Booz Allen sees growth speeding up with one caveat
- By Ross Wilkers
- Jan 31, 2020
Booz Allen Hamilton may have boosted overall revenue growth expectations for its current fiscal year but one line of business is seeing slower expansion than the rest.
During Booz Allen’s fiscal third quarter earnings call Friday, the company reported mere 1-percent intelligence revenue expansion compared to the same quarter last year. They blamed constraints in hiring talent with the needed security clearances and headwinds from two recompete losses earlier in the fiscal year.
The challenge of hiring the right number of cleared talent remains an issue for substantially all government technology services companies, even though the backlog of clearance adjudication clearances significantly dropped last year. Contractors continue to report how people with high-end technology skills remain short in supply on top of the issues in getting them certain levels of clearances.
Booz Allen CEO Horacio Rozanski told Wall Street analysts that the intelligence piece of the business “is a little bit behind our internal expectations,” but added that “defense and civil are actually ahead of our expectations for the year.”
Part of that dynamic could explained by what Booz Allen did with its workforce. Defense revenue grew 18 percent over the prior year quarter and civilian sales rose 9 percent, even as the company is accelerating recruiting efforts for the intelligence business.
“Some of the talent that was in our intell business earlier in the year was actually redeployed to other parts of the business because of the clearances and the skills that they have,” Rozanski said. “That's actually helped fuel the growth that we've seen in other parts of the business, which then when you put it all together takes us to… the first time in a while where our entire revenue guidance range for the year is in the double digits.”
McLean, Virginia-based Booz Allen raised its full-year sales growth forecast to 10-11.5 percent from the previous range of 9-11 percent. Revenue in the company’s last fiscal year totaled $6.7 billion.
One thread Booz Allen is increasingly aiming to pull on is pursuits of larger, more technically complex programs. But Rozanski told analysts that does not pivot the firm away from the kind of multiple award, task order-based work it has won in recent years but is more of an evolution.
“The core of this business is still very vibrant around these mid-size programs that are continuing to grow rapidly, that create tremendous value for the clients and that have all of the economic benefit that we've always liked,” Rozanski said. “The other reality is as you get closer to the center of the clients' mission, you do technically more complex work. Some of it is competed in this larger contracts and we have become quite good at going after them and capturing billion-dollar programs.”
Booz Allen held to its expectation of a low 10-percent adjusted EBITDA (earnings before interest, taxes, depreciation and amortization expense) margin on revenue -- a key metric investors use to gauge the profitability of government services companies.
Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at firstname.lastname@example.org. Follow him on Twitter: @rosswilkers. Also connect with him on LinkedIn.