UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2022
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 001-34972
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Booz Allen Hamilton Holding Corporation
(Exact name of registrant as specified in its charter)
___________________________________
Delaware
(State or other jurisdiction of
incorporation or organization)
8283 Greensboro Drive,
McLean, Virginia
(Address of principal executive offices)
26-2634160
(I.R.S. Employer
Identification No.)
22102
(Zip Code)
(703) 902-5000
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Class A Common Stock
Trading Symbol
BAH
Name of Each Exchange on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None.
__________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and
"emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☒
Non-accelerated filer
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of September 30, 2021, the last business day of the registrant's most recently completed second quarter, the aggregate market value of the
registrant's voting and non-voting common stock held by non-affiliates was $10,457,916,666.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class A Common Stock
Shares Outstanding
as of May 17, 2022
132,185,735
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its Annual Meeting of Stockholders scheduled for July 27, 2022 are incorporated by reference
into Part III.
TABLE OF CONTENTS
INTRODUCTORY NOTE
PART I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
PART II
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Item 6.
Selected Financial Data
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B. Other Information
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
Item 15.
Exhibits, Financial Statement Schedules
Item 16.
Form 10-K Summary
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INTRODUCTORY NOTE
Unless the context otherwise indicates or requires, as used in this Annual Report on Form 10-K for the fiscal year ended
March 31, 2022, references to: (i) “we,” “us,” “our,” or our “company” refer to Booz Allen Hamilton Holding Corporation,
its consolidated subsidiaries and predecessors; (ii) “Booz Allen Holding” refers to Booz Allen Hamilton Holding Corporation,
exclusive of its subsidiaries; (iii) “Booz Allen Investor” refers to Booz Allen Hamilton Investor Corporation, a wholly-owned
subsidiary of Booz Allen Holding; (iv) “Booz Allen Hamilton” and "Booz Allen" refer to Booz Allen Hamilton Inc., our primary
operating company and a wholly-owned subsidiary of Booz Allen Holding; and (v) “fiscal,” when used in reference to any
twelve-month period ended March 31, refers to our fiscal years ended March 31. Unless otherwise indicated, information
contained in this Annual Report is as of March 31, 2022. We have made rounding adjustments to reach some of the figures
included in this Annual Report and, unless otherwise indicated, percentages presented in this Annual Report are approximate.
Cautionary Note Regarding Forward-Looking Statements
Certain statements contained or incorporated in this Annual Report include forward-looking statements. In some cases,
you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “forecasts,” “expects,”
“intends,” “plans,” “anticipates,” “projects,” “outlook,” “believes,” “estimates,” “predicts,” “potential,” “continue,”
“preliminary,” or the negative of these terms or other comparable terminology. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to have
been correct. These forward-looking statements relate to future events or our future financial performance and involve known
and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or
achievements to differ materially from any future results, levels of activity, performance, or achievements expressed or implied
by these forward-looking statements. These risks and other factors include:
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any issue that compromises our relationships with the U.S. government or damages our professional reputation,
including negative publicity concerning government contractors in general or us in particular;
changes in U.S. government spending, including a continuation of efforts by the U.S. government to decrease spending
for management support service contracts, and mission priorities that shift expenditures away from agencies or
programs that we support, or as a result of the U.S. administration transition;
efforts by Congress and other U.S. government bodies to reduce U.S. government spending and address budgetary
constraints and the U.S. deficit, as well as associated uncertainty around the timing, extent, nature, and effect of such
efforts;
delayed long-term funding of our contracts due to uncertainty relating to funding of the U.S. government and a possible
failure of Congressional efforts to approve such funding and to craft a long-term agreement on the U.S. government’s
ability to incur indebtedness in excess of its current limits, or changes in the pattern or timing of government funding
and spending;
U.S. government shutdowns as a result of the failure by elected officials to fund the government;
failure to comply with numerous laws and regulations, including, but not limited to, the Federal Acquisition Regulation
("FAR"), the False Claims Act, the Defense Federal Acquisition Regulation Supplement, and FAR Cost Accounting
Standards and Cost Principles;
the effects of COVID-19 and other pandemics or widespread health epidemics, including disruptions to our workforce
and the impact on government spending and demand for our solutions, as well as the impact of our Company policy
requiring full COVID-19 vaccinations of all employees, except for employees who qualify for medical or religious
exemptions;
our ability to compete effectively in the competitive bidding process and delays or losses of contract awards caused by
competitors’ protests of major contract awards received by us;
variable purchasing patterns under U.S. government General Services Administration Multiple Award schedule
contracts, or GSA schedules, blanket purchase agreements and indefinite delivery/indefinite quantity, or IDIQ,
contracts;
the loss of GSA schedules or our position as prime contractor on government-wide acquisition contract vehicles, or
GWACs;
changes in the mix of our contracts and our ability to accurately estimate or otherwise recover expenses, time, and
resources for our contracts;
changes in estimates used in recognizing revenue;
our ability to realize the full value of and replenish our backlog, generate revenue under certain of our contracts, and the
timing of our receipt of revenue under contracts included in backlog;
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internal system or service failures and security breaches, including, but not limited to, those resulting from external or
internal cyber attacks on our network and internal systems;
risks related to the operations of financial management systems;
an inability to attract, train, or retain employees with the requisite skills and experience;
an inability to timely hire, assimilate and effectively utilize our employees, ensure that employees obtain and maintain
necessary security clearances and/or effectively manage our cost structure;
risks related to inflation that could impact the cost of doing business and/or reduce customer buying power;
the loss of members of senior management or failure to develop new leaders;
• misconduct or other improper activities from our employees or subcontractors, including the improper use or release of
our clients’ sensitive or classified information;
increased competition from other companies in our industry;
failure to maintain strong relationships with other contractors, or the failure of contractors with which we have entered
into a sub- or prime-contractor relationship to meet their obligations to us or our clients;
inherent uncertainties and potential adverse developments in legal or regulatory proceedings, including litigation,
audits, reviews, and investigations, which may result in materially adverse judgments, settlements, withheld payments,
penalties, or other unfavorable outcomes including debarment, as well as disputes over the availability of insurance or
indemnification;
failure to comply with special U.S. government laws and regulations relating to our international operations;
risks associated with increased competition, new relationships, clients, capabilities, and service offerings in our U.S.
and international businesses;
risks related to changes to our operating structure, capabilities, or strategy intended to address client needs, grow our
business, or respond to market developments;
the adoption by the U.S. government of new laws, rules, and regulations, such as those relating to organizational
conflicts of interest issues or limits;
risks related to completed and future acquisitions and dispositions, including our ability to realize the expected benefits
from such acquisitions and dispositions;
the incurrence of additional tax liabilities, including as a result of changes in tax laws or management judgments
involving complex tax matters;
risks inherent in the government contracting environment;
continued efforts to change how the U.S. government reimburses compensation related costs and other expenses or
otherwise limits such reimbursements and an increased risk of compensation being deemed unreasonable and
unallowable or payments being withheld as a result of U.S. government audit, review, or investigation;
increased insourcing by various U.S. government agencies due to changes in the definition of “inherently
governmental” work, including proposals to limit contractor access to sensitive or classified information and work
assignments;
the size of our addressable markets and the amount of U.S. government spending on private contractors;
risks related to our indebtedness and credit facilities which contain financial and operating covenants;
the impact of changes in accounting rules and regulations, or interpretations thereof, that may affect the way we
recognize and report our financial results, including changes in accounting rules governing recognition of revenue;
the impact of ESG-related risks and climate change generally on our and our clients' businesses and operations; and
other risks and factors listed under “Item 1A. Risk Factors” and elsewhere in this Annual Report.
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In light of these risks, uncertainties, and other factors, the forward-looking statements might not prove to be accurate and
you should not place undue reliance upon them. All forward-looking statements speak only as of the date made and we
undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information,
future events, or otherwise.
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PART I
Overview
For more than 100 years, business, government, and military leaders have turned to Booz Allen Hamilton to solve their
most complex problems. A values-driven organization with a guiding purpose to empower people to change the world, we
remain focused on providing long-term solutions to our clients’ emerging and ever-changing challenges. Our people are
passionate about their service to our clients and their missions and supporting the communities in which we live and work. This
is our heritage, and it is as true today as when the Company was founded in 1914.
A collaborative culture is an integral part of our unique operating model and encourages our people to bring a diversity
of ideas and talent to every client engagement. Building on our legacy of passionate client service and guided by our long-term
growth strategy, we blend deep expertise in management consulting with advanced technical capabilities to deliver powerful
solutions. By investing in markets, capabilities, and talent, and building new business models, including ventures, partnerships,
and product offerings, we believe we are creating sustainable quality growth for the Company.
Through our dedication to our clients' missions, and a commitment to evolving our business to address their needs, we
have longstanding relationships with our clients, the longest of which is more than 80 years. We support critical missions for a
diverse base of federal government clients, including nearly all of the U.S. government’s cabinet-level departments, as well as
for commercial clients, both domestically and internationally. We support our federal government clients by helping them
tackle their most complex and pressing challenges, such as protecting soldiers in combat and supporting their families,
advancing cyber capabilities, keeping our national infrastructure secure, enabling and enhancing digital services, transforming
the healthcare system, and improving governmental efficiency to achieve better outcomes. We serve commercial clients across
industries, including financial services, health and life sciences, energy, and technology.
History and Corporate Structure
We were founded in 1914 by Edwin Booz, one of the pioneers of management consulting. In 1940, we began serving the
U.S. government by advising the Secretary of the Navy in preparation for World War II. As the needs of our clients have grown
more complex, we have expanded beyond our management consulting foundation to develop deep expertise in the fields of
analytics, digital solutions, engineering, and cyber.
We are organized and operate as a corporation, but sometimes use the term “partner” to refer to our Chief Executive
Officer and our Senior and Executive Vice Presidents. The use of the term “partner” reflects our collaborative culture and is not
meant to imply that we operate our Company as, or have any intention to create a legal entity that is, a partnership.
Booz Allen Holding was incorporated in Delaware in May 2008 to serve as the top-level holding company for the
consolidated Booz Allen Hamilton U.S. government consulting business. On July 31, 2008, Booz Allen Hamilton completed
the separation of its U.S. government consulting business from its legacy commercial and international consulting business, the
spin-off of the commercial and international business, and the sale of 100% of its outstanding common stock to Booz Allen
Holding, or the Carlyle Acquisition, which was majority owned by The Carlyle Group and certain of its affiliated investment
funds, or Carlyle. Our Company is a corporation that is the successor to the U.S. government consulting business of Booz Allen
Hamilton following the separation. Between 2013 and 2016, we registered the offering and sale of common stock by Carlyle,
and on December 6, 2016, Carlyle disposed of its remaining shares of the Company's Class A Common Stock in a registered
secondary offering.
Our Institution and Operating Model
We operate as a single profit/loss center with a single bonus pool for leadership. Our operating model encourages
collaboration allowing us to bring a mix of the best talent to every client engagement. Our partnership-style culture provides the
operational flexibility necessary to quickly mobilize people and capabilities to react to market changes faster than our
competitors. As a result, we can go to market as a whole company rather than as a collection of individual competing business
units or profit centers. Our operating model also encourages and enables continuous investment in the right markets,
capabilities, and talent to position the Company for further growth by anticipating what government and commercial clients will
need next.
Across all markets, we address our clients’ complex and evolving needs by deploying multifaceted teams with a
combination of deep mission understanding, market-leading functional capabilities, consulting talent, and true technical and
engineering expertise. These client-facing teams, which are fundamental to our differentiated value proposition, better position
us to create market-relevant growth strategies and plan for and meet current, future, and prospective market needs. They also
help us identify and deliver against diverse client needs in a more agile manner. Our significant win rates during fiscal 2022 on
new and re-competed contracts of 64% and 90%, respectively, as compared to 56% and 88%, respectively, in fiscal 2021,
demonstrate the strength of this approach.
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Human Capital
Purpose and Values. As one of the first organizations in the United States to adopt a formal code of business ethics, we
have always believed that doing what is right and holding ourselves and others accountable is the only way to do business. Our
people exemplify our purpose to “empower people to change the world” and live our values:
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Ferocious Integrity: Do right; hold ourselves accountable
Unflinching Courage: Speak truth to power; maintain convictions; bring bold thinking
Passionate Service: Embrace the mission; build community through generosity; make meaningful connections; listen
and act with empathy
Collective Ingenuity: Find the biggest problem and solve it; be resourceful and creative; seek to make the biggest
difference; harness the power of diversity; be devoted to the team
Champion’s Heart: Crave being the best; bring joy to the pursuit; learn from failure; compete with passion
Our People. Our ability to deliver lasting value and results to our clients has always been, and continues to be, a product
of the strong character, expertise, and tremendous passion of our people. Our approximately 29,300 employees solve hard
problems by making our clients’ missions their own, combining decades of consulting and domain expertise with functional
expertise in areas such as analytics, digital solutions, engineering, and cyber. Our talented people are supported by a culture of
innovation, diversity, equity, and inclusion.
Diversity, Equity, and Inclusion (DEI). At Booz Allen, we are committed to enhancing opportunity for all our people to
achieve their full potential. Our DEI Strategy & Action Plan centers on leading by example with transparency and inclusion,
empowering potential by driving equitable access and outcomes, inspiring belonging and inclusion, and being a force for
advancing equity. In 2020, building on our decades-long commitment to advancing diversity, equity, and inclusion, we added a
heightened focus on racial and social equity with the launch of our Race and Social Equity Agenda focused on assessing our
business practices and the impact on Black, Indigenous, and People of Color (BIPOC) individuals; increasing personal time and
space for reflection and mental health; intensifying investment and accountability in BIPOC representation at all levels;
accelerating our DEI learning and education programs; advancing social equity causes; and making racial and social equity a
major element of our corporate philanthropy.
We foster the spirit of innovation and inclusion at Booz Allen through business opportunities, events, partnerships,
programs, and tools that facilitate collaboration to tackle a common challenge or pitch new products and capabilities. It is the
diversity of our employees that fuels this innovation and enhances the way we work by bringing a wealth of experiences and
expertise to any challenge. We celebrate difference in all forms, building an environment of diversity, equity, and inclusion
regardless of ethnicity, religion, gender, sexual orientation, age, or disability. Our Business Resource Groups, which are
executive-sponsored organizations that any Booz Allen employee can join, illustrate our devotion to DEI by cultivating
meaningful networks and development opportunities across locations, job roles, levels, and functional expertise; celebrating
inclusive action through recognition programs; and attracting diverse talent to Booz Allen.
As of March 31, 2022, based upon voluntary self-reporting:
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36% of our global workforce identified as female, including 35% of senior management and 67% of executive
leadership
32% of our U.S. workforce identified as BIPOC, including 19% of senior management and 22% of executive
leadership
Nearly 28% of our employees are veterans
Approximately 89% of our employees hold bachelor’s degrees; approximately 42% hold master’s degrees; and
approximately 4% hold doctoral degrees
Approximately 67% of our employees hold security clearances
Of new employee hires, 32% globally identified as female and 38% in the U.S. identified as BIPOC
Of employee departures, 34% globally identified as female and 36% in the U.S. identified as BIPOC
Talent Acquisition and Development. We attract and retain the best people by providing them with opportunities to grow,
build skills, and be appreciated for their contributions as they work on our clients’ toughest challenges. We continuously invest
in elements of our employee value proposition to ensure we remain an employer of choice in a highly competitive talent
marketplace.
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Our Total Rewards program shows our appreciation for our employeesʼ contributions, provides them with opportunities
and choice, supports well-being, and helps them navigate work-life integration. To support a resilient, high-performing
workforce, we invest in financial, emotional, and physical wellness. We offer financial and non-financial benefits and
incentives built to expand our employees’ life pursuits, such as continuous learning through mentoring, upskilling and reskilling
programs, including Company-funded FlexEd opportunities; paid and unpaid parental leave options for birth and adoptive
primary and secondary caregivers; paid time off and holidays; and civic responsibilities leave.
Our employee value proposition creates a virtuous circle in which our employees know they are making a difference
while growing their careers, which furthers their commitment to Booz Allen and in turn makes them ambassadors for future
talent. Booz Allen has always recognized the importance of our people and culture, and we continue to build on that strong
legacy as we support our employees to meet their full potential.
Employee Engagement. We conduct an annual Employee Experience Survey, which measures, among other factors, our
employees’ impression of the inclusiveness of our work environment. The survey results provide insights into how employees
experience Booz Allen and our culture, helping our leaders better understand areas of opportunity and areas for greater
attention.
In fiscal 2022, we saw the impact of our COVID-19 response efforts on the well-being of our employees and clients, and
we continued to focus our attention on keeping each other, our families, and our clients safe; supporting our clients’ vital
missions; and protecting our business. We engaged with employees to understand how we could best help them, including
maintaining a robust benefits program, financial and job security, enhanced caregiver support, and telework resources.
Community Engagement. Our community engagement efforts bring our corporate purpose to life, empowering our people
to change their worlds, deploying Booz Allen's capabilities to make a difference in the places where we live and work. We
maintain strong connections to these communities—creating positive impact through outreach, recruitment, advocacy,
philanthropy, pro bono service, and volunteerism—all with a focus on creating pathways to resilience by connecting people,
organizations, and communities with transformational innovation and technological solutions that power human potential and
create a secure future for all.
Our community engagement activities enhance our impact on society and create meaningful opportunities for our
employees, who cite these programs as a source of pride and connection to Booz Allen. We take steps through oversight,
technology solutions, and enterprise-wide policies to mitigate any business risks that could arise through these activities. To this
end, we seek to affiliate only with organizations that are responsible stewards of corporate and employee contributions of time
and money and that share our values, such as our commitment to diversity, equity, and inclusion.
Awards and Recognition. The importance we place on our people continues to receive external recognition. Ethisphere, a
global leader in defining and advancing ethical business practices, has once again recognized Booz Allen as one of the World’s
Most Ethical Companies. For the twelfth consecutive year, Booz Allen has received a perfect score on the Corporate Equality
Index, a national benchmarking survey on corporate policies and practices related to LGBTQ workplace equality administered
by the Human Rights Campaign Foundation, as well as designation as a “Best Place to Work for LGBTQ+ Equality.” In
addition, for the seventh consecutive year, Booz Allen received a perfect score on the Disability Equality Index and has been
named a Disability Equality Index “Best Place to Work for Disability Inclusion.” Our inclusive culture has been further
recognized by Military Spouse as “Top 10 Military Spouse Friendly Employers,” by Military Times as “Best for Vets,” on the
“Working Mother Top 100,” and by Forbes as a “Best Employer for Veterans,” a “Best Employer for Diversity,” and a “Best
Employer for Women.” Since 2005, we have had more than 100 employees recognized for the Black Engineer of the Year
Award as Modern Day Technology Leaders. We were also proud recipients of the Washington Business Journal’s Corporate
Philanthropy Award.
We have also been honored with industry awards that showcase our employer brand, including recognition by Forbes as
one of “America’s Best Large Employers” and a “Best Management Consulting Firm,” achieving an eleventh consecutive year
as one of Fortune’s “World’s Most Admired Companies,” receipt of the U.S. Small Business Association’s Dwight D.
Eisenhower “Award for Excellence,” #4 ranked on Vault’s Consulting 50 and in the top 10 of Vault’s Most Prestigious
Consulting Firms, #4 ranked “Best Places to Work in IT” by Computer World and Insider Pro, and #22 ranked “Largest Global
Defense Contractor” by Defense News.
Functional Service Offerings
We offer five functional service offerings supported by continued investment and innovation that drive our capacity to
meet market demand today and into the future. We provide a range of technical capabilities that have had an enduring impact
for our clients, our people, and the communities where we live and work.
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Our functional service offerings are summarized below:
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Analytics focuses on transformational solutions that deliver ethical and responsible outcomes in the areas of artificial
intelligence (AI), such as machine learning (ML), deep learning; data science, such as data engineering and predictive
modeling; automation and decision analytics; and emerging areas, such as quantum computing. We pioneer holistic
approaches to apply these technologies to create and sustain data-driven organizations, with a focus not only on data
and technology, but also the people and culture, to drive real outcomes. We act as our clients' trusted advisor, assisting
them with building and operationalizing scalable analytics and AI systems based on our deep experience in a complex
and evolving AI landscape.
Digital Solutions combines the power of modern systems development techniques and cloud platforms with the power
of ML to transform customer and mission experiences. We blend in-depth client mission understanding and digital
technical expertise with a consultative approach. We develop, design, and implement powerful solutions built on
contemporary methodologies and modern architectures. We accelerate clients to open, cloud native environments,
where capability can be securely developed and deployed at scale, and effort allocated toward data management
challenges is redirected to analysis and insights.
Engineering delivers engineering services and solutions to define, develop, implement, sustain, and modernize
complex physical systems. We leverage mature engineering methodologies to solve our clients' most complex
problems. We bring a holistic understanding of client needs and technical strategy as well as policy experts to deliver
purpose-fit solutions to problems. Our engineering capabilities include external industry standard certifications, such
as International Organization for Standardization 90001 and AS9100.
Cyber focuses on active prevention, detection, and cost effectiveness. Active prevention includes methods of securing
platforms and enterprises against cyber-attacks. Detection is the instrumentation of networks to provide lead indicators
of penetrations. Cost effectiveness includes our integrated engineering capabilities. Our cyber capabilities are rooted in
decades of service to the U.S. federal intelligence community and today afford us the opportunity to maintain technical
expertise in network security. With decades of mission intelligence combined with the most advanced tools available,
we help clients understand the business value of cyber risk management and prepare for future cybersecurity needs
with a lens toward efficiency and effectiveness.
Consulting focuses on the talent and expertise needed to solve client problems and develop mission-oriented solutions
for specific domains, business strategies, human capital, and operations through new and innovative approaches. We
help clients boost organizational performance, deploy new technologies in smart ways, and change and streamline
processes to achieve better outcomes.
Innovation and Solutions
The firm's innovation engine is focused on harnessing our ability to identify and ride successive waves of emerging
technologies, with the goal to amass a portfolio of differentiated and mission-centric technology businesses.
