one is an indicator of future growth.

Revenue for the quarter climbed 8 percent from the prior year period to $1.7 billion. Booz Allen is holding to its full-year guidance of 6 percent to 8 percent sales growth, which suggests $6.55 billion-$6.67 billion in annual revenue.

Back to the budget dynamic. As Rozanski pointed out to analysts, this was the first time in a decade that many agencies began the fiscal year with a full budget. Having that budget in place gives agencies “clarity and opportunity” to make longer-term investments, he said, particularly defense and intelligence.

That general outlook holds true even with all possibilities that could arise from the midterm election and any effects on budget negotiations, which will be required again when the current two-year deal expires.

“Our clients at the operating level in these agencies, especially the larger ones, understand the mission, understand the priorities, feel supported to get things done and feel supported to invest,” Rozanski said.

For the most part, defense and intelligence agencies have more flexibility to program their funds for contracts at quicker speeds than civilian agencies and have mostly acted as they were going to get funding increases given the Trump administration’s push for more military spending.

Civilian agencies are much more constrained by comparison and the Leidos comments from Thursday indicate they are continuing to show some hesitancy to spend on contracts given the White House’s intentions to cut most of their budgets.

The Department of Homeland Security is also operating under a continuing resolution that lasts until December.