We identify, assess, build, and deploy emerging technology solutions, while ensuring that our technical expertise is
closely integrated with mission insight from across the business. Within the larger innovation ecosystem, we cultivate
relationships through technology scouting, partnerships, and venturing to identify emerging technology with applicability to our
clients' missions. We then incubate and prototype that technology against mission use cases to assess market readiness. Once
proven, we focus on building capacity in emerging technology capabilities and solutions (such as AI, Cyber and 5G) in
partnership with our business sectors. Throughout this innovation lifecycle, we are focused on advancing our solution
engineering standards, the creation of reusable Intellectual Property/Intellectual Capital, and the application of new business
and delivery models.
To complement our innovation engine, we are deeply invested in cultivating and inspiring our technical talent. We lead
programs to grow the firm's capacity in emerging technology skills and cultivate a vibrant technical community that fuels
innovation for our client missions. We also maintain an active network of Innovation Centers and hubs that showcase our
capabilities and solutions for clients, partners, and prospective talent to galvanize innovation with our clients and local
communities.
Our Long-Term Growth Strategy
Vision 2020 was a comprehensive strategy to transform Booz Allen and create sustainable growth for the Company. We
drove industry-leading organic revenue growth and enhanced margin expansion, empowered our people to apply both
technology and deep functional expertise to client challenges, and migrated major parts of our portfolio to be more technical
and closer to the center of our clients' missions.
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Our Company has grown in significant ways through Vision 2020, and the world around us continues to change at
exponential speed. Competitive boundaries are shifting, public and private sector technology investments are accelerating, and
the demand for highly-skilled technical talent far outpaces supply. Within this environment, our clients have become
increasingly reliant on technology as missions become larger, more complex, and digitally driven. We must continue to evolve
to ride the waves of change and lead our clients into a new era of digital transformation. Our capacity for change is a key
ingredient of our success and we thoughtfully adjust our trajectory to stay ahead of the competition and anticipate the most
mission-critical challenges for our clients.
We know that continued growth requires operating with increased speed, agility, and scale in a rapidly changing, highly
competitive, and increasingly technical environment. VoLT, our strategy for the next era of Booz Allen, will accelerate our
growth by focusing on the powerful convergence of Velocity, Leadership, and Technology as the blueprint for transforming our
firm.
Velocity: Get There First
Leverage our mission knowledge to get to the future at speed and scale
•
•
Double-down on innovation
Strategically use mergers and acquisitions and partnerships to build market positions
• Make decisions closer to the needs of clients
Leadership: Transform with Conviction
Redefine mission leadership to stand apart in this new era
•
•
Identify client needs ripe for hyper-growth
Scale businesses at the nexus of mission and technology
Technology: Differentiate to Win
Put technology at the heart of the client mission to define the next generation of impact
•
•
Use mission insights to develop solutions
Identify, build, and scale next generation technology to transform mission
With VoLT as the catalyst, our ambition is that by 2030 Booz Allen will be a market-leading mission partner for the U.S.
government in the new digital environment, highly differentiated across a portfolio of scaled mission and technology
businesses, and recognized for integrating, applying, and scaling technologies in the service of national mission priorities.
Our Clients
Booz Allen is committed to solving our clients’ toughest challenges, and we work with a diverse base of public and
private sector clients across a number of industries in the U.S. and internationally, operating at the intersection of technology
and mission understanding.
Our clients call us to work on their hardest problems, such as delivering effective healthcare, protecting soldiers in combat
and their families, and keeping our national infrastructure secure. We are investing in markets, capabilities, and talent and are
building new business models through strategic ventures, partnerships, and product offerings.
Our government clients include nearly all of the cabinet-level departments of the U.S. government. We also serve large
commercial clients across industries, including financial services, health and life sciences, energy, and technology to solve their
hardest and most sophisticated cyber challenges. Internationally, we also serve a portfolio of U.S. and non-U.S. government and
commercial clients.
A Large Addressable Market
We believe that the U.S. government is the world’s largest consumer of management and technology consulting services.
According to the Congressional Budget Office and the U.S. Department of the Treasury, the U.S. government’s total spending
for its fiscal year ended September 30, 2021 was $6.8 trillion. Memorandum baseline estimates for fiscal year 2021 indicate
approximately $1.6 trillion was for discretionary budget authority, including $742 billion for the Department of Defense and
intelligence community and $895 billion for civil agencies. Based on data from the Federal Procurement Data System,
approximately $646 billion, including an estimated $52.7 billion in contract spending tied directly to the COVID-19 National
Interest Action code (code P20C), of the U.S. government’s fiscal year 2021 discretionary outlays were non-intelligence agency
funding-related products and services procured from private contractors. We estimate that $144.9 billion of the spending
directed toward private contractors in U.S. government fiscal year 2021 was for management, technology, and engineering
7
services, with $76.9 billion spent by the Department of Defense and $68.0 billion spent by civil agencies. The agencies of the
U.S. intelligence community that we serve represent an additional market. These numbers also exclude a large addressable
market for our services and capabilities in the global commercial markets where we have a modest footprint.
Highlights of Booz Allen’s fiscal 2022 are as follows:
• We derived 97% of our revenue from contracts where the end client was an agency or department of the U.S.
government.
• We delivered services under 4,219 contracts and task orders.
• We derived 94% of our revenue in fiscal 2022 from engagements for which we acted as the prime contractor.
• We derived 13% of our revenue in fiscal 2022 from the Navy Marine Corps, which was the single largest client that
we served in that year.
Selected Long-Term Client Relationships
Client (1)
U.S. Navy
U.S. Army
Department of Energy
U.S. Air Force
National Security Agency
Department of Homeland Security
Federal Bureau of Investigation
Internal Revenue Service
Department of Health and Human Services
National Reconnaissance Office
A U.S. intelligence agency
(1) Includes predecessor organizations.
Defense Clients
Relationship
Length
(Years)
80+
70+
45+
40+
40+
40+
30+
25+
25+
25+
25+
We are the premier digital integrator for the Department of Defense, blending decades of mission experience with state of-
the-art AI/ML, next-generation data solutions, resilient communications, cyber, and advanced software development. We bring
our defense clients the best cognitive mission solutions to achieve information advantage. As we operate in dynamic geo-
political conditions, we design open architectures to avoid vendor lock, lower lifecycle cost, and maintain a technical edge to
modernize, achieve interoperability, and win. Our technologists partner with our domain experts to build solutions that deliver
the warfighter mission-critical information in today's digital battlespace, the fully networked conflict space extending across all
warfighting domains.
We count among our many defense clients all four branches of the U.S. military, the Office of the Secretary of Defense,
and the Joint Staff. Our key defense clients include the Army, Navy/Marine Corps, Air Force, Space Force, and Joint
Combatant Commands.
Revenue generated from defense clients was $4.0 billion, or approximately 47.3% of our revenue, in fiscal 2022, as
compared to $3.9 billion, or approximately 48.9% of our revenue, in fiscal 2021. Revenue generated from defense clients also
includes foreign military sales and work performed under status of forces agreements to U.S. and non-U.S. government clients.
Intelligence Clients
We deliver innovative, high-value services, capabilities, and solutions that directly impact core national security missions
across the Intelligence Community and national cyber mission providers. We leverage our knowledge of the mission and tailor
our capabilities for our clients—our biggest driver is the demand for innovation, requiring us to be ahead of the pace of
technology adoption. Technology is at the center of our clients' missions and ours—we are investing in emerging technologies
like AI, zero trust cyber solutions, multi-cloud, and 5G to adapt ahead of adversaries. The national security workforce remains
focused on what's next, blending cleared and uncleared talent across dispersed geographies, ensuring mission impact. Our
combination of technology, innovation, and talent is helping to shape the future of our national security ecosystem.
8
Our intelligence clients are the 18 organizations of the U.S. Intelligence Community, which includes independent
agencies, the Department of Defense elements, such as the National Security Agency and Defense Intelligence Agency, and
other departments or agencies.
Revenue generated from intelligence clients was $1.6 billion, or approximately 18.8% of our revenue, in fiscal 2022 as
compared to $1.5 billion, or approximately 19.7% of our revenue, in fiscal 2021.
Civil Clients
Our civil work centers on the federal missions that are the highest priority to the domestic agenda, and we excel at helping
our clients innovate their most-critical missions. From healthcare, homeland security, and financial services to justice, law
enforcement, immigration, energy, transportation, and labor, we work at the core of the mission to address our clients' most
pressing needs.
Our major civil government clients include the Departments of Veterans Affairs, Health and Human Services, Treasury,
Labor, Homeland Security, Justice, Energy, Commerce, and Transportation. Modernization, transformation, and reform are key
needs of our clients, and we offer the technical expertise and mission understanding that is required to deliver innovative
solutions to all our clients' needs across the civil portfolio.
Revenue generated from civil clients was $2.6 billion, or approximately 31.3% of our revenue, in fiscal 2022, as
compared to $2.2 billion, or approximately 27.8% of our revenue, in fiscal 2021.
Global Commercial Clients
The Global Commercial business partners with clients, from sophisticated multinational organizations to small-to-medium
organizations, to elevate their business to new heights. We deliver advanced cyber defense solutions across three industry
leading lines of business: enterprise consulting, incident response, and managed services. Our team is led by practitioners with
decades of cyber operational, strategic consulting, incident response, commercial, and federal experience. Our extensive
industry expertise is earned through years of working with market leading clients in financial services, health and life sciences,
software and technology, high tech manufacturing, logistics, and energy.
Revenue generated from global commercial clients was $216.3 million, or approximately 2.6% of our revenue, in fiscal
2022, as compared to $205.8 million, or approximately 2.6% of our revenue, in fiscal 2021.
Contracts
Booz Allen’s approach has long been to ensure that we have prime or subcontractor positions on a wide range of
contracts that allow clients maximum opportunity to access our services. Our diverse contract base provides stability to our
business. This diversity shows that more than 79% of our revenue for fiscal 2022 was derived from 3,166 active task orders
under IDIQ contract vehicles. Our top IDIQ contract vehicle represented approximately 12.0% of our revenue in fiscal 2022.
Our largest task order under an IDIQ contract vehicle accounted for approximately 3.6% of our revenue in fiscal 2022. Our
largest definite contract represented approximately 3.0% of our revenue in fiscal 2022.
The U.S. government procures services through two predominant contracting methods: indefinite contract vehicles and
definite contracts. Each of these is described below:
•
•
Indefinite contract vehicles provide for the issuance by the client of orders for services or products under the terms of
the contract. Indefinite contracts are often referred to as contract vehicles or ordering contracts. IDIQ contracts may be
awarded to one contractor (single award) or several contractors (multiple award). Under a multiple award IDIQ
contract, there is no guarantee of work as contract holders must compete for individual work orders. IDIQ contracts
will often include pre-established labor categories and rates, and the ordering process is streamlined (usually taking
less than a month from recognition of a need to an established order with a contractor). IDIQ contracts often have
multiyear terms and unfunded ceiling amounts, thereby enabling but not committing the U.S. government to purchase
substantial amounts of products and services from one or more contractors in a streamlined procurement process.
Definite contracts call for the performance of specified services or the delivery of specified products. The
U.S. government procures services and solutions through single award, definite contracts that specify the scope of
services that will be delivered and identify the contractor that will provide the specified services. When an agency
recognizes a need for services or products, it develops an acquisition plan, which details how it will procure those
services or products. During the acquisition process, the agency may release a request for information to determine if
qualified bidders exist, a draft request for a proposal to allow the industry to comment on the scope of work and
acquisition strategy, and finally a formal request for a proposal. Following the evaluation of submitted proposals, the
agency will award the contract to the winning bidder.
Listed below are our top IDIQ contracts for fiscal 2022 and the number of active task orders under these contracts as of
March 31, 2022.
9
One Acquisition Solution for Integrated Services
Booz Allen Engineering Services - Alliant
Booz Allen Engineering Services - Alliant 2
Transformation Twenty-One Total Technology Next
Generation
Information Technology Schedule 70 (Successor)
Professional Services Schedule
DTIC Information Analysis Center Multiple Award
Contract
System Engineering and Analysis/Advanced
Technology Support
Seaport Next Generation
Chief Information Officer - Solutions & Partners 3
Fiscal
2022 Revenue
(in millions)
$1,003.2
650.5
611.4
519.1
348.7
345.8
298.7
280.4
233.0
223.5
% of
Total
Revenue
12.0%
7.8%
7.3%
6.2%
4.2%
4.1%
3.6%
3.4%
2.8%
2.7%
Number of
Task Orders
as of
March 31, 2022 Expiration Date (1)
92
42
55
17
54
101
37
43
14
25
9/2/2024
4/30/2019
6/30/2028
3/6/2026
6/28/2036
9/30/2035
9/29/2027
12/31/2019
1/1/2029
5/31/2022
(1) Expiration date applies to the IDIQ vehicle. Task orders awarded under the IDIQ can run past the expiration of the
IDIQ itself.
Listed below for each specified revenue band is the number of task orders, revenue derived from the task orders, and
average duration of the task orders as of March 31, 2022. The table includes revenue earned during fiscal 2022 under all task
orders that were active during fiscal 2022 under these IDIQ contracts and the number of active task orders on which this
revenue was earned. Average duration reflected in the table below is calculated based on the inception date of the task order,
which may be prior to the beginning of fiscal 2022, and the completion date which may have been prior or subsequent to
March 31, 2022. As a result, the actual average remaining duration for task orders included in this table may be less than the
average duration shown in the table, and task orders included in the table may have been complete on March 31, 2022.
Segmentation of Task Order by Revenue Fiscal
2022
Number of Task
Orders Active
During Fiscal 2022
Fiscal 2022 Revenue
(in millions)
% of Total
Revenue
Average
Duration
(Years)
Less than $1 million
Between $1 million and $3 million
Between $3 million and $5 million
Between $5 million and $10 million
Greater than $10 million
Total
2,368
407
139
132
120
3,166
$399.2
723.9
533.8
932.8
4,012.6
$6,602.3
5%
9%
6%
11%
48%
79%
2.1
3.3
3.8
4.1
4.9
2.5
10
Listed below are our top definite contracts for fiscal 2022 and revenue recognized under these contracts. Classified
contracts that cannot be named are noted generically in the table:
Classified Contract
Classified Contract
Classified Contract
R1S Recreation One Stop Support Services
Classified Contract
Classified Contract
Classified Contract
Classified Contract
Classified Contract
Classified Contract
Fiscal
2022 Revenue
(in millions)
% of
Total
Revenue
Expiration
Date
$
247.8
65.7
51.3
44.0
38.0
35.1
25.8
24.6
24.6
22.5
3.0%
0.8%
0.6%
0.5%
0.5%
0.4%
0.3%
0.3%
0.3%
0.3%
9/30/2022
6/30/2025
3/7/2023
9/30/2027
3/31/2025
9/16/2024
5/26/2021
3/31/2024
4/18/2028
8/31/2021
Backlog
We define backlog to include the following three components:
• Funded Backlog. Funded backlog represents the revenue value of orders for services under existing contracts for which
funding is appropriated or otherwise authorized less revenue previously recognized on these contracts.
• Unfunded Backlog. Unfunded backlog represents the revenue value of orders (including optional orders) for services
under existing contracts for which funding has not been appropriated or otherwise authorized.
• Priced Options. Priced contract options represent 100% of the revenue value of all future contract option periods under
existing contracts that may be exercised at our clients’ option and for which funding has not been appropriated or
otherwise authorized.
Our backlog does not include contracts that have been awarded but are currently under protest, and also does not include
any task orders under IDIQ contracts except to the extent that task orders have been awarded to us under those contracts.
The following table summarizes the value of our contract backlog as of the respective dates presented:
Funded
Unfunded
Priced options
Total backlog
As of March 31,
2022
2021
(In millions)
3,710 $
9,925
15,612
29,247 $
3,510
6,086
14,436
24,032
$
$
We may never realize all of the revenue that is included in our total backlog, and there is a higher degree of risk in this
regard with respect to unfunded backlog and priced options. See “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Factors and Trends Affecting Our Results of Operations—Sources of Revenue—
Contract Backlog” for additional disclosure regarding our backlog. See also “Item 1A. Risk Factors—Industry and Economic
Risks—We may not realize the full value of our backlog, which may result in lower than expected revenue.”
Competition
The government services market is highly fragmented and competition within the government professional services
industry has intensified as a result of market pressure and consolidation activity. In addition to professional service companies
like ours that focus principally on the provision of services to the U.S. government, other companies active in our markets
include large defense contractors; diversified consulting, technology, and outsourcing service providers; and small businesses.
11
Changing government policies and market dynamics are impacting the competitive landscape. In the past, the
government’s focus on organizational conflicts of interest has driven divestitures, which have changed the competitive
landscape. More recently, there has been increasing pressure from government clients to utilize small businesses, in large part
because of a push by both past and present administrations to bolster the economy by helping small business owners. Finally, as
a result of the foregoing factors and the drive in our markets to quickly build competencies in growth areas and achieve
economies of scale, we believe that consolidation activity among market participants will continue.
In the course of doing business, we compete and collaborate with companies of all types and sizes. We strive to maintain
positive and productive relationships with these organizations. Some of them hire us as a subcontractor, and we hire some of
them to work with us as our subcontractors. Our major competitors include: (1) contractors focused principally on the provision
of services to the U.S. government, (2) large defense contractors that provide both products and services to the
U.S. government, and (3) diversified service providers. We compete based on our technical expertise and client knowledge, our
ability to successfully recruit and retain appropriately skilled and experienced talent, our ability to deliver cost-effective
multifaceted services in a timely manner, our reputation and relationship with our clients, our past performance, security
clearances, and the size and scale of our Company. In addition, to maintain our competitive position, we routinely review our
operating structure, capabilities, and strategy to determine whether we are effectively meeting the needs of existing clients,
effectively responding to developments in our markets, and successfully building a platform intended to provide the foundation
for the future growth of our business.
Patents and Proprietary Information
Our management and technology consulting services business utilizes a variety of proprietary rights in delivering
products and services to our clients. We claim a proprietary interest in certain service offerings, products, software tools,
methodologies, and know-how, and also have certain licenses to third-party intellectual property that may be significant to our
business. While we have several patents issued and pending in the United States and in certain foreign countries, we do not
consider our overall business to be materially dependent on the protection of such patents. In addition, we have a number of
trade secrets that contribute to our success and competitive position, and we endeavor to protect this proprietary information.
While protecting trade secrets and proprietary information is important, we are not materially dependent on any specific trade
secret or group of trade secrets.
We rely on a combination of nondisclosure agreements and other contractual arrangements, as well as copyright,
trademark, patent, and trade secret laws, to protect our proprietary information. We also enter into proprietary information and
intellectual property agreements with employees, which require them to disclose any inventions created during employment, to
convey such rights to inventions to us, and to restrict any disclosure of proprietary information. We have a variety of
trademarks registered in the United States and certain foreign countries, including "Booz Allen Hamilton." Generally, registered
trademarks have perpetual life, provided that they are renewed on a timely basis and continue to be used properly as
trademarks. We have registered trademarks related to our name and logo in the United States, with the earliest renewal in
November 2022, while the earliest renewal for our trademarks outside of the United States is February 2023.
For our work under U.S. government funded contracts and subcontracts, the U.S. government obtains certain rights to
data, software, and related information developed under such contracts or subcontracts. These rights may allow the
U.S. government to disclose such data, software, and related information to third parties, which may include our competitors in
some instances. In the case of our work as a subcontractor, our prime contractor may also have certain rights to data,
information, and products we develop under the subcontract.
Booz Allen Hamilton and other trademarks or service marks of Booz Allen Hamilton Inc. appearing in this Annual
Report are the trademarks or registered trademarks of Booz Allen Hamilton Inc. Trade names, trademarks, and service marks of
other companies appearing in this Annual Report are the property of their respective owners.
Regulation
As a contractor to the U.S. government, as well as state and local governments, we are heavily regulated in most fields in
which we operate. We deal with numerous U.S. government agencies and entities, and, when working with these and other
entities, we must comply with and are affected by unique laws and regulations relating to the formation, administration, and
performance of public government contracts. Some significant laws and regulations that affect us include the following:
•
the FAR, and agency regulations supplemental to the FAR, which regulate the formation, administration, and
performance of U.S. government contracts. For example, FAR 52.203-13 requires contractors to establish a Code of
Business Ethics and Conduct, implement a comprehensive internal control system, and report to the government when
the contractor has credible evidence that a principal, employee, agent, or subcontractor, in connection with a
government contract, has violated certain federal criminal laws, violated the civil False Claims Act, or has received a
significant overpayment;
12
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the False Claims Act, which imposes civil and criminal liability for violations, including substantial monetary
penalties, for, among other things, presenting false or fraudulent claims for payments or approval;
the False Statements Act, which imposes civil and criminal liability for making false statements to the U.S.
government;
the Truthful Cost or Pricing Data Statute (formerly known as the Truth in Negotiations Act), which requires
certification and disclosure of cost and pricing data in connection with the negotiation of certain contracts,
modifications, or task orders;
the Procurement Integrity Act, which regulates access to competitor bid and proposal information and certain internal
government procurement sensitive information, and our ability to provide compensation to certain former government
procurement officials;
laws and regulations restricting the ability of a contractor to provide gifts or gratuities to employees of the U.S.
government;
post-government employment laws and regulations, which restrict the ability of a contractor to recruit and hire current
employees of the U.S. government and deploy former employees of the U.S. government;
laws, regulations, and executive orders restricting the handling, use, and dissemination of information classified for
national security purposes or determined to be “controlled unclassified information” or “for official use only,” and the
export of certain products, services, and technical data, including requirements regarding any applicable licensing of
our employees involved in such work;
laws, regulations, and executive orders, regulating the handling, use, and dissemination of personally identifiable
information in the course of performing a U.S. government contract;
international trade compliance laws, regulations, and executive orders that prohibit business with certain sanctioned
entities and require authorization for certain exports or imports in order to protect national security and global stability;
laws, regulations, and executive orders governing organizational conflicts of interest that may restrict our ability to
compete for certain U.S. government contracts because of the work that we currently perform for the U.S. government
or may require that we take measures such as firewalling off certain employees or restricting their future work
activities due to the current work that they perform under a U.S. government contract;
laws, regulations, and executive orders that impose requirements on us to ensure compliance with requirements and
protect the government from risks related to our supply chain;
laws, regulations, and mandatory contract provisions providing protections to employees or subcontractors seeking to
report alleged fraud, waste, and abuse related to a government contract;
the Contractor Business Systems rule, which authorizes Department of Defense agencies to withhold a portion of our
payments if we are determined to have a significant deficiency in our accounting, cost estimating, purchasing, earned
value management, material management and accounting, and/or property management system; and
the Cost Accounting Standards and Cost Principles, which impose accounting and allowability requirements that
govern our right to reimbursement under certain cost-based U.S. government contracts and require consistency of
accounting practices over time.
Given the magnitude of our revenue derived from contracts with the Department of Defense, the Defense Contract Audit
Agency (DCAA) is our cognizant government audit agency. The DCAA audits the adequacy of our internal control systems and
policies including, among other areas, compensation. The Defense Contract Management Agency (DCMA), as our cognizant
government contract management agency, may determine that a portion of our employee compensation is unallowable based on
the findings and recommendations in the DCAA's audits. In addition, the DCMA directly reviews the adequacy of certain of our
business systems, such as our purchasing system. See “Item 1A. Risk Factors—Legal and Regulatory Risks—Our work with
government clients exposes us to additional risks inherent in the government contracting environment, which could reduce our
revenue, disrupt our business, or otherwise materially adversely affect our results of operations.” We are also subject to audit by
Inspectors General of other U.S. government agencies.
The U.S. government may revise its procurement practices or adopt new contract rules and regulations at any time. To
help ensure compliance with these laws and regulations, all of our employees are required to attend ethics training at least
annually, and to participate in other compliance training relevant to their position. Internationally, we are subject to special
U.S. government laws and regulations (such as the Foreign Corrupt Practices Act), local government regulations and
procurement policies and practices, including regulations relating to import-export control, investments, exchange controls, and
repatriation of earnings, as well as varying currency, political, and economic risks.
13
U.S. government contracts are, by their terms, subject to termination by the U.S. government either for its convenience or
default by the contractor. In addition, U.S. government contracts are conditioned upon the continuing availability of
Congressional appropriations. Congress usually appropriates funds for a given program on a September 30 fiscal year basis,
even though contract performance could take many years. As is common in the industry, our Company is subject to business
risks, including changes in governmental appropriations, national defense policies, service modernization plans, and availability
of funds. Any of these factors could materially adversely affect our Company’s business with the U.S. government in the future.
The U.S. government has a broad range of actions that it can instigate to enforce its procurement law and policies. These
include proposing a contractor, certain of its operations or individual employees for debarment or suspending or debarring a
contractor, certain of its operations or individual employees from future government business. In addition to criminal, civil, and
administrative actions by the U.S. government, under the False Claims Act, an individual alleging fraud related to payments
under a U.S. government contract or program may file a qui tam lawsuit on behalf of the government against us; if successful in
obtaining a judgment or settlement, the individual filing the suit may receive up to 30% of the amount recovered by the
government.
See “Item 1A. Risk Factors—Legal and Regulatory Risks—We are required to comply with numerous laws and
regulations, some of which are highly complex, and our failure to comply could result in fines or civil or criminal penalties or
suspension or debarment by the U.S. government that could result in our inability to continue to work on or receive
U.S. government contracts, which could materially and adversely affect our results of operations.”
Available Information
We file annual, quarterly, and current reports and other information with the Securities and Exchange Commission (the
"SEC"). The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other
information regarding registrants that file electronically with the SEC, including us. You may also access, free of charge, our
reports filed with the SEC (for example, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current
Reports on Form 8-K, and any amendments to those forms) through the “Investors” portion of our website
(www.boozallen.com). Reports filed with or furnished to the SEC will be available as soon as reasonably practicable after they
are filed with or furnished to the SEC. Our website is included in this Annual Report as an inactive textual reference only. The
information found on our website is not part of this or any other report filed with or furnished to the SEC.
Item 1A.
Risk Factors
You should consider and read carefully all of the risks and uncertainties described below, as well as other information
included in this Annual Report, including our consolidated financial statements and related notes. The risks described below
are not the only ones facing us. The occurrence of any of the following risks or additional risks and uncertainties not presently
known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial
condition, and results of operations. This Annual Report also contains forward-looking statements and estimates that involve
risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a
result of specific factors, including the risks and uncertainties described below.
This risk factor summary contains a high-level summary of risks associated with our business. It does not contain all of
the information that may be important to you, and you should read this risk factor summary together with the more detailed
discussion of risks and uncertainties set forth following this summary. A summary of our risks includes, but is not limited, to
the following:
Industry and Economic Risks
•
risks relating to our relationships with the U.S. government;
• changes in U.S. government spending and mission priorities, including due to uncertainty relating to funding of the
U.S. government and a possible failure of Congressional efforts to approve such funding and to craft a long-term
agreement on the U.S. government’s ability to incur indebtedness in excess of its current limits;
•
the effects of COVID-19 and other pandemics or widespread health epidemics, including disruptions to our workforce
and the impact on government spending and demand for our solutions;
• our ability to compete effectively in the competitive bidding process and delays or losses of contract awards caused by
competitors’ protests of major contract awards received by us;
•
the loss of GSA schedules, or our position as prime contractor on GWACs;
• variable purchasing patterns under GSA schedules, blanket purchase agreements, and IDIQ contracts;
• changes in the mix of our contracts and our ability to accurately estimate or otherwise recover expenses, time, and
resources for our contracts;
14
• changes in estimates used in recognizing revenue;
• our ability to realize the full value of and replenish our backlog, generate revenue under certain of our contracts, and
the timing of our receipt of revenue under contracts included in backlog;
•
•
internal system or service failures and security breaches, including, but not limited to, those resulting from external or
internal cyber attacks on our network and internal systems;
risks related to the operation of financial management systems;
• our ability to attract, train, or retain employees with the requisite skills and experience and ensure that employees
obtain and maintain necessary security clearances and effectively manage our cost structure;
•
•
risks related to inflation that could impact the cost of doing business and/or reduce customer buying power;
the loss of members of senior management or failure to develop new leaders;
• misconduct or other improper activities from our employees or subcontractors, including the improper use or release of
sensitive or classified information;
the impact of increased competition from other companies in our industry;
failure to maintain strong relationships with other contractors, or the failure of contractors with which we have entered
into a sub- or prime-contractor relationship to meet their obligations to us or our clients;
risks related to changes to our operating structure, capabilities, or strategy intended to address client needs, grow our
business, or respond to market developments; and
risks related to completed and future acquisitions, including our ability to realize the expected benefits from such
acquisitions.
•
•
•
•
Legal and Regulatory Risks
•
•
•
•
failure to comply with numerous laws and regulations, including FAR, the False Claims Act, the Defense Federal
Acquisition Regulation Supplement, and FAR Cost Accounting Standards and Cost Principles;
risks related to our international operations;
the adoption by the U.S. government of new laws, rules, and regulations, such as those relating to organizational
conflicts of interest issues or limits;
the incurrence of additional tax liabilities, including as a result of changes in tax laws or management judgments
involving complex tax matters;
• continued efforts to change how the U.S. government reimburses compensation related costs and other expenses or
otherwise limit such reimbursements and an increased risk of compensation being deemed unreasonable and
unallowable or payments being withheld as a result of U.S. government audit, review, or investigation;
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inherent uncertainties and potential adverse developments in legal or regulatory proceedings;
the impact of changes in accounting rules and regulations, or interpretations thereof, that may affect the way we
recognize and report our financial results, including changes in accounting rules governing recognition of revenue; and
the impact of ESG-related risks and climate change generally on our and our clients' businesses and operations.
Risks Related to Our Indebtedness
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the impact of our substantial indebtedness and our ability to service and refinance such indebtedness;
the restrictions and limitations in the agreements and instruments governing our indebtedness; and
the impact of a substantial portion of our indebtedness being secured by substantially all of our assets.
Risks Related to Our Common Stock
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the volatility of the market price of our Class A common stock;
the timing and amount of our dividends, if any; and
the impact of fulfilling our obligations incident to being a public company.
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Industry and Economic Risks
We depend on contracts with U.S. government agencies for substantially all of our revenue. If our relationships with
such agencies are harmed, our future revenue and operating profits would decline.
The U.S. government is our primary client, with revenue from contracts and task orders, either as a prime or a
subcontractor, with U.S. government agencies accounting for 97% of our revenue for fiscal 2022. Our belief is that the
successful future growth of our business will continue to depend primarily on our ability to be awarded work under U.S.
government contracts, as we expect this will be the primary source of substantially all of our revenue in the foreseeable future.
For this reason, any issue that compromises our relationship with the U.S. government generally or any U.S. government
agency that we serve would cause our revenue to decline. Among the key factors in maintaining our relationship with U.S.
government agencies is our performance on contracts and task orders, the strength of our professional reputation, compliance
with applicable laws and regulations, and the strength of our relationships with client personnel. In addition, the mishandling or
the perception of mishandling of sensitive information, such as our failure to maintain the confidentiality of the existence of our
business relationships with certain of our clients, including as a result of misconduct or other improper activities by our
employees or subcontractors, or a failure to maintain adequate protection against security breaches, including those resulting
from cyber attacks, could harm our relationship with U.S. government agencies. See "—Our employees or subcontractors may
engage in misconduct or other improper activities, which could harm our ability to conduct business with the U.S. government."
Our relationship with the U.S. government could also be damaged as a result of an agency’s dissatisfaction with work
performed by us, a subcontractor, or other third parties who provide services or products for a specific project for any reason,
including due to perceived or actual deficiencies in the performance or quality of our work, and we may incur additional costs
to address any such situation and the profitability of that work might be impaired. Further, negative publicity concerning
government contractors in general or us in particular, regardless of accuracy, may harm our reputation among federal
government contractors. Due to the sensitive nature of our work and our confidentiality obligations to our customers, we may
be unable or limited in our ability to respond to such negative publicity, which could also harm our reputation and business. To
the extent our reputation or relationships with U.S. government agencies is impaired, our revenue and operating profits could
materially decline.
U.S. government spending levels and mission priorities could change in a manner that adversely affects our future
revenue and limits our growth prospects.
Our business depends upon continued U.S. government expenditures on defense, intelligence, and civil programs for
which we provide support. These expenditures have not remained constant over time, have been reduced in certain periods, and
have been affected by the U.S. government’s efforts to improve efficiency and reduce costs affecting U.S. government
programs generally. Our business, prospects, financial condition, or operating results could be materially harmed, among other
causes, by the following:
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budgetary constraints, including Congressionally mandated automatic spending cuts, affecting U.S. government
spending generally, or specific agencies in particular, and changes in available funding;
a shift in the permissible federal debt limit;
a shift in expenditures away from agencies or programs that we support;
reduced U.S. government outsourcing of functions that we are currently contracted to provide, including as a result of
increased insourcing by various U.S. government agencies due to changes in the definition of “inherently
governmental” work, including proposals to limit contractor access to sensitive or classified information and work
assignments;
changes or delays in U.S. government programs that we support or related requirements;
U.S. government shutdowns due to, among other reasons, a failure by elected officials to fund the government and
other potential delays in the appropriations process;
U.S. government agencies awarding contracts on a technically acceptable/lowest cost basis in order to reduce
expenditures;
delays in the payment of our invoices by government payment offices;
an inability by the U.S. government to fund its operations as a result of a failure to increase the U.S. government’s debt
ceiling, a credit downgrade of U.S. government obligations or for any other reason; and
changes in the political climate and general economic conditions, including a slowdown of the economy or unstable
economic conditions and responses to COVID-19 or other conditions, such as emergency spending, that reduce funds
available for other government priorities.
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In addition, any disruption in the functioning of U.S. government agencies, including as a result of U.S. government
closures and shutdowns, terrorism, war, international conflicts (such as Russia's invasion of Ukraine in 2022), natural disasters,
public health crises (such as COVID-19), destruction of U.S. government facilities, and other potential calamities could have a
negative impact on our operations and cause us to lose revenue or incur additional costs due to, among other things, our
inability to deploy our staff to client locations or facilities as a result of such disruptions.
The U.S. government budget deficits, the national debt, and prevailing economic conditions, and actions taken to address
them, could negatively affect U.S. government expenditures on defense, intelligence, and civil programs for which we provide
support. The Department of Defense is one of our significant clients and cost cutting, including through consolidation and
elimination of duplicative organizations and insourcing, has become a major initiative for the Department of Defense. A
reduction in the amount of, or delays or cancellations of funding for, services that we are contracted to provide as a result of any
of these related initiatives, legislation, or otherwise could have a material adverse effect on our business and results of
operations. In addition, government agencies have reduced management support services spending in recent years. If federal
awards for management support services continue to decline, our revenue and operating profits may materially decline and
could have a material and adverse effect on our business and results of operations.
If government funding relating to our contracts with the U.S. government or Department of Defense becomes
unavailable, or is reduced or delayed, or planned orders are reduced, our contract or subcontract under such programs may be
terminated or adjusted by the U.S. government or the prime contractor, if applicable. Our operating results could also be
adversely affected by spending caps or changes in the budgetary priorities of the U.S. government or Department of Defense, as
well as delays in program starts or the award of contracts or task orders under contracts.
These or other factors could cause our defense, intelligence, or civil clients to decrease the number of new contracts
awarded generally and fail to award us new contracts, reduce their purchases under our existing contracts, exercise their right to
terminate our contracts, or not exercise options to renew our contracts, any of which could cause a material decline in our
revenue.
The effects of a pandemic or widespread health epidemic such as COVID-19 could have a material adverse effect on
our business and results of operations.
The COVID-19 pandemic and ongoing attempts to contain and reduce its spread have adversely affected U.S. and global
economies, including impacts to supply chains, customer demand, international trade, and capital markets. These effects have
adversely affected certain of our business operations, may further adversely affect our business operations, and may materially
and adversely affect our financial condition, results of operations, cash flows, and equity.
In light of the uncertain and evolving situation relating to COVID-19, we have taken precautionary measures intended to
minimize the risk of the virus to our employees, our clients and the communities in which we operate, which could negatively
impact our business. Consistent with public health guidance and Executive Order 14042 regarding COVID-19 vaccination for
employees of businesses servicing federal contracts, we have implemented a Company policy requiring full COVID-19
vaccinations of all employees, except for employees who qualify for medical or religious exemptions. This policy could impair
our ability to perform certain contractual services, to retain such contracts, and to win new business. See “—We may fail to
attract, train, and retain skilled and qualified employees, which may impair our ability to generate revenue, effectively serve our
clients, and execute our growth strategy.” In addition, some of our employees, clients, and subcontractors are located in foreign
countries, which may be impacted differently from the United States, and we continue to monitor the situation in each of the
jurisdictions in which we operate and may adjust our current policies as more information and public health guidance become
available. Although the Company has business continuity plans and other safeguards in place, there is no assurance that such
plans and safeguards will be effective or that such measures will not adversely affect our operations or long-term plans. In
addition, as local conditions and regulations begin to permit the return of employees to business generally, our workforce may
not be able to return to work in person immediately, if at all, or may instead choose to pursue competing employment
opportunities, including as a result of transportation, childcare, and ongoing health issues, which could negatively affect our
business.
In addition, COVID-19 may continue to disrupt the operations of our suppliers, vendors, service providers, and
subcontractors, including as a result of travel restrictions, business shutdowns, key material shortages, or lack of access to
financial markets, all of which could negatively impact our business and results of operations. Any inability to develop
alternative sources of supply on a cost-effective and timely basis could materially impair our ability to manufacture and deliver
products, systems, and services to our clients. We are also subject to federal and state laws and regulations enacted in response
to the outbreak, such as the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), which contains a
provision that allows U.S. government contractors to seek specified reimbursement for certain employees who are unable to
perform their contract requirements at their designated work locations due to facility closures or restrictions as a result of
COVID-19 and cannot perform such work remotely. The legislation enables but does not mandate reimbursement for such
costs, and agency guidance has imposed certain restrictions. Further, the relief contemplated under the provision did not extend
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past September 30, 2021. Although we cannot currently predict the overall impact of COVID-19, the longer the duration of the
pandemic, the more likely it is that it could have an adverse effect on our business, financial position, results of operations,
billable expenses, and/or cash flows.
We expect COVID-19 to continue to negatively impact our business and results of operations and are unable to predict
how long or with what degree of severity that impact will continue. The duration and extent of COVID-19 impacts will depend
on future developments outside of our control, including the availability of effective treatments, the effectiveness and adoption
of available vaccines, and the evolutionary development of COVID-19 or related viruses, including the emergence and spread
of new and more transmissible COVID-19 variants such as Delta and Omicron, which are highly uncertain and cannot be
predicted.
We derive a majority of our revenue from contracts awarded through a competitive bidding process, and our revenue
and profitability may be adversely affected if we are unable to compete effectively in the process or if there are delays caused
by our competitors protesting major contract awards received by us.
We derive a majority of our revenue from U.S. government contracts awarded through competitive bidding processes.
We do not expect this to change for the foreseeable future. Our failure to compete effectively in this procurement environment
would have a material adverse effect on our revenue and profitability.
The competitive bidding process involves risk and significant costs to businesses operating in this environment,
including:
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the necessity to expend resources, make financial commitments (such as procuring leased premises), and bid on
engagements in advance of the completion of their design, which may result in unforeseen difficulties in execution,
cost overruns and, in the case of an unsuccessful competition, the loss of committed costs;
the substantial cost and managerial time and effort spent to prepare bids and proposals for contracts that may not be
awarded to us;
the ability to accurately estimate the resources and costs that will be required to service any contract we are awarded;
the expense and delay that may arise if our competitors protest or challenge contract awards made to us pursuant to
competitive bidding, and the risk that any such protest or challenge could result in the resubmission of bids on
modified specifications, or in termination, reduction, or modification of the awarded contract; and
any opportunity cost of not bidding and winning other contracts we might have otherwise pursued.
In circumstances where contracts are held by other companies and are scheduled to expire, we still may not be provided
the opportunity to bid on those contracts if the U.S. government determines to extend the existing contract. If we are unable to
win particular contracts that are awarded through the competitive bidding process, we may not be able to operate in the market
for services that are provided under those contracts for the duration of those contracts to the extent that there is no additional
demand for such services. An inability to consistently win new contract awards over any extended period would have a material
adverse effect on our business and results of operations.
We have seen our current competitive environment result in an increase in the number of bid protests from unsuccessful
bidders on new program awards. It can take many months for the relevant U.S. government agency to resolve protests by one or
more of our competitors of contract awards we receive. Bid protests may result in significant expense to us, contract
modification, or loss of an awarded contract as a result of the award being overturned. Even where we do not lose the awarded
contract, the resulting delay in the startup and funding of the work under these contracts may cause our actual results to differ
materially and adversely from those anticipated.
A significant majority of our revenue is derived from task orders under indefinite delivery/indefinite quantity, or IDIQ,
contract vehicles where we perform in either a prime or subcontractor position.
We believe that one of the key elements of our success is our position as the holder of 3,166 active task orders under
IDIQ contract vehicles as of March 31, 2022.
IDIQ contracts provide for the issuance by the client of orders for services or products under the contract, and often
contain multi-year terms and unfunded ceiling amounts, which allow but do not commit the U.S. government to purchase
products and services from contractors. Our ability to generate revenue under each of these types of contracts depends upon our
ability to be awarded task orders for specific services by the client. IDIQ contracts may be awarded to one contractor (single
award) or several contractors (multiple award). Multiple contractors must compete under multiple award IDIQ contracts for task
orders to provide particular services, and contractors earn revenue only to the extent that they successfully compete for these
task orders. A failure to be awarded task orders under such contracts would have a material adverse effect on our results of
operations and financial condition.
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In addition, our ability to maintain our existing business and win new business depends on our ability to maintain our
prime and subcontractor positions on these contracts. The loss, without replacement, of certain of these contract vehicles could
have a material adverse effect on our ability to win new business and our operating results. If the U.S. government elects to use
a contract vehicle that we do not hold, we will not be able to compete for work under that contract vehicle as a prime contractor.
Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure
to accurately estimate or otherwise recover the expenses, time, and resources for our contracts.
We enter into three general types of U.S. government contracts for our services: cost-reimbursable, time-and-materials,
and fixed-price. Each of these types of contracts, to varying degrees, involves the risk that we could underestimate our cost of
fulfilling the contract, which may reduce the profit we earn or lead to a financial loss on the contract and adversely affect our
operating results.
Under cost-reimbursable contracts, we are reimbursed for allowable costs up to a ceiling and paid a fee, which may be
fixed or performance-based. If our actual costs exceed the contract ceiling or are not allowable under the terms of the contract
or applicable regulations, we may not be able to recover those costs. In particular, there is ongoing focus by the U.S.
government on the extent to which government contractors, including us, are able to receive reimbursement for employee
compensation, including the adoption of interim rules by federal agencies implementing a section of the Bipartisan Budget Act
of 2013, as amended, that substantially decreased the level of allowable compensation cost for executive-level employees and
further applied the newly reduced limitation to all employees. In addition, there is an increased risk of compensation being
deemed unallowable or payments being withheld as a result of U.S. government audit, review, or investigation.
Under time-and-materials contracts, we are reimbursed for labor at negotiated hourly billing rates and for certain
allowable expenses. We assume financial risk on time-and-materials contracts because our costs of performance may exceed
these negotiated hourly rates.
Under fixed-price contracts, we perform specific tasks for a predetermined price. Compared to time-and-materials and
cost-reimbursable contracts, fixed-price contracts generally offer higher margin opportunities because we receive the benefits of
any cost savings, but involve greater financial risk because we bear the impact of any cost overruns. The U.S. government has
generally indicated that it intends to increase its use of fixed price contract procurements. Because we assume the risk for cost
overruns and contingent losses on fixed-price contracts, an increase in the percentage of fixed-price contracts in our contract
mix would increase our risk of suffering losses.
Additionally, our profits could be adversely affected if our costs under any of these contracts exceed the assumptions we
used in bidding for the contract. For example, we may miscalculate the costs, resources, or time needed to complete projects or
meet contractual milestones as a result of delays on a particular project, including delays in designs, engineering information, or
materials provided by the customer or a third party, delays or difficulties in equipment and material delivery, schedule changes,
and other factors, some of which are beyond our control. We have recorded provisions in our consolidated financial statements
for losses on our contracts, as required under accounting principles generally accepted in the United States, or GAAP, but our
contract loss provisions may not be adequate to cover all actual losses that we may incur in the future.
Our professional reputation and relationships with U.S. government agencies are critical to our business, and any
harm to our reputation or relationships could decrease the amount of business the U.S. government does with us, which
could have a material adverse effect on our future revenue and growth prospects.
We depend on our contracts with U.S. government agencies for substantially all of our revenue and if our reputation or
relationships with these agencies were harmed, our future revenue and growth prospects would be materially and adversely
affected. Our reputation and relationship with the U.S. government is a key factor in maintaining and growing revenue under
contracts with the U.S. government. In addition, a significant portion of our business relates to designing, developing, and
implementing advanced defense and technology systems and products, including cybersecurity products and services. Negative
press reports regarding poor contract performance, employee misconduct, information security breaches, engagements in or
perceived connections to politically or socially sensitive activities, or other aspects of our business, or regarding government
contractors generally, could harm our reputation. In addition, to the extent our performance under a contract does not meet a
U.S. government agency’s expectations, the client might seek to terminate the contract prior to its scheduled expiration date,
provide a negative assessment of our performance to government-maintained contractor past-performance data repositories, fail
to award us additional business under existing contracts or otherwise, and direct future business to our competitors. If our
reputation or relationships with these agencies are negatively affected, or if we are suspended or debarred from contracting with
government agencies for any reason, such actions would decrease the amount of business that the U.S. government does with
us, which would have a material adverse effect on our future revenue and growth prospects.
We use estimates in recognizing revenue and if we make changes to estimates used in recognizing revenue, our
profitability may be adversely affected.
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Revenue from our fixed-price contracts is primarily recognized using the percentage-of-completion method with progress
toward completion of a particular contract based on actual costs incurred relative to total estimated costs to be incurred over the
life of the contract. Revenue from our cost-reimbursable-plus-award-fee contracts are based on our estimation of award fees
over the life of the contract. Estimating costs at completion and award fees on our long-term contracts is complex and involves
significant judgment. Adjustments to original estimates are often required as work progresses, experience is gained, and
additional information becomes known, even though the scope of the work required under the contract may not change. Any
adjustment as a result of a change in estimate is recognized as events become known.
In the event updated estimates indicate that we will experience a loss on the contract, we recognize the estimated loss at
the time it is determined. Additional information may subsequently indicate that the loss is more or less than initially
recognized, which requires further adjustments in our consolidated financial statements. Changes in the underlying
assumptions, circumstances, or estimates could result in adjustments that could have a material adverse effect on our future
results of operations.
We may not realize the full value of our backlog, which may result in lower than expected revenue.
Our backlog does not include contracts that have been awarded but are currently under protest and also does not include
any task orders under IDIQ contracts, except to the extent that task orders have been awarded to us under those contracts. For
additional disclosure regarding our backlog, please see "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations—Factors and Trends Affecting Our Results of Operations—Sources of Revenue—Contract
Backlog."
We historically have not realized all of the revenue included in our total backlog, and we may not realize all of the
revenue included in our total backlog in the future. There is a higher degree of risk in this regard with respect to unfunded
backlog and priced options. In addition, there can be no assurance that our backlog will result in actual revenue in any particular
period. This is because the actual receipt, timing, and amount of revenue under contracts included in backlog are subject to
various contingencies, including congressional appropriations, many of which are beyond our control. The actual receipt of
revenue from contracts included in backlog may never occur or may be delayed because: a program schedule could change or
the program could be canceled; a contract’s funding or scope could be reduced, modified, delayed, de-obligated, or terminated
early, including as a result of a lack of appropriated funds or cost cutting initiatives and other efforts to reduce U.S. government
spending and/or the automatic federal defense spending cuts required by sequestration; in the case of funded backlog, the period
of performance for the contract has expired or the U.S. government has exercised its unilateral right to cancel multi-year
contracts and related orders or terminate existing contracts for convenience or default; in the case of unfunded backlog, funding
may not be available; or, in the case of priced options, our clients may not exercise their options. In addition, client staff
headcount growth is the primary means by which we are able to recognize revenue growth. Any inability to hire additional
appropriately qualified personnel or failure to timely and effectively deploy such additional personnel against funded backlog
could negatively affect our ability to grow our revenue. We may also not recognize revenue on funded backlog due to, among
other reasons, the tardy submissions of invoices by our subcontractors and the expiration of the relevant appropriated funding in
accordance with a predetermined expiration date such as the end of the U.S. government's fiscal year. The amount of our
funded backlog is also subject to change, due to, among other factors: changes in congressional appropriations that reflect
changes in U.S. government policies or priorities resulting from various military, political, economic, or international
developments; changes in the use of U.S. government contracting vehicles, and the provisions therein used to procure our
services; and adjustments to the scope of services under, or cancellation of contracts, by the U.S. government at any time.
Furthermore, even if our backlog results in revenue, the contracts may not be profitable.
Systems that we develop, integrate, maintain, or otherwise support could experience security breaches which may
damage our reputation with our clients and hinder future contract win rates.
We develop, integrate, maintain, or otherwise support systems and provide services that include managing and protecting
information involved in intelligence, national security, and other sensitive or classified government functions. Our systems also
store and process sensitive information for commercial clients, including personally identifiable, health and financial
information. The cyber and security threats that our clients face have grown more frequent and sophisticated. A security breach
in one of these systems could cause serious harm to our business, damage our reputation, and prevent us from being eligible for
further work on sensitive systems for U.S. government or commercial clients or hinder future contract win rates. Work for non-
U.S. government and commercial clients involving the protection of information systems or that store clients' information could
also be harmed due to associated security breaches. Damage to our reputation or limitations on our eligibility for additional
work or any liability resulting from a security breach in one of the systems we develop, install, maintain, or otherwise support
could have a material adverse effect on our results of operations.
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Certain services we provide and technologies we develop are designed to detect and monitor threats to our clients and
may expose our staff to financial loss or physical or reputational harm.
We help our clients detect, monitor and mitigate threats to their people, information, and facilities. These threats may
originate from nation states, terrorist or criminal actors, activist hackers or others who seek to harm our clients. Successful
attacks on our clients may cause reputational harm to us and our clients, as well as liability to our clients or third parties. In
addition, if we are associated with our clients in this regard, our staff, information, and facilities may be targeted by a similar
group of threat actors and may be at risk for financial loss, or physical or reputational harm.
Internal system or service failures, or those of our vendors, including as a result of cyber or other security threats,
could disrupt our business and impair our ability to effectively provide our services to our clients, which could damage our
reputation and have a material adverse effect on our business and results of operations.
We create, implement, and maintain information technology and engineering systems and also use vendors to provide
services that are often critical to our clients' operations, some of which involve sensitive information and may be conducted in
war zones or other hazardous environments, or include information whose confidentiality is protected by law. As a result, we
are subject to systems or service failures, not only resulting from our own failures or the failures of third-party service
providers, natural disasters, power shortages, or terrorist attacks, but also from continuous exposure to constantly evolving
cyber and other security threats, including computer viruses and malware, attacks by computer hackers, or physical break-ins.
There has been an increase in the frequency and sophistication of the cyber and security threats we face, with attacks ranging
from those common to businesses generally to those that are more advanced and persistent, which may target us because, as a
cybersecurity services contractor, we hold classified, controlled unclassified, and other sensitive information. As a result, we
and our vendors face a heightened risk of a security breach or disruption resulting from an attack by computer hackers, foreign
governments, and cyber terrorists. While we put in place policies, controls, and technologies to help detect and protect against
such attacks, we cannot guarantee that future incidents will not occur, and if an incident does occur, we may not be able to
successfully mitigate the impact. We have been the target of these types of attacks in the past and future attacks are likely to
occur. The 2022 geopolitical conflict between Russia and Ukraine is an example of the increased potential threat of
cybersecurity attacks. If successful, these types of attacks on our network or other systems or service failures could have a
material adverse effect on our business and results of operations, due to, among other things, the loss of client or proprietary
data, interruptions or delays in our clients' businesses, and damage to our reputation. In addition, the failure or disruption of our
systems, communications, vendors, or utilities could cause us to interrupt or suspend our operations, which could have a
material adverse effect on our business and results of operations. In addition, if our employees inadvertently do not adhere to
appropriate information security protocols, our protocols are inadequate, or our employees intentionally avoid these protocols,
our or our clients' sensitive information may be released thereby causing significant negative impacts to our reputation and
exposing us or our clients to liability.
If our or our vendors' systems, services, or other applications have significant defects or errors, are successfully attacked
by cyber and other security threats, suffer delivery delays, or otherwise fail to meet our clients’ expectations, we may:
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lose revenue due to adverse client reaction;
be required to provide additional services to a client at no charge;
incur additional costs related to remediation, monitoring, and increasing our cybersecurity;
lose revenue due to the deployment of internal staff for remediation efforts instead of client assignments;
receive negative publicity, which could damage our reputation and adversely affect our ability to attract or retain
clients;
be unable to successfully market services that are reliant on the creation and maintaining of secure information
technology systems to U.S. government, international, and commercial clients;
suffer claims by clients or impacted third parties for substantial damages, particularly as a result of any successful
network or systems breach and exfiltration of client and/or third party information; or
incur significant costs, including fines from government regulators related to complying with applicable federal or
state law, including laws pertaining to the security and protection of personal information.
In addition to any costs resulting from contract performance or required corrective action, these failures may result in
increased costs or loss of revenue if they result in clients postponing subsequently scheduled work or canceling or failing to
renew contracts.
The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means.
Additionally, some cyber technologies and techniques that we utilize or develop may raise potential liabilities related to legal
compliance, intellectual property, and civil liberties, including privacy concerns, which may not be fully insured or indemnified.
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We may not be able to obtain and maintain insurance coverage on reasonable terms or in sufficient amounts to cover one or
more large claims, or the insurer may disclaim coverage as to some types of future claims. The successful assertion of any large
claim against us could seriously harm our business. Even if not successful, these claims could result in significant legal and
other costs, may be a distraction to our management, and may harm our client relationships. In certain new business areas, we
may not be able to obtain sufficient insurance and may decide not to accept or solicit business in these areas.
Implementation of and compliance with various data privacy and cybersecurity laws, regulations and standards could
require significant investment into ongoing compliance activities, trigger potential liability, and limit our ability to use
personal data.
Any failure by us, our vendors or other business partners to comply with international, federal, state or local laws and
regulations regarding data privacy or cybersecurity could result in regulatory actions or lawsuits against us, legal liability, fines,
damages and other costs. We may also incur substantial expenses in implementing and maintaining compliance with such laws
and regulations, including those that may require certain types of data to be retained on servers within these jurisdictions. Our
failure to comply with applicable laws and regulations may result in privacy claims or enforcement actions against us, including
liabilities, fines and damage to our reputation, any of which may have a material adverse effect on our results of operations.
For example, the General Data Protection Regulation, or GDPR, has created new compliance obligations for companies
that process personal data of people in the European Union, which require investment into ongoing data protection activities
and documentation requirements, and create the potential for significantly increased fines for noncompliance. In addition,
Virginia, California, and Colorado have enacted comprehensive state privacy laws that provide rights to residents of those
respective states. The California Consumer Privacy Act, or CCPA, as amended by the California Privacy Rights and
Enforcement Act, or CPRA, the Virginia Consumer Data Protection Act, or VCDPA, and the Colorado Privacy Act, or CPA,
provide for consumer rights for residents of those respective states and create corresponding compliance obligations and
litigation risks. The impact from these laws to Booz Allen is currently low because most of our personal information is client or
employee related and therefore not defined as consumer. It is possible that other states will follow this trend, and laws of this
nature will be deemed applicable to some aspects of our business, which would impose new compliance obligations and require
additional investment into data protection activities. Any obligations that may be imposed on us under CCPA, CPRA, VCDPA,
CPA or similar laws may increase our compliance costs and potential liability, particularly in the event of a data breach, and
could have a material adverse effect on our business, including how we use personal information or our results of operations.
The U.S. Congress also is considering federal privacy and cybersecurity legislation that would create requirements
similar to or possibly exceeding CCPA, CPRA, VCDPA, and CPA on a 50-state basis. Any federal legislation may or may not
preempt the CCPA, CPRA, VCDPA, and CPA or other state laws, creating the possibility of different compliance measures or
enforcement risks nationally or on a per-state basis. Any obligations that may be imposed on us under the CCPA, CPRA,
VCDPA, CPA or similar laws may be different from or in addition to those required by GDPR, which may cause additional
expense for compliance across various jurisdictions. The GDPR and the laws of other U.S. states also impose obligations to
maintain and implement an information security program that includes administrative, technical, physical or organizational
safeguards, as well as obligations to give notice to affected individuals and to certain regulators in the event of a data breach.
We may be required to spend significant resources to comply with these information security and data breach legal
requirements. A significant data breach (including various forms of external attack, such as ransomware, as well as data
incidents resulting from internal actions or omissions) could also have negative consequences for our business and future
prospects, including possible penalties, fines, damages, reduced customer demand, legal claims against and by clients, business
partners or other persons claiming to be affected, harm to our systems and operations and harm to our reputation and brand.
In addition, as a contractor supporting defense and national security clients, we are also subject to certain additional
regulatory compliance requirements relating to data privacy and cybersecurity. Under the Defense Federal Acquisition
Regulation Supplement and other federal regulations, our networks and IT systems are required to comply with the security and
privacy controls in National Institute of Standards and Technology Special Publications. To the extent that we do not comply
with the applicable security and control requirements, unauthorized access or disclosure of sensitive information could
potentially result in a contract termination, which could have a material adverse effect on our business and financial results and
lead to reputational harm. We are also subject to the Department of Defense Cybersecurity Maturity Model Certification, or
CMMC, requirements, which will require all contractors to receive specific third-party certifications relating to specified
cybersecurity standards in order to be eligible for contract awards. Under “CMMC 1.0”, released in January 2020, there were 5
maturity levels, comprised of 171 requirements and 14 required processes. In March 2021, the Department of Defense initiated
an interim review of CMMC’s implementation, which led to a refinement of the overall program and implementation strategy.
In November 2021, the Department of Defense announced “CMMC 2.0”, which included updated program structure and
requirements. These refinements included a reduction in levels from 5 to 3, which includes the removal of CMMC-unique
practices and reliance on the practices set forth in National Institute of Standards and Technology Special Publication
800-171(r2). The Department of Defense announced that CMMC 2.0 will become a contract requirement once rulemaking is
completed and indicated that the rulemaking process and timeline would take place within 9 to 24 months of November 2021.
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We are in the process of preparing for certification against the CMMC program, but to the extent we are unable to achieve
certification in advance of applicable contract awards that specify the requirement, we will be unable to bid on such contract
awards or on follow-on awards for existing work with the Department of Defense, depending on the level of standard as
required for each solicitation, which could adversely impact our revenue and profitability. In addition, our subcontractors, and
in some cases our vendors, may also be required to adhere to the CMMC program requirements and potentially to achieve
certification. Should our supply chain fail to meet compliance requirements or achieve certification, this may adversely affect
our ability to receive award or execute on relevant government programs. In addition, any obligations that may be imposed on
us under the CMMC may be different from or in addition to those otherwise required by applicable laws and regulations, which
may cause additional expense for compliance.
The operation of financial management systems may have an adverse effect on our business and results of operations.
We, from time to time, modernize and upgrade our management systems. In particular, we launched new financial
management systems in fiscal 2022 that are designed to modernize and enhance our financial systems infrastructure and cost
accounting practices through minimizing manual processes, increasing automation, and providing enhanced business analytics.
Implementation and operation of the new systems required significant investment of human and financial resources. With the
implementation of these new systems, we incurred additional expenses and experienced certain one-time impacts to profitability
related to the roll-out and operation of the new financial systems, including costs related to training. In addition, any significant
difficulties in the operation could have a material adverse effect on our ability to fulfill and invoice customer orders, apply cash
receipts, place purchase orders with suppliers, and make cash disbursements, and could negatively impact data processing and
electronic communications among business locations, which may have a material adverse effect on our business, consolidated
financial condition, or results of operations. We also face the challenge of supporting our legacy systems and implementing
necessary upgrades to those systems to support routine government and financial audits while and after we implement our new
systems.
We may fail to attract, train, and retain skilled and qualified employees, which may impair our ability to generate
revenue, effectively serve our clients, and execute our growth strategy.
Our business depends in large part upon our ability to attract and retain sufficient numbers of highly qualified individuals
who may have advanced degrees in areas such as information technology as well as appropriate security clearances. We
compete for such qualified personnel with other U.S. government contractors, the U.S. government, and private industry, and
such competition is intense. Personnel with the requisite skills, qualifications, or security clearance may be in short supply or
generally unavailable. The government and industry have recognized that the current process for obtaining security clearances
is time-consuming, sometimes taking years to complete, and can present a risk to customer mission. See "—We may fail to
obtain and maintain necessary security clearances which may adversely affect our ability to perform on certain contracts."
Our ability to attract and retain skilled and qualified employees may also be impacted by our engagements in, or
perceived connections to, politically or socially sensitive activities. In addition, our ability to recruit, hire, and internally deploy
former employees of the U.S. government is subject to complex laws and regulations, which may serve as an impediment to our
ability to attract such former employees, and failure to comply with these laws and regulations may expose us and our
employees to civil or criminal penalties. Additionally, our ability to attract, hire, and retain skilled and qualified employees may
be impacted by COVID-19, including whether an employment opportunity requires work in person and related considerations.
See “—The effects of a pandemic or widespread health epidemic such as COVID-19 could have a material adverse effect on
our business and results of operations.” In particular, consistent with public health guidance and Executive Order 14042
regarding mandatory vaccinations, we have implemented a Company policy requiring full COVID-19 vaccinations of all
employees, except for employees who qualify for medical or religious exemptions.
Adverse labor and economic market conditions and intense competition for skilled personnel may inhibit our ability to
recruit new employees, as well as our policy requiring full COVID-19 vaccinations of all employees, except for employees who
qualify for medical or religious exemptions, consistent with public health guidance. If we are unable to recruit and retain a
sufficient number of qualified employees, or cannot obtain their appropriate security clearances in a timely manner, or fail to
deploy such employees, our ability to maintain and grow our business and to effectively serve our clients could be limited and
our future revenue and results of operations could be materially and adversely affected. Furthermore, to the extent that we are
unable to make necessary permanent hires to appropriately serve our clients, we could be required to engage larger numbers of
contracted personnel, which could reduce our profit margins.
If we are able to attract sufficient numbers of qualified new hires, training and retention costs may place significant
demands on our resources. In addition, to the extent that we experience attrition in our employee ranks, we may realize only a
limited or no return on such invested resources, and we would have to expend additional resources to hire and train replacement
employees. The loss of services of key personnel could also impair our ability to perform required services under some of our
contracts and to retain such contracts, as well as our ability to win new business.
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We may fail to obtain and maintain necessary security clearances which may adversely affect our ability to perform on
certain contracts.
Many U.S. government programs require contractor employees and facilities to have security clearances. Depending on
the level of required clearance, security clearances can be difficult and time-consuming to obtain. If we or our employees are
unable to obtain or retain necessary security clearances in a timely manner, we may not be able to win new business, and our
existing clients could terminate their contracts with us or decide not to renew them. To the extent we are not able to obtain and
maintain facility security clearances or engage employees with the required security clearances for a particular contract, we may
not be able to bid on or win new contracts, or effectively rebid on expiring contracts, as well as lose existing contracts, which
may adversely affect our operating results and inhibit the execution of our growth strategy.
Our profitability could suffer if we are not able to timely and effectively utilize our employees or manage our cost
structure.
The cost of providing our services, including the degree to which our employees are utilized, affects our profitability. The
degree to which we are able to utilize our employees in a timely manner or at all is affected by a number of factors, including:
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our ability to transition employees from completed projects to new assignments and to hire, assimilate, and deploy new
employees;
our ability to forecast demand for our services and to maintain and deploy headcount that is aligned with demand,
including employees with the right mix of skills and experience to support our projects;
our employees’ inability to obtain or retain necessary security clearances;
our ability to manage attrition; and
our need to devote time and resources to training, business development, and other non-chargeable activities.
If our employees are under-utilized, our profit margin and profitability could suffer. Additionally, if our employees are
over-utilized, it could have a material adverse effect on employee engagement and attrition, which would in turn have a material
adverse impact on our business.
Our profitability is also affected by the extent to which we are able to effectively manage our overall cost structure for
operating expenses, such as wages and benefits, overhead and capital, and other investment-related expenditures. If we are
unable to effectively manage our costs and expense and achieve efficiencies, our competitiveness and profitability may be
adversely affected.
Global inflationary pressures have increased the prices of goods and services, which could raise the costs associated
with providing our services, diminish our ability to compete for new contracts or task orders and/or reduce customer buying
power.
For a variety of reasons, including geopolitical factors and the COVID-19 pandemic, the global economy in which we
operate is facing heightened inflationary pressure, impacting the cost of doing business (in both supply and labor markets).
These inflationary pressures have been and could continue to be exacerbated by geopolitical turmoil and economic policy
actions, and the duration of such pressures is uncertain. We generate revenue through various fixed price and multi-year
government contracts, our primary customer being the U.S. government, which has traditionally been viewed as less affected by
inflationary pressures. However, with inflation rising at historic levels, our approach to include modest annual price escalations
in our bids for multi-year work may be insufficient to counter inflationary cost pressures, which may result in significant cost
overruns on each contract. This could result in reduced profits, or even losses, as inflation increases, particularly for fixed
priced contracts, and our longer-term multi-year contracts as contractual prices become less favorable to us over time. In the
competitive environment in which we operate as a government contractor, the lack of pricing leverage and power to renegotiate
long-term, multi-year contracts, coupled with reduced customer buying power as a result of inflation, could reduce our profits,
disrupt our business, or otherwise materially adversely affect our results of operations.
We may lose one or more members of our senior management team or fail to develop new leaders, which could cause
the disruption of the management of our business.
We believe that the future success of our business and our ability to operate profitably depends on the continued
contributions of the members of our senior management and the continued development of new members of senior
management. We rely on our senior management to generate business and execute programs successfully. In addition, the
relationships and reputation that many members of our senior management team have established and maintain with our clients
are important to our business and our ability to identify new business opportunities. The loss of any member of our senior
management or our failure to continue to develop new members could impair our ability to identify and secure new contracts, to
maintain good client relations, and to otherwise manage our business.
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Our employees or subcontractors may engage in misconduct or other improper activities, which could harm our ability
to conduct business with the U.S. government.
We are exposed to the risk that employee or subcontractor fraud or other misconduct could occur. Misconduct by
employees or subcontractors could include intentional or unintentional failures to comply with U.S. government procurement
regulations, engaging in other unauthorized activities, or falsifying time records. Employee or subcontractor misconduct could
also involve the improper use of our clients’ sensitive or classified information, or the inadvertent or intentional disclosure of
our or our clients' sensitive information in violation of our contractual, statutory, or regulatory obligations. It is not always
possible to deter employee or subcontractor misconduct, and the precautions we take to prevent and detect this activity may not
be effective in controlling unknown or unmanaged risks or losses, which could materially harm our business. As a result of such
misconduct, our employees could lose their security clearance and we could face fines and civil or criminal penalties, loss of
facility clearance accreditation, and suspension, proposed debarment or debarment from bidding for or performing under
contracts with the U.S. government, as well as reputational harm, which would materially and adversely affect our results of
operations and financial condition.
We face intense competition from many competitors, which could cause us to lose business, lower prices and suffer
employee departures.
Our business operates in a highly competitive industry, and we generally compete with a wide variety of U.S. government
contractors, including large defense contractors, diversified service providers, and small businesses. We also face competition
from entrants into our markets including companies divested by large prime contractors in response to increasing scrutiny of
organizational conflicts of interest issues. There is also a significant industry trend towards consolidation, which may result in
the emergence of companies that are better able to compete against us. Some of these companies possess greater financial
resources and larger technical staffs, and others have smaller and more specialized staffs. These competitors could, among other
things:
• make acquisitions of businesses, or establish teaming or other agreements among themselves or third parties, that
allow them to offer more competitive and comprehensive solutions;
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divert sales from us by winning very large-scale government contracts, a risk that is enhanced by the recent trend in
government procurement practices to bundle services into larger contracts;
force us to charge lower prices in order to win or maintain contracts;
seek to hire our employees; or
adversely affect our relationships with current clients, including our ability to continue to win competitively awarded
engagements where we are the incumbent.
If we lose business to our competitors or are forced to lower our prices or suffer employee departures, our revenue and
our operating profits could decline. In addition, we may face competition from our subcontractors who, from time to time, seek
to obtain prime contractor status on contracts for which they currently serve as a subcontractor to us. If our current
subcontractors are awarded prime contractor status on such contracts in the future, it could divert sales from us and could force
us to charge lower prices, which could have a material adverse effect on our revenue and profitability.
Our failure to maintain strong relationships with other contractors, or the failure of contractors with which we have
entered into a sub- or prime-contractor relationship to meet their obligations to us or our clients, could have a material
adverse effect on our business and results of operations.
Maintaining strong relationships with other U.S. government contractors, who may also be our competitors, is important
to our business and our failure to do so could have a material adverse effect on our business, prospects, financial condition, and
operating results. To the extent that we fail to maintain good relations with our subcontractors or other prime contractors due to
either perceived or actual performance failures or other conduct, they may refuse to hire us as a subcontractor in the future or to
work with us as our subcontractor. In addition, other contractors may choose not to use us as a subcontractor or choose not to
perform work for us as a subcontractor for any number of additional reasons, including because they choose to establish
relationships with our competitors or because they choose to directly offer services that compete with our business.
As a prime contractor, we often rely on other companies to perform some of the work under a contract, and we expect to
continue to depend on relationships with other contractors for portions of our delivery of services and revenue in the
foreseeable future. If our subcontractors fail to perform their contractual obligations, our operating results and future growth
prospects could be impaired. There is a risk that we may have disputes with our subcontractors arising from, among other
things, the quality and timeliness of work performed by the subcontractor, client concerns about the subcontractor, our failure to
extend existing task orders or issue new task orders under a subcontract, or our hiring of a subcontractor’s personnel. In
addition, if any of our subcontractors fail to deliver the agreed-upon supplies or perform the agreed-upon services on a timely
basis, our ability to fulfill our obligations as a prime contractor may be jeopardized. Material losses could arise in future periods
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and subcontractor performance deficiencies could result in a client terminating a contract for default. A termination for default
could expose us to liability and have an adverse effect on our ability to compete for future contracts and orders.
As a subcontractor, we often lack control over fulfillment of a contract, and poor performance on the contract could
tarnish our reputation, even when we perform as required, and could cause other contractors to choose not to hire us as a
subcontractor in the future. If the U.S. government terminates or reduces other prime contractors’ programs or does not award
them new contracts, subcontracting opportunities available to us could decrease, which would have a material adverse effect on
our financial condition and results of operations. In addition, as a subcontractor, we may be unable to collect payments owed to
us by the prime contractor, even if we have performed our obligations under the contract, as a result of, among other things, the
prime contractor’s inability to fulfill the contact. Due to certain common provisions in subcontracts in certain countries, we
could also experience delays in receiving payment if the prime contractor experiences payment delays, which could have an
adverse effect on our financial condition and results of operations.
A delay in the completion of the U.S. government’s budget process could result in a reduction in our backlog and have
a material adverse effect on our revenue and operating results.
To the extent the U.S. Congress is unable to approve the annual federal budget on a timely basis, and enacts a continuing
resolution, funding for new projects may not be available and funding on contracts we are already performing may be delayed.
Any such delays would likely result in new business initiatives being delayed or canceled and a reduction in our backlog, and
could have a material adverse effect on our revenue and operating results.
In addition, a failure to complete the budget process and fund government operations pursuant to a continuing resolution
may result in a U.S. government shutdown, which could result in us incurring substantial costs without reimbursement under
our contracts and the delay or cancellation of key programs or the delay of contract payments and may have a material adverse
effect on our revenue and operating results. In addition, when supplemental appropriations are required to operate the U.S.
government or fund specific programs and the passage of legislation needed to approve any supplemental appropriation bill is
delayed, the overall funding environment for our business could be adversely affected.
We face certain significant risk exposures and potential liabilities that may not be adequately covered by indemnity or
insurance.
A significant portion of our business relates to designing, developing, and implementing advanced defense and technology
systems and products, including cybersecurity products and services. New technologies may be untested or unproven, and
insurance may not be available. We maintain insurance policies that mitigate against risk and potential liabilities related to our
operations, including data breaches. This insurance is maintained in amounts that we believe are reasonable. However, our
insurance coverage may not be adequate to cover those claims or liabilities, and we may be forced to bear significant costs from
an accident or incident. The amount of the insurance coverage we maintain or indemnification to which we may be
contractually or otherwise entitled may not be adequate to cover all claims or liabilities. Accordingly, we may be forced to bear
substantial costs resulting from risks and uncertainties of our business which would negatively impact our results of operations,
financial condition or liquidity.
Failure to adequately protect, maintain, or enforce our rights in our intellectual property may adversely limit our
competitive position.
We rely upon a combination of nondisclosure agreements and other contractual arrangements, as well as copyright,
trademark, patent, and trade secret laws to protect our proprietary information. We also enter into proprietary information and
intellectual property agreements with employees, which require them to disclose any inventions created during employment, to
convey such rights to inventions to us, and to restrict any disclosure of proprietary information. Trade secrets are generally
difficult to protect. Although our employees are subject to confidentiality obligations, this protection may be inadequate to deter
or prevent misappropriation of our confidential information and/or the infringement of our patents and copyrights. Further, we
may be unable to detect unauthorized use of our intellectual property or otherwise take appropriate steps to enforce our rights.
Failure to adequately protect, maintain, or enforce our intellectual property rights may adversely limit our competitive position.
Assertions by third parties of infringement, misappropriation or other violations by us of their intellectual property
rights could result in significant costs and substantially harm our business and operating results.
In recent years, there has been significant litigation involving intellectual property rights in technology industries. We
may face from time to time, allegations that we or a supplier or customer have violated the rights of third parties, including
patent, copyright, trademark, trade secret, and other intellectual property rights. If, with respect to any claim against us for
violation of third-party intellectual property rights, we are unable to prevail in the litigation or retain or obtain sufficient rights
or develop non-infringing intellectual property or otherwise alter our business practices on a timely or cost-efficient basis, our
business and competitive position may be adversely affected.
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Any infringement, misappropriation or related claims, whether or not meritorious, are time consuming, divert technical
and management personnel, and are costly to resolve. As a result of any such dispute, we may have to develop non-infringing
technology, pay damages, enter into royalty or licensing agreements, cease utilizing certain products or services, or take other
actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to us.
Our focus on new growth areas for our business entails risks, including those associated with new relationships,
clients, talent needs, capabilities, service offerings, and maintaining our collaborative culture and core values.
We are focused on growing our presence in our addressable markets by: expanding our relationships with existing clients,
developing new clients by leveraging our core competencies, further developing our existing capabilities and service offerings,
creating new capabilities and service offerings to address our clients' emerging needs, and undertaking business development
efforts focused on identifying near-term developments and long-term trends that may pose significant challenges for our clients.
These efforts entail inherent risks associated with innovation and competition from other participants in those areas, potential
failure to help our clients respond to the challenges they face, our ability to comply with uncertain evolving legal standards
applicable to certain of our service offerings, including those in the cybersecurity area, and, with respect to potential
international growth, risks associated with operating in foreign jurisdictions, such as compliance with applicable foreign and
U.S. laws and regulations that may impose different and, occasionally, conflicting or contradictory requirements, and the
economic, legal, and political conditions in the foreign jurisdictions in which we operate, including the GDPR. See "—
Implementation of and compliance with various data privacy and cybersecurity laws, regulations and standards could require
significant investment into ongoing compliance activities, trigger potential liability, and limit our ability to use personal data."
As we attempt to develop new relationships, clients, capabilities, and service offerings, these efforts could harm our results of
operations due to, among other things, a diversion of our focus and resources and actual costs, opportunity costs of pursuing
these opportunities in lieu of others and a failure to reach a profitable return on our investments in new technologies,
capabilities, and businesses, including expenses on research and development investments, and these efforts could ultimately be
unsuccessful.
The needs of our customers change and evolve regularly and in particular due to complex and rapidly changing
technologies. Our success depends upon our ability to identify emerging technological trends; develop technologically
advanced, innovative, and cost-effective products and services; and market these products and services to our customers. Our
success also depends on our continued access to suppliers of important technologies and components. The possibility exists that
our competitors might develop new capabilities or service offerings that might cause our existing capabilities and service
offerings to become obsolete. If we fail in our new capabilities development efforts or our capabilities or services fail to
achieve market acceptance more rapidly than our competitors, our ability to procure new contracts could be negatively
impacted, which would negatively impact our results of operations and financial condition.
Our ability to grow our business by leveraging our operating model to efficiently and effectively deploy our people across
our client base is also largely dependent on our ability to maintain our collaborative culture. To the extent that we are unable to
maintain our culture for any reason, including our effort to focus on new growth areas or acquire new businesses with different
corporate cultures, we may be unable to grow our business. Any such failure could have a material adverse effect on our
business and results of operations.
In addition, with the growth of our U.S. and international operations, we are now providing client services and
undertaking business development efforts in numerous and disparate geographic locations both domestically and
internationally. Our ability to effectively serve our clients is dependent upon our ability to successfully leverage our operating
model across all of these and any future locations, maintain effective management controls over all of our locations to ensure,
among other things, compliance with applicable laws, rules and regulations, and instill our core values in all of our personnel at
each of these and any future locations. Any inability to ensure any of the foregoing could have a material adverse effect on our
business and results of operations.
Changes to our operating structure, capabilities or strategy intended to address our clients’ needs, respond to
developments in our markets and grow our business may not be successful.
We routinely review our operating structure, capabilities and strategy to determine whether we are effectively meeting the
needs of existing clients, effectively responding to developments in our markets and successfully building platforms intended to
provide the foundation for the future growth of our business. The outcome of any such review is difficult to predict and the
extent of changes to our business following such a review, if any, are dependent in part upon the nature and extent of the
review.
The implementation of changes to our operating structure, capabilities, strategy or any other aspect of our business
following an internal review, may materially alter various aspects of our business or our business model as an entirety and there
can be no assurance that any such changes will be successful or that they will not ultimately have a negative effect on our
business and results of operations.
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Many of our contracts with the U.S. government are classified or subject to other security restrictions, which may limit
investor insight into portions of our business.
We derive a substantial portion of our revenue from contracts with the U.S. government that are classified or subject to
security restrictions that preclude the dissemination of certain information. In addition, a significant number of our employees
have security clearances which preclude them from providing information regarding certain of our clients and services provided
to such clients to other of our employees without security clearances and investors. Because we are limited in our ability to
provide information about these contracts and services, the various risks associated with these contracts or services or any
dispute or claims relating to such contracts or services, you may not have important information concerning our business, which
will limit your insight into a substantial portion of our business and therefore may be less able to fully evaluate the risks related
to that portion of our business.
If we cannot collect our receivables or if payment is delayed, our business may be adversely affected by our inability to
generate cash flow, provide working capital, or continue our business operations.
We depend on the timely collection of our receivables to generate cash flow, provide working capital, and continue our
business operations. If the U.S. or any other government or any prime contractor for whom we are a subcontractor fails to pay
or delays the payment of invoices for any reason, our business and financial condition may be materially and adversely
affected. The U.S. or any other government may delay or fail to pay invoices for a number of reasons, including lack of
appropriated funds, lack of an approved budget, lack of revised or final settled billing rates as a result of open audit years or as a
result of audit findings by government regulatory agencies. Some prime contractors for whom we are a subcontractor have
significantly fewer financial resources than we do, which may increase the risk that we may not be paid in full or that payment
may be delayed.
We may consummate acquisitions, investments, joint ventures and divestitures, which involve numerous risks and
uncertainties.
As part of our operating strategy, we continually monitor U.S. government spending and budgetary priorities to align our
investments in new capabilities to drive organic growth, and also selectively pursue acquisitions, investments, partnerships, and
joint ventures that broaden our domain expertise and service offerings, and/or establish relationships with new customers. These
transactions pose many risks, including:
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we may not be able to identify suitable acquisition and investment candidates at prices we consider attractive;
we may not be able to compete successfully for identified acquisition and investment candidates, complete acquisitions
and investments on intended terms and timeline (including, without limitation, by failing to obtain required regulatory
or other approvals in a timely manner), or accurately estimate the financial effect of acquisitions and investments on
our business;
future acquisitions and investments may require us to issue common stock or spend significant cash, resulting in
dilution of ownership or additional debt leverage;
we may have difficulty retaining an acquired company’s key employees or clients;
we may have difficulty integrating personnel from the acquired company with our people and our core values;
we may have difficulty integrating acquired businesses and investments, resulting in unforeseen difficulties, such as
incompatible accounting, information management, or other control systems, and greater expenses than expected;
acquisitions and investments may disrupt our business or distract our management from other responsibilities;
as a result of an acquisition or investment, we may incur additional debt and we may need to record write-downs from
future impairments of intangible assets, each of which could reduce our future reported earnings; and
we may not be able to effectively influence the operations of our joint ventures or partnerships, or we may be exposed
to certain liabilities if our partners do not fulfill their obligations.
In connection with any acquisition or investment that we make, there may be liabilities that we fail to discover or that we
inadequately assess, and we may fail to discover any failure of a target company to have fulfilled its contractual obligations to
the U.S. government or other clients. Acquired entities and investments may not operate profitably or result in improved
operating performance. Additionally, we may not realize anticipated synergies, business growth opportunities, cost savings, and
other benefits, which could have a material adverse effect on our business and results of operations.
In addition, we may divest businesses, including businesses that are no longer a part of our ongoing strategic plan. These
divestitures similarly require significant investment of time and resources, may disrupt our business, distract management from
other responsibilities and may result in losses on disposal or continued financial involvement in the divested business, including
through indemnification, guarantees or other financial arrangements, which could adversely affect our financial results. In
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addition, we may be unable to complete strategic divestitures on satisfactory terms and conditions, including non-competition
arrangements, or within expected time frames.
Goodwill represents a significant asset on our balance sheet, and changes in future business conditions could cause
these investments to become impaired, requiring substantial write-downs that would reduce our operating income.
As of March 31, 2022, the value of our goodwill was $2.0 billion. The amount of our recorded goodwill may
substantially increase in the future as a result of any acquisitions that we make. We evaluate the recoverability of recorded
goodwill amounts annually, or when evidence of potential impairment exists. Impairment analysis is based on several factors
requiring judgment and the use of estimates, which are inherently uncertain and based on assumptions that may prove to be
inaccurate. Additionally, material changes in our financial outlook, as well as events outside of our control, such as
deteriorating market conditions for companies in our industry, may indicate a potential impairment. When there is an
impairment, we are required to write down the recorded amount of goodwill, which is reflected as a charge against operating
income. Such non-cash impairment charges could have a material adverse effect on our results of operations in the period in
which they are recognized.
Legal and Regulatory Risks
We are required to comply with numerous laws and regulations, some of which are highly complex, and our failure to
comply could result in fines or civil or criminal penalties or suspension or debarment by the U.S. government that could
result in our inability to continue to work on or receive U.S. government contracts, which could materially and adversely
affect our results of operations.
As a U.S. government contractor, we must comply with laws and regulations relating to the formation, administration,
and performance of U.S. government contracts, which affect how we do business with our clients. Such laws and regulations
may potentially impose added costs on our business and our failure to comply with them may lead to civil or criminal penalties,
termination of our U.S. government contracts, and/or suspension or debarment from contracting with federal agencies. Some
significant laws and regulations that affect us include:
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the FAR, and agency regulations supplemental to the FAR, which regulate the formation, administration, and
performance of U.S. government contracts. For example, the FAR 52.203-13 requires contractors to establish a Code
of Business Ethics and Conduct, implement a comprehensive internal control system, and report to the government
when the contractor has credible evidence that a principal, employee, agent, or subcontractor, in connection with a
government contract, has violated certain federal criminal laws, violated the civil False Claims Act, or has received a
significant overpayment;
the False Claims Act, which imposes civil and criminal liability for violations, including substantial monetary
penalties, for, among other things, presenting false or fraudulent claims for payments or approval;
the False Statements Act, which imposes civil and criminal liability for making false statements to the
U.S. government;
the Truthful Cost or Pricing Data Statute (formerly known as the Truth in Negotiations Act), which requires
certification and disclosure of cost and pricing data in connection with the negotiation of certain contracts,
modifications, or task orders;
the Procurement Integrity Act, which regulates access to competitor bid and proposal information and certain internal
government procurement sensitive information, and our ability to provide compensation to certain former government
procurement officials;
laws and regulations restricting the ability of a contractor to provide gifts or gratuities to employees of the U.S.
government;
post-government employment laws and regulations, which restrict the ability of a contractor to recruit and hire current
employees of the U.S. government and deploy former employees of the U.S. government;
laws, regulations, and executive orders restricting the handling, use and dissemination of information classified for
national security purposes or determined to be “controlled unclassified information” or “for official use only” and the
export of certain products, services, and technical data, including requirements regarding any applicable licensing of
our employees involved in such work;
laws, regulations, and executive orders regulating the handling, use, and dissemination of personally identifiable
information in the course of performing a U.S. government contract;
international trade compliance laws, regulations and executive orders that prohibit business with certain sanctioned
entities and require authorization for certain exports or imports in order to protect national security and global stability;
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laws, regulations, and executive orders governing organizational conflicts of interest that may restrict our ability to
compete for certain U.S. government contracts because of the work that we currently perform for the U.S. government
or may require that we take measures such as firewalling off certain employees or restricting their future work
activities due to the current work that they perform under a U.S. government contract;
laws, regulations and executive orders that impose requirements on us to ensure compliance with requirements and
protect the government from risks related to our supply chain;
laws, regulations and mandatory contract provisions providing protections to employees or subcontractors seeking to
report alleged fraud, waste, and abuse related to a government contract;
the Contractor Business Systems rule, which authorizes Department of Defense agencies to withhold a portion of our
payments if we are determined to have a significant deficiency in our accounting, cost estimating, purchasing, earned
value management, material management and accounting, and/or property management system; and
the FAR Cost Accounting Standards and Cost Principles, which impose accounting and allowability requirements that
govern our right to reimbursement under certain cost-based U.S. government contracts and require consistency of
accounting practices over time.
In addition, the U.S. government adopts new laws, rules, and regulations from time to time that could have a material
impact on our results of operations. Adverse developments in legal or regulatory proceedings on matters relating to, among
other things, cost accounting practices and compliance, contract interpretations and statute of limitations, could also result in
materially adverse judgments, settlements, withheld payments, penalties, or other unfavorable outcomes.
Our performance under our U.S. government contracts and our compliance with the terms of those contracts and
applicable laws and regulations are subject to periodic audit, review, and investigation by various agencies of the
U.S. government and the current environment has led to increased regulatory scrutiny and sanctions for non-compliance by
such agencies generally. In addition, from time to time we report potential or actual violations of applicable laws and
regulations to the relevant governmental authority. Any such report of a potential or actual violation of applicable laws or
regulations could lead to an audit, review, or investigation by the relevant agencies of the U.S. government. If such an audit,
review, or investigation uncovers a violation of a law or regulation, or improper or illegal activities relating to our
U.S. government contracts, we may be subject to civil or criminal penalties or administrative sanctions, including the
termination of contracts, forfeiture of profits, the triggering of price reduction clauses, withholding or suspension of payments,
fines and suspension, or debarment from contracting with U.S. government agencies. Such penalties and sanctions are not
uncommon in the industry and there is inherent uncertainty as to the outcome of any particular audit, review, or investigation. If
we incur a material penalty or administrative sanction or otherwise suffer harm to our reputation, our profitability, cash
position, and future prospects could be materially and adversely affected.
Further, if the U.S. government were to initiate suspension or debarment proceedings against us or if we are indicted for
or convicted of illegal activities relating to our U.S. government contracts following an audit, review, or investigation, we may
lose our ability to be awarded contracts in the future or receive renewals of existing contracts for a period of time which could
materially and adversely affect our results of operations or financial condition. We could also suffer harm to our reputation if
allegations of impropriety were made against us, which would impair our ability to win awards of contracts in the future or
receive renewals of existing contracts. See "Item 1. Business — Regulation."
Adverse judgments or settlements in legal disputes could result in materially adverse monetary damages or injunctive
relief and damage our reputation.
We are subject to, and may become a party to, a variety of litigation or other claims and suits that arise from time to time
in the ordinary course of our business. For example, our performance under U.S. government contracts and compliance with the
terms of those contracts and applicable laws and regulations are subject to continuous audit, review, and investigation by the
U.S. government which may include such investigative techniques as subpoenas or civil investigative demands. As more fully
described under "Item 3. Legal Proceedings", the U.S. Department of Justice (the "DOJ") is conducting a civil investigation of
the Company, and the Company has also been in contact with other regulatory agencies and bodies, including the Securities and
Exchange Commission, which notified the Company that it is conducting an investigation that the Company believes relates to
matters that are also the subject of the DOJ's investigation. The Company may receive additional regulatory or governmental
inquiries related to the matters that are the subject of the DOJ's investigation. The total cost associated with these matters will
depend on many factors, including the duration of these matters and any related finding. Given the nature of our business, these
audits, reviews, and investigations may focus, among other areas, on various aspects of procurement integrity, labor time
reporting, sensitive and/or classified information access and control, executive compensation, and post government employment
restrictions. In addition, from time to time, we are also involved in legal proceedings and investigations arising in the ordinary
course of business, including those relating to employment matters (such as matters involving alleged violations of civil rights,
wage and hour, and worker’s compensation laws), relationships with clients and contractors, intellectual property disputes, and
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other business matters. Any such claims, proceedings or investigations may be time-consuming, costly, divert management
resources, or otherwise have a material adverse effect on our result of operations.
The results of litigation and other legal proceedings, including the other claims described under "Item 3. Legal
Proceedings," are inherently uncertain and adverse judgments or settlements in some or all of these legal disputes may result in
materially adverse monetary damages or injunctive relief against us. Any claims or litigation, even if fully indemnified or
insured, could damage our reputation and make it more difficult to compete effectively or obtain adequate insurance in the
future. The litigation and other legal proceedings described under “Item 3. Legal Proceedings” are subject to future
developments and management’s view of these matters may change in the future.
We cannot predict the consequences of future geopolitical events, but they may adversely affect the markets in which
we operate and our results of operations.
Ongoing instability and current conflicts in global markets, including in Eastern Europe, the Middle East and Asia, and
the potential for other conflicts and future terrorist activities and other recent geopolitical events throughout the world,
including Russia’s invasion of Ukraine, have created and may continue to create economic and political uncertainties and
impacts that could have a material adverse effect on our business, operations and profitability. These types of matters cause
uncertainty in financial markets and may significantly increase the political, economic and social instability in the geographic
areas in which we operate.
In addition, in connection with the current status of international relations with Russia, particularly in light of the conflict
between Russia and Ukraine, the U.S. government has stated it is considering imposing enhanced export controls on certain
products and sanctions on certain industry sectors and parties in Russia. The governments of other jurisdictions in which we
operate, such as the European Union and Canada, may also implement sanctions or other restrictive measures. These potential
sanctions and export controls, as well as any responses from Russia, could adversely affect the Company and/or our supply
chain, business partners or customers.
We are subject to risks associated with operating internationally.
Our business operations are subject to a variety of risks associated with conducting business internationally, including:
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Changes in or interpretations of laws or policies that may adversely affect the performance of our services;
Political instability in foreign countries and international security concerns, such as those relating to the geopolitical
conflict, including in Russia and Ukraine, and potential actions or retaliatory measures taken in respect thereof;
Imposition of inconsistent or contradictory laws or regulations;
Reliance on the U.S. or other governments to authorize us to export products, technology, and services to clients and
other business partners;
Conducting business in places where laws, business practices, and customs are unfamiliar or unknown;
Failure to comply with U.S. government and foreign laws and regulations applicable to international business,
employment, privacy, data protection, information security, or data transfer could have an adverse impact on our
business with the U.S. government and could expose us to risks and costs of non-compliance with such laws and
regulations, in addition to administrative, civil, or criminal penalties;
U.S. and foreign government import and export control requirements and regulations, including International Traffic
in Arms Regulations and the anti-boycott provisions of the U.S. Export Administration Act, technology transfer
restrictions and other administrative, legislative, or regulatory actions that could materially interfere with our ability
to offer our products or services in certain countries;
Imposition of limitations on or increase of withholding and other taxes on payments by foreign subsidiaries or joint
ventures;
Changes in state and federal regulations in state money transmission regulations, anti-money laundering regulations,
economic and trade sanctions administered by the U.S. Treasury Department's Office of Foreign Asset Control;
Volatility resulting from the United Kingdom's withdrawal from the European Union in January 2020, particularly
in countries where the Company has substantial activities; and
Imposition of tariffs or embargoes, export controls and other trade restrictions.
In addition, we are subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, and other laws that prohibit improper
payments or offers of payments to foreign government officials and political parties by business entities for the purpose of
obtaining or retaining business. We have operations and deal with governmental clients and regulators in countries known to
create heightened corruption risk, including certain developing countries in the Middle East and Southeast Asia. Our activities
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in these countries create the risk of unauthorized payments or offers of payments by one of our employees or third parties that
we work with that could implicate Booz Allen for violations of various laws including the FCPA and other anti-corruption laws,
even though these parties are not always subject to our control. Our international operations also involve activities involving the
transmittal of information, which may include personal data, that may expose us to data privacy laws in the jurisdictions in
which we operate. If our data protection practices become subject to new or different restrictions, and to the extent such
practices are not compliant with the laws of the countries in which we process data, we could face increased compliance
expenses and face penalties for violating such laws or be excluded from those markets altogether, in which case our operations
could be adversely affected. We are also subject to import-export control regulations restricting the use and dissemination of
information classified for national security purposes and the export of certain products, services, and technical data, including
requirements regarding any applicable licensing of our employees involved in such work.
If we were to fail to comply with the FCPA, other anti-corruption laws, applicable import-export control regulations, data
privacy laws, or other applicable rules and regulations, we could be subject to substantial civil and criminal penalties, including
fines for our company and incarceration for responsible employees and managers, suspension or debarment, and the possible
loss of export or import privileges which could have a material adverse effect on our business and results of operations.
Efforts by the U.S. government to revise its organizational conflict of interest rules could limit our ability to
successfully compete for new contracts or task orders, which would adversely affect our results of operations.
Efforts by the U.S. government to reform its procurement practices have focused, among other areas, on the separation of
certain types of work to facilitate objectivity and avoid or mitigate organizational conflicts of interest and the strengthening of
regulations governing organizational conflicts of interest. Organizational conflicts of interest may arise from circumstances in
which a contractor has:
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impaired objectivity during performance;
unfair access to non-public information; or
the ability to set the “ground rules” for another procurement for which the contractor competes.
A focus on organizational conflicts of interest issues has resulted in legislation and a proposed regulation aimed at
increasing organizational conflicts of interest requirements, including, among other things, separating sellers of products and
providers of advisory services in major defense acquisition programs. The U.S. government has not taken action to amend the
FAR to address organizational conflicts of interest issues regarding government contractors in Department of Defense and other
procurements since the withdrawal of an unsuccessful FAR amendment proposal in March 2021. Continuing reform initiatives
in procurement practices may however result in future amendments to the FAR, increasing the restrictions in current
organizational conflicts of interest regulations and rules. To the extent that proposed and future organizational conflicts of
interest laws, regulations, and rules, limit our ability to successfully compete for new contracts or task orders with the
U.S. government, either because of organizational conflicts of interest issues arising from our business, or because companies
with which we are affiliated, or with which we otherwise conduct business, create organizational conflicts of interest issues for
us, our results of operations could be materially and adversely affected.
Changes in tax law or judgments by management related to complex tax matters could adversely impact our results of
operations.
We are subject to taxation in the U.S. and certain other foreign jurisdictions. Any future changes in applicable federal,
state and local, or foreign tax laws and regulations or their interpretation or application, including those that could have a
retroactive effect, could result in the Company incurring additional tax liabilities in the future. In particular, effective starting in
fiscal 2023, the Tax Cuts and Jobs Act (the "2017 Tax Act") requires the capitalization of research and development costs for
tax purposes, which can then be amortized over five or fifteen years. If the current effective date remains in place, the
Company's initial assessment, based on the law as currently enacted, is that the Company could experience a material decrease
in cash from operations in fiscal 2023, but our net deferred tax assets could also increase by a similar amount. Management is
currently evaluating the potential impact of the 2017 Tax Act on our operating cash flows. The actual impact on fiscal 2023
cash from operations and future fiscal years will depend on the amount of research and development costs we incur, whether
Congress modifies or repeals this provision of the 2017 Tax Act and on whether new guidance and interpretive rules are issued
by the U.S. Treasury, among other factors. For additional information, see "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations".
Additionally, we recognize liabilities for uncertainty in income taxes when it is more likely than not that a tax position
will not be sustained on examination and settlement with various taxing authorities. We regularly assess the adequacy of our
uncertain tax positions and other reserves, which requires a significant amount of judgment. Although we accrue for uncertain
tax positions and other reserves, the results of regulatory audits and negotiations with taxing and customs authorities may be in
excess of our accruals, resulting in the payment of additional taxes, duties, penalties and interest. As a result, any final
determination of tax audits or related litigation may be materially different than our current provisional amounts, which could
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materially affect our tax obligations and effective tax rate. For example, during fiscal 2022, we recorded additional uncertain
tax positions of approximately $15.5 million related to research and development credits that we have claimed, or will soon
claim. Any increase to the liability we established as of March 31, 2022 for these uncertain tax positions as a result of audits by
taxing authorities, changes in tax laws and regulations or otherwise relating to this, or any other, tax matter could have a
material effect on our results of operations. For a description of our related accounting policies, refer to Note 2 and Note 13 to
our accompanying consolidated financial statements.
Our U.S. government contracts may be terminated by the government at any time and may contain other provisions
permitting the government to discontinue contract performance, and if lost contracts are not replaced, our operating results
may differ materially and adversely from those anticipated.
U.S. government contracts contain provisions and are subject to laws and regulations that provide government clients
with rights and remedies not typically found in commercial contracts. These rights and remedies allow government clients,
among other things, to:
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terminate existing contracts, with short notice, for convenience as well as for default;
reduce orders under or otherwise modify contracts;
for contracts subject to the Truthful Cost or Pricing Data Statute, reduce the contract price or cost where it was
increased because a contractor or subcontractor furnished cost or pricing data during negotiations that was not
complete, accurate or current;
for some contracts, (i) demand a refund, make a forward price adjustment, or terminate a contract for default if a
contractor provided inaccurate or incomplete data during the contract negotiation process and (ii) reduce the contract
price under certain triggering circumstances, including the revision of price lists or other documents upon which the
contract award was predicated;
terminate our facility security clearances and thereby prevent us from receiving classified contracts;
cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become
unavailable;
decline to exercise an option to renew a multi-year contract or issue task orders in connection with IDIQ contracts;
claim rights in solutions, systems, and technology produced by us, appropriate such work-product for their continued
use without continuing to contract for our services and disclose such work-product to third parties, including other
U.S. government agencies and our competitors, which could harm our competitive position;
prohibit future procurement awards with a particular agency due to a finding of organizational conflicts of interest
based upon prior related work performed for the agency that would give a contractor an unfair advantage over
competing contractors, or the existence of conflicting roles that might bias a contractor’s judgment;
subject the award of contracts to protest by competitors, which may require the contracting federal agency or
department to suspend our performance pending the outcome of the protest and may also result in a requirement to
resubmit offers for the contract or in the termination, reduction, or modification of the awarded contract;
suspend or debar us from doing business with the U.S. government; and
control or prohibit the export of our services.
Recent and potential future budget cuts and recent efforts to decrease federal awards for management support services,
may cause agencies with which we currently have contracts to terminate, reduce the number of task orders under or fail to
renew such contracts. If a U.S. government client were to unexpectedly terminate, cancel, or decline to exercise an option to
renew with respect to one or more of our significant contracts, or suspend or debar us from doing business with the
U.S. government, our revenue and operating results would be materially harmed.
Our work with government clients exposes us to additional risks inherent in the government contracting environment,
which could reduce our revenue, disrupt our business, or otherwise materially adversely affect our results of operations.
U.S. government contractors (including their subcontractors and others with whom they do business) operate in a highly
regulated environment and are routinely audited and reviewed by the U.S. government and its agencies, including the DCAA,
DCMA, Department of Defense Inspector General, and others. These agencies review our performance on contracts, pricing
practices, cost accounting practices, and compliance with applicable policies, laws, regulations and standards, including
applicable government cost accounting standards, as well as our contract costs, including allocated indirect costs. The DCAA
audits and the DCMA reviews, among other areas, the adequacy of our internal control systems and policies, including our
Defense Federal Acquisition Regulation Supplement ("DFARS") required business systems, which are comprised of our
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purchasing, property, estimating, earned value, accounting and material management and accounting systems. These internal
control systems could focus on significant elements of costs, such as executive compensation. Determination of a significant
internal control deficiency by a government agency could result in increased payment withholding that might adversely affect
our cash flow. In particular, over time the DCMA has increased and may continue to increase the proportion of executive
compensation that it deems unallowable and the size of the executive population whose compensation is disallowed, which will
continue to materially and adversely affect our results of operations or financial condition including the requirement to carry an
increased level of reserves. We recognize as revenue, net of reserves, executive compensation that we determine, based on
management's estimates, to be allowable; management's estimates in this regard are based on a number of factors that may
change over time, including executive compensation survey data, our and other government contractors' experiences with the
DCAA audit practices in our industry and relevant decisions of courts and boards of contract appeals. Any costs found to be
unallowable under a contract will not be reimbursed, and any such costs already reimbursed must be refunded. Further, the
amount of any such refund may exceed the provision of claimed indirect costs, which is based on management's estimates and
assumptions that are inherently uncertain and may not cover actual losses. For example, DCAA audits may result in, and have
historically resulted in, the Company's inability to retain certain claimed indirect costs, including executive and employee
compensation, due to differing views of the allowability and reasonableness of such costs. As of March 31, 2022, years
subsequent to the Company's fiscal year 2011 remained subject to audit and final resolution. As of March 31, 2022, the
Company recognized a liability of $290.4 million for estimated adjustments to claimed indirect costs based on its historical
DCAA audit results, including the final resolution of such audits with the DCMA. Determining the provision for claimed
indirect costs is complex and subject to management's estimate of adjustments to claimed indirect costs based on the number of
years that remain open to audit and expected final resolution by U.S. government agencies. As a result, significant changes in
estimates could have a material effect on the Company's results of operations. Furthermore, the disallowance of any costs
previously charged could directly and negatively affect our current results of operations for the relevant prior fiscal periods, and
we could be required to repay any such disallowed amounts. Each of these results could materially and adversely affect our
results of operations or financial condition.
Moreover, if any of the administrative processes and business systems, some of which are currently certified as effective,
are found not to comply with government imposed requirements, we may be subjected to increased government scrutiny and
approval that could delay or otherwise adversely affect our ability to compete for or perform contracts or to be paid timely.
Unfavorable U.S. government audit, review, or investigation results could subject us to civil or criminal penalties or
administrative sanctions, require us to retroactively and prospectively adjust previously agreed to billing or pricing rates for our
work, and could harm our reputation and relationships with our clients and impair our ability to be awarded new contracts,
which could affect our future sales and profitability by preventing us, by operation of law or in practice, from receiving new
government contracts for some period of time. In addition, if our invoicing system were found to be inadequate following an
audit by the DCAA, our ability to directly invoice U.S. government payment offices could be eliminated. As a result, we would
be required to submit each invoice to the DCAA for approval prior to payment, which could materially increase our accounts
receivable days sales outstanding and adversely affect our cash flow. In addition, proposed regulatory changes, if adopted,
would require the Department of Defense’s contracting officers to impose contractual withholdings at no less than certain
minimum levels based on assessments of a contractor’s business systems. If a government investigation uncovers improper or
illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of
contracts, forfeitures of profits, withholding of payments, suspension of payments, fines, and suspension or debarment from
doing business with the U.S. government. We could also suffer serious reputational harm if allegations of impropriety were
made against us.
In addition, in fiscal 2022 we launched new financial management systems and have adopted certain changes to our cost
accounting practices. This may negatively impact our profitability. In particular, the changes we adopted to our cost accounting
practices required us to estimate changes in costs for certain contracts and make payments in connection with such estimates.
The changes are subject to audit by the DCAA and negotiation with the DCMA, which could result in additional payments that
may be material and not recoverable. To the extent we are unable to fully mitigate the costs associated with changes to our cost
accounting practices as we implement the new systems, our business and financial results may be adversely affected.
The U.S. government may revise its procurement, contract or other practices in a manner adverse to us.
The U.S. government may:
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revise its procurement practices or adopt new contract laws, rules, and regulations, such as cost accounting standards,
organizational conflicts of interest, and other rules governing inherently governmental functions at any time;
reduce, delay, or cancel procurement programs resulting from U.S. government efforts to improve procurement
practices and efficiency;
limit the creation of new government-wide or agency-specific multiple award contracts;
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face restrictions or pressure from government employees and their unions regarding the amount of services the
U.S. government may obtain from private contractors;
award contracts on a technically acceptable/lowest cost basis in order to reduce expenditures, and we may not be the
lowest cost provider of services;
adopt new socio-economic requirements, including setting aside procurement opportunities to small, disadvantaged
businesses;
change the basis upon which it reimburses our compensation and other expenses or otherwise limit such
reimbursements; and
at its option, terminate or decline to renew our contracts.
In addition, any new contracting methods could be costly or administratively difficult for us to implement and could
adversely affect our future revenue and profit margin. In addition, changes to the procurement system could cause delays in the
procurement decision-making process. Any such changes to the U.S. government’s procurement practices or the adoption of
new contracting rules or practices could impair our ability to obtain new or re-compete contracts and any such changes or
increased associated costs could materially and adversely affect our results of operations.
The U.S. government may prefer minority-owned, small and small disadvantaged businesses; therefore, we may have
fewer opportunities to bid for.
As a result of the Small Business Administration set-aside program, the U.S. government may decide to restrict certain
procurements only to bidders that qualify as minority-owned, small, or small disadvantaged businesses. As a result, we would
not be eligible to perform as a prime contractor on those programs and would be restricted to a maximum of 49% of the work as
a subcontractor on those programs. An increase in the amount of procurements under the Small Business Administration set-
aside program may impact our ability to bid on new procurements as a prime contractor or restrict our ability to re-compete on
incumbent work that is placed in the set-aside program.
Increasing scrutiny and changing expectations from governmental organizations, clients and our employees with
respect to our ESG related practices may impose additional costs on us or expose us to new or additional risks.
There is increased scrutiny from governmental organizations, clients and employees on environmental, social and
governance ("ESG") issues such as diversity, equity and inclusion, workplace culture, community investment, environmental
management, climate impact and information security. We have expended and may further expend resources to monitor, report
and adopt policies and practices that we believe will improve alignment with our evolving ESG goals, as well as third-party
imposed ESG-related standards and expectations. If our ESG practices, including our goals for diversity and inclusion,
environmental sustainability and information security, do not meet evolving rules and regulations or investor expectations and
standards (or if we are viewed negatively based on positions we do or do not take or work we do or do not perform for certain
clients and industries), then our reputation, our ability to attract or retain leading experts, employees and other professionals and
our ability to attract new business and clients could be negatively impacted, as could our attractiveness as an investment, service
provider or business partner. Similarly, our failure or perceived failure in our efforts to fulfill our current or future ESG-related
goals, targets and objectives or to satisfy various reporting standards within the timelines we announce, or at all, could also
result in similar negative impacts. Organizations that provide information to investors on corporate governance and related
matters have developed ratings processes for evaluating companies on their approach to ESG matters, and unfavorable ratings
of our ESG efforts may lead to negative investor sentiment, diversion of investment to other companies and difficulty in hiring
skilled employees. In addition, existing or future ESG legislation and regulations applicable to our business and operations,
including related to greenhouse gas emissions, climate change, or other matters, by federal state, local, and foreign regulatory
bodies and agencies could cause us to incur additional compliance and operational costs or actions if we fail to comply. If our
responses to these new or evolving legal and regulatory requirements or other sustainability concerns are unsuccessful or
perceived as inadequate, we may also suffer damage to our reputation, which could adversely affect our business.
We are exposed to certain physical and regulatory risks, and could incur additional costs, related to climate change
and other natural disasters.
Due to the global nature of our business, we are exposed to a variety of physical risks related to climate change, including
rising temperatures, sea levels rising, extreme heat and weather events. Our worldwide operations and the operations of our
customers could be subject to natural disasters (including those as a result of climate change) such as hurricanes, typhoons,
tsunamis, floods, earthquakes, fires, water shortages and prolonged drought. Such events could disrupt our operations or those
of our customers and suppliers, including through the inability of employees to work, destruction of facilities, loss of life, and
adverse effects on supply chains, power, infrastructure and the integrity of information technology systems, all of which could
materially increase our costs and expenses, delay or decrease revenue from our customers and disrupt our ability to maintain
business continuity. We could incur significant costs to improve the climate-related resiliency of our infrastructure and
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otherwise prepare for, respond to, and mitigate the effects of climate change. Additionally, if insurance or other risk transfer
mechanisms are unavailable or insufficient to recover all costs or if we experience a significant disruption to our business due to
a natural disaster, our results of operations could be adversely affected.
We may also face operational costs and transition risks due to decisions we make to conduct or change our activities in
response to considerations relating to climate change, such as our goal to eventually reach net-zero greenhouse gas emissions.
Risks Related to Our Indebtedness
We have substantial indebtedness and may incur substantial additional indebtedness, which could adversely affect
our financial health and our ability to obtain financing in the future as well as to react to changes in our business.
As of March 31, 2022, we had total indebtedness of approximately $2.8 billion and $999.0 million of availability
under our revolving credit facility (the “Revolving Credit Facility”). We are able to, and may, incur additional indebtedness in
the future, subject to the limitations contained in the agreements governing our indebtedness. Our substantial indebtedness
could have important consequences to holders of our common stock, including:
▪ making it more difficult for us to satisfy our obligations with respect to our Secured Credit Facility, consisting of a
$1.2 billion term loan facility (“Term Loan A”), a $380 million term loan facility (“Term Loan B” and, together with
Term Loan A, the “Term Loans”), a $1.0 billion Revolving Credit Facility, with a sublimit for letters of credit of $200
million, our $700 million in aggregate principal amount of 3.875% Senior Notes due 2028 (the “Senior Notes due
2028”), our $500 million in aggregate principal amount of 4.000% Senior Notes due 2029 (the “Senior Notes due
2029”, and together with the Senior Notes due 2028, the “Senior Notes”) and our other debt;
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limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or
other general corporate requirements;
requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes,
thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other
general corporate purposes;
increasing our vulnerability to general adverse economic and industry conditions;
exposing us to the risk of increased interest rates as certain of our borrowings, including under the Secured Credit
Facility, are at variable rates of interest;
limiting our flexibility in planning for and reacting to changes in the industry in which we compete;
placing us at a disadvantage compared to other, less leveraged competitors or competitors with comparable debt and
more favorable terms and thereby affecting our ability to compete; and
increasing our cost of borrowing.
Although the Secured Credit Facility and the indentures governing the Senior Notes contain restrictions on the incurrence
of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional
indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also will not prevent us from
incurring obligations that do not constitute indebtedness. In addition, the Revolving Credit Facility provides for commitments
of $1.0 billion, which as of March 31, 2022, had availability of $999.0 million. Additionally, the used portion as it pertains to
open standby letters of credit and bank guarantees totaled $1.0 million. Furthermore, subject to specified conditions, without the
consent of the then-existing lenders (but subject to the receipt of commitments), the indebtedness under the Secured Credit
Facility may be increased by up to (i) the greater of (x) $909 million and (y) 100% of consolidated EBITDA of Booz Allen
Hamilton, as of the end of the most recently ended four quarter period for which financial statements have been delivered
pursuant to the Credit Agreement, plus (ii) the aggregate principal amount under which the pro forma consolidated net secured
leverage ratio is equal to or less than 3.50:1.00. If new debt is added to our current debt levels, the related risks that we and the
guarantors now face would increase and we may not be able to meet all our debt obligations, including the repayment of the
Senior Notes.
We may not be able to generate sufficient cash to service our indebtedness and may be forced to take other actions
to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or refinance our debt obligations will depend on our financial condition and
operating performance, which are subject to prevailing economic and competitive conditions and to financial, business,
legislative, regulatory and other factors beyond our control. We might not be able to maintain a level of cash flows from
operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. For
information regarding the risks to our business that could impair our ability to satisfy our obligations under our indebtedness,
see “— Risks Related to Our Indebtedness.”
36
If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial
liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets
or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect
any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may
not allow us to meet our scheduled debt service obligations.
The agreements governing our indebtedness restrict our ability to dispose of assets and use the proceeds from those
dispositions and also restrict our ability to raise debt to be used to repay other indebtedness when it becomes due.
We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt
service obligations then due. In addition, under the Secured Credit Facility, we are subject to mandatory prepayments of our
Term Loans from a portion of our excess cash flows, which may be stepped down upon the achievement of specified first lien
leverage ratios. To the extent that we are required to prepay any amounts under our Term Loans, we may have insufficient cash
to make required principal and interest payments on other indebtedness.
Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on
commercially reasonable terms or at all, would materially and adversely affect our financial condition and results of operations
and our ability to satisfy our obligations under our indebtedness.
If we cannot make scheduled payments on our debt, we would be in default and the following events could occur: lenders
under our Secured Credit Facility and holders of the Senior Notes could declare all outstanding principal and interest to be due
and payable; lenders under the Revolving Credit Facility could terminate their commitments to provide loans; and lenders could
foreclose against the assets securing their loans. All of these events could force us into bankruptcy or liquidation and result in
investors' losing some or all of the value of their investment.
The terms of the agreements governing our indebtedness restrict our current and future operations, particularly our
ability to respond to changes or to take certain actions, which could harm our long-term interests.
The Secured Credit Facility and the indentures governing the Senior Notes contain covenants that, among other things,
impose significant operating and financial restrictions on us and limit our ability to engage in actions that may be in our long-
term best interest, including restrictions on our ability to:
◦
◦
◦
incur additional indebtedness, guarantee indebtedness or issue disqualified stock or preferred stock;
pay dividends on or make other distributions in respect of, or repurchase or redeem, our capital stock;
prepay, redeem or repurchase subordinated indebtedness;
◦ make loans and investments;
◦
◦
◦
◦
◦
◦
◦
sell or otherwise dispose of assets;
incur liens securing indebtedness;
enter into transactions with affiliates;
enter into agreements restricting our subsidiaries’ ability to pay dividends to us or the guarantors or make other
intercompany transfers;
consolidate, merge or sell all or substantially all of our or any guarantor’s assets;
designate our subsidiaries as unrestricted subsidiaries; and
enter into certain lines of business.
These covenants are subject to a number of important exceptions and qualifications. In addition, the restrictive
covenants in the Secured Credit Facility require us to maintain a consolidated net total leverage ratio and a consolidated net
interest coverage ratio that will each be tested at the end of each fiscal quarter. Our ability to satisfy such financial ratio tests
may be affected by events beyond our control.
A breach of the covenants under the agreements governing our indebtedness could result in an event of default
under those agreements. Such a default may allow certain creditors to accelerate the related debt and may result in the
acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of
default under the Secured Credit Facility would also permit the lenders under the Revolving Credit Facility to terminate all
other commitments to extend further credit under that facility. Furthermore, if we were unable to repay the amounts due and
payable under the Secured Credit Facility, those lenders could proceed against the collateral granted to them to secure that
indebtedness. In the event the lenders accelerate the repayment of our borrowings, we may not have sufficient assets to
repay that indebtedness.
37
As a result of all of these restrictions, we may be:
•
limited in how we conduct our business;
• unable to raise additional debt or equity financing to operate during general economic or business downturns; or
• unable to compete effectively or to take advantage of new business opportunities.
These restrictions might hinder our ability to grow in accordance with our strategy.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to
increase significantly.
Borrowings under the Secured Credit Facility are at variable rates of interest and expose us to interest rate risk. While
interest rates are currently at historically low levels, if interest rates were to increase, our debt service obligations on the
variable rate indebtedness would increase even though the amount borrowed remains the same, and our net income and cash
flows, including cash available for servicing our indebtedness, would correspondingly decrease.
Based on Term Loans outstanding as of March 31, 2022 and assuming all revolving loans are fully drawn, and after
considering interest rate swaps that fixed the interest rate on $700 million of principal of our variable rate debt each quarter
point change in interest rates would result in a $4.8 million change in our projected annual interest expense on our
indebtedness under the Secured Credit Facility. We have entered into interest rate swaps and may in the future enter into
additional interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce future
interest rate volatility of our variable rate indebtedness. However, due to risks for hedging gains and losses and cash
settlement costs, we may not elect to maintain such interest rate swaps, and any swaps may not fully mitigate our interest rate
risk.
In addition, a transition away from the London Interbank Offering Rate (“LIBOR”) as a benchmark for establishing
the applicable interest rate may affect the cost of servicing our debt under the Secured Credit Facility and the Revolving Credit
Facility. As of March 31, 2022, we had $2.8 billion outstanding under the Secured Credit Facility and $999.0 million of
availability under the Revolving Credit Facility, each of which incurs interest based on LIBOR. In addition, we had interest rate
swaps with an aggregate notional amount of $700.0 million which are based on one-month LIBOR. No modification has been
made to our Credit Agreement or interest rate swaps relating to the applicable benchmarks, although such changes may be
required or otherwise made in the future. On March 5, 2021, the ICE Benchmark Administration, which administers LIBOR,
and the Financial Conduct Authority announced that all LIBOR settings will either cease to be provided by any administrator,
or no longer be representative, immediately after December 31, 2021 for all non-U.S. dollar LIBOR settings and one-week and
two-month U.S. dollar LIBOR settings, and immediately after June 30, 2023, for the remaining U.S. dollar LIBOR settings. The
potential consequences from discontinuation, modification, or reform of LIBOR, implementation of alternative reference rates,
and any interest rate transition process cannot be fully predicted and may have an adverse impact on values of LIBOR-linked
securities and other financial obligations or extensions of credit and may involve among other things, increased volatility or
illiquidity in markets for instruments that rely on LIBOR, reductions in effectiveness of related transactions such as hedges,
increased borrowing costs, uncertainty under applicable documentation, or difficult and costly consent processes. Once LIBOR
ceases to be published, it is uncertain whether it will continue to be viewed as an acceptable market benchmark, what rate or
rates may become accepted alternatives to LIBOR or what the effect of any such changes in views or alternatives may be on the
markets for LIBOR-indexed financial instruments. For example, if any alternative base rate or means of calculating interest
with respect to our outstanding variable rate indebtedness leads to an increase in the interest rates charged, it could result in an
increase in the cost of such indebtedness, impact our ability to refinance some or all of our existing indebtedness or otherwise
have a material adverse impact on our business, financial condition and results of operations.
A downgrade, suspension or withdrawal of the rating assigned by a rating agency to us or our indebtedness could
make it more difficult for us to obtain additional debt financing in the future.
Our indebtedness has been rated by nationally recognized rating agencies and may in the future be rated by
additional rating agencies. We cannot assure you that any rating assigned to us or our indebtedness will remain for any given
period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in that rating agency’s
judgment, circumstances relating to the basis of the rating, such as adverse changes in our business, so warrant. Any
downgrade, suspension or withdrawal of a rating by a rating agency (or any anticipated downgrade, suspension or
withdrawal) could make it more difficult or more expensive for us to obtain additional debt financing in the future.
Risks Related to Our Common Stock
Booz Allen Holding is a holding company with no operations of its own, and it depends on its subsidiaries for cash to
fund all of its operations and expenses, including to make future dividend payments, if any.
The operations of Booz Allen Holding are conducted almost entirely through its subsidiaries and its ability to generate
cash to meet its debt service obligations or to pay dividends is highly dependent on the earnings and the receipt of funds from
its subsidiaries via dividends or intercompany loans. Further, the Secured Credit Facility and indentures governing the Senior
38
Notes significantly restrict the ability of our subsidiaries to pay dividends or otherwise transfer assets to us. In addition,
Delaware law may impose requirements that may restrict our ability to pay dividends to holders of our common stock.
Our financial results may vary significantly from period to period as a result of a number of factors many of which are
outside our control, which could cause the market price of our Class A Common Stock to fluctuate.
Our financial results may vary significantly from period to period in the future as a result of many external factors that are
outside of our control. Factors that may affect our financial results and that could cause the market price of our outstanding
securities, including our Class A Common Stock, to fluctuate include those listed in this “Risk Factors” section and others such
as:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
any cause of reduction or delay in U.S. government funding;
fluctuations in revenue earned on existing contracts;
commencement, completion, or termination of contracts during a particular period;
a potential decline in our overall profit margins if our other direct costs and subcontract revenue grow at a faster rate
than labor-related revenue;
strategic decisions by us or our competitors, such as changes to business strategy, strategic investments, acquisitions,
divestitures, spin offs, and joint ventures;
a change in our contract mix to less profitable contracts;
changes in policy or budgetary measures that adversely affect U.S. government contracts in general;
variable purchasing patterns under U.S. government GSA schedules, blanket purchase agreements, which are
agreements that fulfill repetitive needs under GSA schedules, and IDIQ contracts;
changes in demand for our services and solutions;
fluctuations in the degree to which we are able to utilize our professionals;
seasonality associated with the U.S. government’s fiscal year;
an inability to utilize existing or future tax benefits for any reason, including a change in law;
alterations to contract requirements; and
adverse judgments or settlements in legal disputes.
We cannot assure you that we will pay special or regular dividends on our stock in the future.
Our board of directors (the "Board") has authorized and declared a regular quarterly dividend for each quarter in the last
several years. The Board has also authorized and declared special cash dividends from time to time. The declaration of any
future dividends and the establishment of the per share amount, record dates and payment dates for any such future dividends
are subject to the discretion of the Board taking into account future earnings, cash flows, financial requirements and other
factors. There can be no assurance that the Board will declare any dividends in the future. To the extent that expectations by
market participants regarding the potential payment, or amount, of any special or regular dividend prove to be incorrect, the
price of our common stock may be materially and negatively affected and investors that bought shares of our common stock
based on those expectations may suffer a loss on their investment. Further, to the extent that we declare a regular or special
dividend at a time when market participants hold no such expectations or the amount of any such dividend exceeds current
expectations, the price of our common stock may increase and investors that sold shares of our common stock prior to the
record date for any such dividend may forego potential gains on their investment.
Fulfilling our obligations incident to being a public company, including with respect to the requirements of and related
rules under the Sarbanes Oxley Act of 2002, is expensive and time consuming and any delays or difficulty in satisfying these
obligations could have a material adverse effect on our future results of operations and our stock price.
As a public company, the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC, as well as the
New York Stock Exchange rules, require us to implement various corporate governance practices and adhere to a variety of
reporting requirements and complex accounting rules. Compliance with these public company obligations requires us to devote
significant management time and place significant additional demands on our finance, accounting and legal staff and on our
management systems, including our financial, accounting, and information systems. Other expenses associated with being a
public company include increased auditing, accounting, and legal fees and expenses, investor relations expenses, increased
directors’ fees and director and officer liability insurance costs, registrar and transfer agent fees, listing fees, as well as other
expenses.
39
In particular, the Sarbanes-Oxley Act of 2002 requires us to document and test the effectiveness of our internal control
over financial reporting in accordance with an established internal control framework, and to report on our conclusions as to the
effectiveness of our internal controls. It also requires an independent registered public accounting firm to test our internal
control over financial reporting and report on the effectiveness of such controls. In addition, we are required under the
Exchange Act to maintain disclosure controls and procedures and internal control over financial reporting. Because of inherent
limitations in any internal control environment, there can be no assurance that all control issues and instances of fraud, errors or
misstatements, if any, within our company have been or will be detected on a timely basis. Such deficiencies could result in the
correction or restatement of financial statements of one or more periods. Any failure to maintain effective controls or implement
new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to
fail to meet our reporting obligations. We also rely on third parties for certain calculations and other information that support
our accounting and financial reporting, which includes reports from such organizations on their controls and systems that are
used to generate this information. Any failure by such third parties to provide us with accurate or timely information or
implement and maintain effective controls may cause us to fail to meet our reporting obligations as a publicly traded company.
In addition, as we implement new financial management systems, we could experience deficiencies in its operation that could
have an adverse effect on the effectiveness of our internal control over financial reporting.
If we are unable to conclude that we have effective internal control over financial reporting, or if our independent
registered public accounting firm is unable to provide us with an unqualified report regarding the effectiveness of our internal
control over financial reporting, investors could lose confidence in the reliability of our consolidated financial statements,
which could result in a decrease in the value of our common stock. Failure to comply with the Sarbanes-Oxley Act of 2002
could potentially subject us to sanctions or investigations by the SEC, the New York Stock Exchange, or other regulatory
authorities.
Provisions in our organizational documents and in the Delaware General Corporation Law may prevent takeover
attempts that could be beneficial to our stockholders.
Our amended and restated certificate of incorporation and amended and restated bylaws include a number of provisions
that may have the effect of delaying, deterring, preventing, or rendering more difficult a change in control of Booz Allen
Holding that our stockholders might consider in their best interests. These provisions include:
•
•
•
•
•
granting to the Board the sole power to set the number of directors and to fill any vacancy on the Board;
granting to the Board the ability to designate and issue one or more series of preferred stock without stockholder
approval, the terms of which may be determined at the sole discretion of the Board;
a prohibition on stockholders from calling special meetings of stockholders;
the establishment of advance notice requirements for stockholder proposals and nominations for election to the Board
at stockholder meetings; and
prohibiting our stockholders from acting by written consent.
In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law,
which imposes additional requirements regarding mergers and other business combinations. These provisions may prevent our
stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a
takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the
prevailing market price of our common stock if the provisions are viewed as discouraging takeover attempts in the future.
Our amended and restated certificate of incorporation and amended and restated by-laws may also make it difficult for
stockholders to replace or remove our management. These provisions may facilitate management entrenchment that may delay,
deter, render more difficult, or prevent a change in our control, which may not be in the best interests of our stockholders.
The market for our Class A Common Stock may be adversely affected by the performance of other companies in the
government services market.
In addition to factors that may affect our financial results and operations, the price of our Class A Common Stock may be
impacted by the financial performance and outlook of other companies in the government services market. While certain factors
may affect all participants in the markets in which we operate, such as U.S. government spending conditions and changes in
rules and regulations applicable to government contractors, the market for our Class A Common Stock may be adversely
affected by financial results or negative events only affecting other market participants or financial results of such participants.
While such events or results may not impact or be indicative of our current or future performance, the price of our securities
may nonetheless be adversely affected as a result thereof.
40
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as
the sole and exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our
stockholders' ability to obtain a favorable judicial forum for disputes with us or our current or former directors, officers, or
stockholders.
Our fifth amended and restated certificate of incorporation requires that the Court of Chancery of the State of Delaware
be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action
asserting a claim of breach of a fiduciary duty owed by any director, officer, or other employee of the Company to the
Company or the Company's stockholders, (iii) any action asserting a claim against the Company arising pursuant to any
provision of the Delaware General Corporation Law, the Company's fifth amended and restated certificate of incorporation or
the Company's bylaws, or (iv) any action asserting a claim against the Company governed by the internal affairs doctrine.
Because the applicability of the exclusive forum provision is limited to the extent permitted by applicable law, we do not intend
that the exclusive forum provision would apply to suits brought to enforce any duty or liability created by the Exchange Act or
any other claim for which the federal courts have exclusive jurisdiction, and acknowledge that federal courts have concurrent
jurisdiction over all suits brought to enforce any duty or liability created by the Securities Act. We note that there is uncertainty
as to whether a court would enforce the provision and that investors cannot waive compliance with federal securities laws and
the rules and regulations thereunder. Although we believe this provision benefits us by providing increased consistency in the
application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging
lawsuits against our directors and officers.
Item 1B.
Unresolved Staff Comments
None.
Item 2.
Properties
We do not own any facilities or real estate. Our corporate headquarters is located at 8283 Greensboro Drive, McLean,
Virginia 22102. We lease other operating offices and facilities throughout North America, and a limited number of overseas
locations. Our principal offices outside of McLean, Virginia include: Annapolis Junction, Maryland; Bethesda, Maryland;
Laurel, Maryland; San Diego, California; Herndon, Virginia; Charleston, South Carolina; Arlington, Virginia; Alexandria,
Virginia; and Washington, D.C. We have a number of Sensitive Compartmented Information Facilities, which are enclosed
areas within buildings that are used to perform classified work for the U.S. Intelligence Community. Many of our employees
are located in facilities provided by the U.S. government. The total square footage of our leased offices and facilities is
approximately 2.50 million square feet. We believe our facilities meet our current needs.
Item 3.
Legal Proceedings
The Company is involved in legal proceedings and investigations arising in the ordinary course of business, including
those relating to employment matters, relationships with clients and contractors, intellectual property disputes, compliance with
various laws and regulations, and other business matters. We have provided information about these legal proceedings and
investigations in "Note 20—Commitments and Contingencies" of the notes to the consolidated financial statements contained
within this Annual Report on Form 10-K. These legal proceedings seek various remedies, including claims for monetary
damages in varying amounts, none of which are considered material, or are unspecified as to amount. Although the outcome of
any such matter is inherently uncertain and may be materially adverse, based on current information, we do not expect any of
the currently ongoing audits, reviews, investigations, or litigation to have a material adverse effect on our financial condition
and results of operations. As of March 31, 2022 and 2021, there were no material amounts accrued in the consolidated financial
statements related to these proceedings.
On June 7, 2017, Booz Allen Hamilton was informed that the U.S. Department of Justice (DOJ) is conducting a civil
and criminal investigation of the Company. In connection with the investigation, the DOJ has requested information from the
Company relating to certain elements of the Company’s cost accounting and indirect cost charging practices with the U.S.
government. Since learning of the investigation, the Company has engaged a law firm experienced in these matters to represent
the Company in connection with this matter and respond to the government's requests. As is commonly the case with this type
of matter, the Company has also been in contact with other regulatory agencies and bodies, including the SEC, which notified
the Company that it is conducting an investigation that the Company believes relates to the matters that are also the subject of
the DOJ's investigation. The Company may receive additional regulatory or governmental inquiries related to the matters that
are the subject of the DOJ's investigation. In accordance with the Company's practice, the Company is cooperating with all
relevant government parties. On May 12, 2021, the Company was informed that the DOJ has closed its criminal investigation.
The total cost associated with these matters will depend on many factors, including the duration of these matters and any related
41
findings. At this stage, the Company is not able to reasonably estimate the expected amount or range of cost or any loss
associated with these matters.
On June 19, 2017, a purported stockholder of the Company filed a putative class action lawsuit in the United States
District Court for the Eastern District of Virginia styled Langley v. Booz Allen Hamilton Holding Corp., No. 17-cv-00696
naming the Company, its Chief Executive Officer, and its Chief Financial Officer as defendants purportedly on behalf of all
purchasers of the Company’s securities from May 19, 2016 through June 15, 2017. On September 5, 2017, the court named two
lead plaintiffs, and on October 20, 2017, the lead plaintiffs filed a consolidated amended complaint. The complaint asserts
claims under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, alleging
misrepresentations or omissions by the Company purporting to relate to matters that are the subject of the DOJ investigation
described above. The plaintiffs seek to recover from the Company and the individual defendants an unspecified amount of
damages. The Company believes the suit lacks merit and intends to defend against the lawsuit. Motions to dismiss were argued
on January 12, 2018, and on February 8, 2018, the court dismissed the amended complaint in its entirety without prejudice. At
this stage of the lawsuit, the Company is not able to reasonably estimate the expected amount or range of cost or any loss
associated with the lawsuit.
On November 13, 2017, a Verified Shareholder Derivative Complaint was filed in the United States District Court for the
District of Delaware styled Celine Thum v. Rozanski et al., C.A. No. 17-cv-01638, naming the Company as a nominal
defendant and numerous current and former officers and directors as defendants. The complaint asserts claims for breach of
fiduciary duties, unjust enrichment, waste of corporate assets, abuse of control, gross mismanagement, and violations of
Sections 14(a), 10(b), and 20(a) of the Exchange Act, purportedly relating to matters that are the subject of the DOJ
investigation described above. The parties have stipulated to a stay of the proceedings pending the outcome of the securities
litigation (described above), which the court so ordered on January 24, 2018. On December 12, 2019, the court ordered that the
stay remain in effect and ordered the parties to submit periodic status reports. On May 27, 2020, November 23, 2020, May 24,
2021, and November 22, 2021, the parties submitted status reports stating that plaintiff believes the stay should remain in effect
and defendants do not object to the stay remaining in effect. At this stage of the lawsuit, the Company is not able to reasonably
estimate the expected amount or range of cost or any loss associated with the lawsuit.
Item 4.
Mine Safety Disclosures
None.
Information about our Executive Officers
The following table sets forth information about our executive officers as of the date hereof:
Name
Horacio D. Rozanski
Lloyd W. Howell, Jr.
Kristine Martin Anderson
Karen M. Dahut
Judith Dotson
Nancy J. Laben
Susan L. Penfield
Elizabeth M. Thompson
Scott M. Murphy
Age
54
56
53
58
58
60
60
67
42
Position
President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President and Chief Legal Officer
Executive Vice President and Chief Technology Officer
Executive Vice President and Chief People Officer
Vice President, Chief Accounting Officer and Controller
Horacio D. Rozanski is our President and Chief Executive Officer. A respected authority and leader in the consulting
industry, Mr. Rozanski has expertise in business strategy, technology and operations, talent and diversity, and the future of
consulting. He joined Booz Allen in 1992 as a consultant to commercial clients, was elected vice president in 1999, and served
as our Chief Personnel Officer, Chief Strategy and Talent Officer, Chief Operating Officer, and President before becoming
Chief Executive Officer in 2015. He also is a member of our board of directors. Mr. Rozanski currently serves as Chair of the
board of directors for Children’s National Medical Center and is a member of the board of directors at Marriott International,
Inc. (NASDAQ: MAR) and CARE. He is also a member of the Business Roundtable and the United States Holocaust Memorial
Museum’s Committee on Conscience, and Vice Chair of the Kennedy Center Corporate Fund Board.
Lloyd W. Howell, Jr. is an Executive Vice President of our Company and our Chief Financial Officer since July 2016.
Mr. Howell previously served as our Treasurer from July 2016 until February 2022 and as the group leader for our Civil
Commercial Group. Mr. Howell joined our Company in 1988, left in 1991, rejoined in 1995 and became an Executive Vice
42
President in 2005. He served as chairman of our Ethics & Compliance Committee for over seven years, until April 2014. Mr.
Howell serves on the board of directors of Moody’s Corporation (NYSE: MCO) since March 2021 and is a member of the
Senior Advisory Board of TowerBrook Capital Partners. Mr. Howell also serves on the board of trustees at the University of
Pennsylvania, the board of advisors for the School of Engineering and Applied Science at the University of Pennsylvania, and
is a member of the Washington, D.C. Economics Club. In addition, Mr. Howell previously served on the board of directors of
Integra Life Sciences from 2013 to February 2021.
Kristine Martin Anderson is an Executive Vice President and is President for the Company's Civil sector. She has led the
Civil sector since April 2018, after leading the Company's civil health business since April 2015. Prior to joining Booz Allen in
2006, she was Vice President for Operations and Strategy at CareScience, a software solutions company. Ms. Anderson
currently serves as treasurer of the Executives for Health Innovation (formerly the eHealth Initiative) board of directors. In
addition, she serves as co-chair of the Cost and Resource Use Standing Committee of the National Quality Forum.
Karen M. Dahut is an Executive Vice President and is President for the Company's Global Defense sector. Ms. Dahut
joined our Company in 2002 and became a Senior Vice President in 2004. Ms. Dahut led the Company's Strategic Innovations
Group from 2012 to April 2016 and the Civil Commercial Group from 2016 to March 2018. Previously, she also led the
Company's Analytics business and its US Navy and Marine Corps business. Ms. Dahut has served as a board member of
DexCom, Inc. since August 2020. She also serves on the board of the Smithsonian National Air and Space Museum and the
Eisner Amper Advisory Group.
Judith Dotson is an Executive Vice President and is President for the Company's National Security sector. Ms. Dotson
joined our Company in 1989 and became a Senior Vice President in 2004. Ms. Dotson led the Company's Finance, Economic
Development, and Energy business from 2014 to March 2017 and the Joint Combatant Command business from 2017 to March
2020. Previously, she led the Company's Enterprise Integration Capability Development Team, the Defense System
Development Capability Team, and the Environment & Energy Technology Team. Ms. Dotson previously served on the board
of directors for the Nature Generation, a not-for-profit that inspires and empowers environmental stewardship in youth.
Nancy J. Laben is an Executive Vice President of our Company and our Chief Legal Officer. She also served as the
Secretary until August 2019. Ms. Laben joined our Company in September 2013. She oversees the Legal functions, Ethics &
Compliance, and Corporate Affairs. Before joining our Company, Ms. Laben served as General Counsel of AECOM
Technology Corporation from June 2010 to August 2013, where she was responsible for all legal support. Prior to June 2010,
Ms. Laben served as Deputy General Counsel at Accenture plc beginning in 1989. Prior to Accenture, Ms. Laben served in the
law department at IBM Corporation.
Susan L. Penfield is an Executive Vice President and our Chief Technology Officer, and leads our Strategic Innovation
Group. Prior to her role as Chief Technology Officer, she served as our Chief Innovation Officer. Ms. Penfield joined the
Company in 1994. She has over 25 years of strategy, technology, marketing, and solutions delivery experience. Prior to joining
the Strategic Innovation Group, Ms. Penfield led the Company's Health business, where she drove technology and
transformation initiatives across the federal, commercial, and non-profit health space. She serves as Chair of the board of
directors of the Children's Inn at the National Institutes of Health, and also on the board of directors of Seed Spot Inc. and the
Northern Virginia Technology Council. Ms. Penfield is a member of the National Association for Female Executives (NAFE),
and was recognized by the NAFE as its 2015 Digital Trailblazer.
Elizabeth M. Thompson is an Executive Vice President of our Company and serves as our Chief People Officer.
Ms. Thompson joined our Company in 2008. Ms. Thompson served as Vice President of Human Resources for Fannie Mae
from 2000 to 2008. Ms. Thompson sits on the board of the Society for Human Resource Management.
Scott M. Murphy is a Vice President of our Company and our Chief Accounting Officer and Controller. Mr. Murphy
joined Booz Allen in May 2021 as the Company's Controller, and has served as the Company’s Chief Accounting Officer since
February 2022. Prior to joining Booz Allen, Mr. Murphy spent 11 years at Iron Mountain Incorporated, where he most recently
served as their Americas Controller and Global Controller. Prior to joining Iron Mountain Incorporated, Mr. Murphy spent
seven years at Ernst & Young, LLP in the assurance practice.
43
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our Class A Common Stock began trading on the New York Stock Exchange on November 17, 2010. On May 16, 2022,
there were 258,250 beneficial holders of our Class A Common Stock. Our Class A Common Stock is listed on the New York
Stock Exchange under the ticker symbol "BAH".
Dividends
The Company plans to continue paying recurring dividends in the future and assessing its excess cash resources to
determine the best way to utilize its excess cash flow to meet its objectives. Any future dividends declared will be at the
discretion of the Board and will depend, among other factors, upon our earnings, liquidity, financial condition, alternate capital
allocation opportunities, or any other factors the Board deems relevant. On May 20, 2022, the Company announced that the
Board had declared a quarterly cash dividend of $0.43 per share. Payment of the dividend will be made on June 30, 2022 to
stockholders of record at the close of business on June 15, 2022.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
The following table shows the share repurchase activity for each of the three months in the quarter ended March 31,
2022:
January 2022
February 2022
March 2022
Total
Period
Total Number of
Shares Purchased
Average Price Paid
per Share
369,144
655,526
287,734
1,312,404
$81.27
$76.27
$82.10
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans or
Programs
369,144
655,526
287,734
1,312,404
Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under
the Plans or
Programs (1)
$
$
$
727,555,903
675,251,659
651,627,902
(1)
On December 12, 2011, the Board of Directors approved a share repurchase program, which was most recently
increased to $2,160.0 million on January 26, 2022. As of March 31, 2022, the Company had approximately $651.6
million remaining under the repurchase program. A special committee of the Board of Directors was appointed to
evaluate market conditions and other relevant factors and initiate repurchases under the program from time to time.
The share repurchase program may be suspended, modified or discontinued at any time at the Company’s discretion
without prior notice.
Use of Proceeds from Registered Securities
None.
44
Performance
The graph set forth below compares the cumulative shareholder return on our Class A Common Stock between March 31,
2017 and March 31, 2022, to the cumulative return of (i) the Russell 1000 Index and (ii) S&P Software & Services Select
Industry Index over the same period. The Russell 1000 and S&P Software & Services Select Industry Indices represent
comparator groups for relative cumulative return performance to Booz Allen Hamilton. This graph assumes an initial
investment of $100 on March 31, 2017 in our Class A Common Stock, the Russell 1000 Index, and the S&P Software &
Services Select Industry Index and assumes the reinvestment of dividends, if any. The stock price performance included in this
graph is not necessarily indicative of future stock price performance.
ASSUMES $100 INVESTED ON MARCH 31, 2017
ASSUMES DIVIDEND REINVESTED
Company/Market/Peer Group
Booz Allen Hamilton Holding Corp.
Russell 1000 Index
S&P Software & Services Select Industry Index
3/31/2017
3/31/2018
3/31/2019
3/31/2020
3/31/2021
3/31/2022
$ 100.00 $ 111.55
$ 100.00 $ 113.98
$ 170.18 $ 203.84 $ 242.91 $ 269.94
$ 124.58 $ 114.58 $ 184.00 $ 208.42
$ 100.00 $ 129.22
$ 162.49 $ 142.54 $ 274.29 $ 257.72
This performance graph and other information furnished under this Part II Item 5 of this Annual Report shall not be
deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of
Section 18 of the Exchange Act.
Item 6.
Reserved
45
DollarsCOMPARISON OF CUMULATIVE TOTAL RETURNBooz Allen Hamilton Holding CorporationRussell 1000 IndexS&P Software & Services Select Industry Index03/31/201703/31/201803/31/201903/31/202003/31/202103/31/2022100150200250300350
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis is intended to help the reader understand our business, financial condition, results
of operations, and liquidity and capital resources. You should read this discussion in conjunction with our consolidated
financial statements and the related notes contained elsewhere in this Annual Report, and Part II, Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of our Form 10-K for the fiscal year ended March
31, 2021, which provides additional information on comparisons of fiscal 2021 and 2020 .
The statements in this discussion regarding industry outlook, our expectations regarding our future performance,
liquidity and capital resources, and other non-historical statements in this discussion are forward-looking statements. These
forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and
uncertainties described in “Item 1A. Risk Factors” and “Introductory Note — Cautionary Note Regarding Forward-Looking
Statements”. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Our fiscal year ends March 31 and, unless otherwise noted, references to years or fiscal are for fiscal years ended
March 31. See “— Results of Operations.”
Overview
We are a leading provider of management and technology consulting, analytics, engineering, digital solutions, mission
operations, and cyber services to U.S. and international governments, major corporations, and not-for-profit organizations. Our
ability to deliver value to our clients has always been, and continues to be, a product of the strong character, expertise and
tremendous passion of our people. Our approximately 29,300 employees work to solve hard problems by making clients'
missions their own, combining decades of consulting and domain expertise with functional expertise in areas such as analytics,
digital solutions, engineering, and cyber, all fostered by a culture of innovation that extends to all reaches of the company.
Through our dedication to our clients' missions, and a commitment to evolving our business to address their needs, we
have longstanding relationships with our clients, the longest of which is more than 80 years. We support critical missions for a
diverse base of federal government clients, including nearly all of the U.S. government's cabinet-level departments, as well as
for commercial clients, both domestically and internationally. We support our federal government clients by helping them
tackle their most complex and pressing challenges such as protecting soldiers in combat and supporting their families,
advancing cyber capabilities, keeping our national infrastructure secure, enabling and enhancing digital services, transforming
the healthcare system, and improving government efficiency to achieve better outcomes. We serve commercial clients across
industries including financial services, health and life sciences, energy, and technology.
Financial and Other Highlights
During fiscal 2022, the Company generated year over year revenue growth and increased client staff headcount for the
year. Revenue increased 6.4% from fiscal 2021 to fiscal 2022 primarily driven by the impact of acquisitions and strong demand,
partially offset by reduced staff utilization.
Operating income decreased 9.2% to $685.2 million in fiscal 2022 from $754.4 million in fiscal 2021, which reflects a
decrease in operating margin to 8.2% from 9.6% in the comparable year. The decrease in operating income and operating
margin were impacted by acquisition and divestiture costs of $97.5 million primarily related to our acquisitions during fiscal
2022. Increases in depreciation and amortization (primarily due to the recent acquisitions) year over year also contributed to the
decline in operating income. These decreases were partially offset by profitable contract level performance and mix, which
includes inorganic contributions, as well as prudent cost management. In addition, fiscal 2021 operating income was impacted
by approximately $24.0 million by the inability to recognize revenue on, or bill for, fee on certain contracts involving a ready
workforce.
The Company also incurred incremental legal costs during fiscal 2022 and 2021 in response to the U.S. Department of
Justice investigation and matters which purport to relate to the investigation, a portion of which was offset by the receipt of
insurance reimbursements. We expect to incur additional costs in the future. Based on the information currently available, the
Company is not able to reasonably estimate the expected long-term incremental legal costs or amounts that may be reimbursed
associated with this investigation and these related matters.
We are monitoring the evolving situation related to COVID-19, and we continue to work with our stakeholders to assess
further possible implications to our business. We could be impacted by the implementation of our Company policy requiring
full COVID-19 vaccinations of all employees, except for employees who qualify for medical or religious exemptions. Although
we cannot currently predict the overall impact of COVID-19, the longer the duration the more likely it is that it could have an
adverse effect on our business, financial position, results of operations, billable expenses, and/or cash flows.
46
Non-GAAP Measures
We publicly disclose certain non-GAAP financial measurements, including Revenue, Excluding Billable Expenses,
Adjusted Operating Income, Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on
Revenue, Excluding Billable Expenses, Adjusted Net Income, and Adjusted Diluted Earnings Per Share, or Adjusted Diluted
EPS, because management uses these measures for business planning purposes, including to manage our business against
internal projected results of operations and measure our performance. We view Adjusted Operating Income, Adjusted EBITDA,
Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses, Adjusted Net
Income, and Adjusted Diluted EPS as measures of our core operating business, which exclude the impact of the items detailed
below, as these items are generally not operational in nature. These non-GAAP measures also provide another basis for
comparing period to period results by excluding potential differences caused by non-operational and unusual or non-recurring
items. In addition, we use Revenue, Excluding Billable Expenses because it provides management useful information about the
Company's operating performance by excluding the impact of costs that are not indicative of the level of productivity of our
client staff headcount and our overall direct labor, which management believes provides useful information to our investors
about our core operations. We also utilize and discuss Free Cash Flow, because management uses this measure for business
planning purposes, measuring the cash generating ability of the operating business, and measuring liquidity generally. We
present these supplemental measures because we believe that these measures provide investors and securities analysts with
important supplemental information with which to evaluate our performance, long-term earnings potential, or liquidity, as
applicable, and to enable them to assess our performance on the same basis as management. These supplemental performance
measurements may vary from and may not be comparable to similarly titled measures by other companies in our industry.
Revenue, Excluding Billable Expenses, Adjusted Operating Income, Adjusted EBITDA, Adjusted EBITDA Margin on
Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses, Adjusted Net Income, Adjusted Diluted EPS,
and Free Cash Flow are not recognized measurements under accounting principles generally accepted in the United States, or
GAAP, and when analyzing our performance or liquidity, as applicable, investors should (i) evaluate each adjustment in our
reconciliation of revenue to Revenue, Excluding Billable Expenses, operating income to Adjusted Operating Income, net
income to Adjusted EBITDA, Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding
Billable Expenses, Adjusted Net Income and Adjusted Diluted Earnings Per Share, and net cash provided by operating
activities to Free Cash Flow, (ii) use Revenue, Excluding Billable Expenses, Adjusted Operating Income, Adjusted EBITDA,
Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses, Adjusted Net
Income, and Adjusted Diluted EPS in addition to, and not as an alternative to, revenue, operating income, net income or diluted
EPS, as measures of operating results, each as defined under GAAP and (iii) use Free Cash Flow in addition to, and not as an
alternative to, net cash provided by operating activities as a measure of liquidity, each as defined under GAAP. We have
defined the aforementioned non-GAAP measures as follows:
•
•
•
•
"Revenue, Excluding Billable Expenses" represents revenue less billable expenses. We use Revenue,
Excluding Billable Expenses because it provides management useful information about the Company's
operating performance by excluding the impact of costs that are not indicative of the level of productivity of
our client staff headcount and our overall direct labor, which management believes provides useful
information to our investors about our core operations.
"Adjusted Operating Income" represents operating income before acquisition and divestiture costs, financing
transaction costs, supplemental employee benefits due to COVID-19, significant acquisition amortization, and
restructuring costs. We prepare Adjusted Operating Income to eliminate the impact of items we do not
consider indicative of ongoing operating performance due to their inherent unusual, extraordinary, or non-
recurring nature or because they result from an event of a similar nature.
"Adjusted EBITDA" represents net income before income taxes, net interest and other expense and
depreciation and amortization and before certain other items, including acquisition and divestiture costs,
financing transaction costs, supplemental employee benefits due to COVID-19, and restructuring costs.
“Adjusted EBITDA Margin on Revenue” is calculated as Adjusted EBITDA divided by revenue. "Adjusted
EBITDA Margin on Revenue, Excluding Billable Expenses" is calculated as Adjusted EBITDA divided by
Revenue, Excluding Billable Expenses. The Company prepares Adjusted EBITDA, Adjusted EBITDA
Margin on Revenue, and Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses to eliminate
the impact of items it does not consider indicative of ongoing operating performance due to their inherent
unusual, extraordinary or non-recurring nature or because they result from an event of a similar nature.
"Adjusted Net Income" represents net income before: (i) acquisition and divestiture costs, (ii) financing
transaction costs, (iii) supplemental employee benefits due to COVID-19, (iv) significant acquisition
amortization, (v) restructuring costs, (vi) gain associated with equity method investment activity, (vii)
research and development tax credits, (viii) release of income tax reserves, (ix) loss on debt extinguishment,
(x) remeasurement of deferred tax assets/liabilities, and (xi) amortization or write-off of debt issuance costs
47
and debt discount, in each case net of the tax effect where appropriate calculated using an assumed effective
tax rate. We prepare Adjusted Net Income to eliminate the impact of items, net of tax, we do not consider
indicative of ongoing operating performance due to their inherent unusual, extraordinary, or non-recurring
nature or because they result from an event of a similar nature. We view net income excluding the impact of
the re-measurement of the Company's deferred tax assets and liabilities as an important indicator of
performance consistent with the manner in which management measures and forecasts the Company's
performance and the way in which management is incentivized to perform.
"Adjusted Diluted EPS" represents diluted EPS calculated using Adjusted Net Income as opposed to net
income. Additionally, Adjusted Diluted EPS does not contemplate any adjustments to net income as required
under the two-class method as disclosed in the footnotes to the consolidated financial statements.
"Free Cash Flow" represents the net cash generated from operating activities less the impact of purchases of
property, equipment, and software.
•
•
48
Below is a reconciliation of Revenue, Excluding Billable Expenses, Adjusted Operating Income, Adjusted EBITDA,
Adjusted EBITDA Margin on Revenue, Adjusted EBITDA Margin on Revenue, Excluding Billable Expenses, Adjusted Net
Income, Adjusted Diluted EPS, and Free Cash Flow to the most directly comparable financial measure calculated and presented
in accordance with GAAP.
(Amounts in thousands, except share and per share data)
2022
Fiscal Year Ended
March 31,
2021
(Unaudited)
2020
Revenue, Excluding Billable Expenses
Revenue
Less: Billable expenses
Revenue, Excluding Billable Expenses
Adjusted Operating Income
Operating Income
Acquisition and divestiture costs (a)
Financing transaction costs (b)
COVID-19 supplemental employee benefits (c)
Significant acquisition amortization (d)
Restructuring costs (e)
Adjusted Operating Income
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin on
Revenue & Adjusted EBITDA Margin on Revenue, Excluding
Billable Expenses
Net income
Income tax expense
Interest and other, net (f)
Depreciation and amortization
EBITDA
Acquisition and divestiture costs (a)
Financing transaction costs (b)
COVID-19 supplemental employee benefits (c)
Restructuring costs (e)
Adjusted EBITDA
Adjusted EBITDA Margin on Revenue
Adjusted EBITDA Margin on Revenue, Excluding Billable
Expenses
Adjusted Net Income
Net income
Acquisition and divestiture costs (a)
Financing transaction costs (b)
COVID-19 supplemental employee benefits (c)
Significant acquisition amortization (d)
Restructuring costs (e)
Gain associated with equity method investment activities (g)
Research and development tax credits (h)
Release of income tax reserves (i)
Loss on debt extinguishment (j)
Remeasurement of deferred tax assets/liabilities (k)
Amortization or write-off of debt issuance costs and debt discount
49
$
8,363,700
$
7,858,938
$
7,463,841
2,474,163
2,325,888
2,298,413
$
5,889,537
$
5,533,050
$
5,165,428
$
685,181
$
754,371
$
669,202
97,485
2,348
—
38,295
4,164
411
—
577
—
—
—
1,069
2,722
—
—
$
827,473
$
755,359
$
672,993
$
466,577
$
608,958
$
482,603
137,466
81,138
145,747
830,928
97,485
2,348
—
4,164
934,925
11.2 %
15.9 %
53,481
91,932
84,315
838,686
411
—
577
96,831
89,768
81,081
750,283
—
1,069
2,722
—
839,674
$
—
754,074
$
10.7 %
15.2 %
10.1 %
14.6 %
$
$
466,577
$
608,958
$
482,603
97,485
2,348
—
38,295
4,164
(12,761)
—
—
—
—
3,340
411
—
577
—
—
—
(2,928)
(29)
13,239
(76,767)
2,402
—
1,069
2,722
—
—
—
(38,395)
(68)
—
—
2,395
Adjustments for tax effect (l)
Adjusted Net Income
Adjusted Diluted Earnings Per Share
Weighted-average number of diluted shares outstanding
Adjusted Net Income Per Diluted Share (m)
Free Cash Flow
Net cash provided by operating activities
Less: Purchases of property, equipment and software
Free Cash Flow
(31,399)
(4,324)
(1,608)
$
568,049
$
541,539
$
448,718
134,850,808
138,703,220
141,238,135
$
$
$
4.21
736,526
(79,964)
656,562
$
$
$
3.90
718,684
(87,210)
631,474
$
$
$
3.18
551,428
(128,079)
423,349
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
Represents costs associated with the acquisition and divestiture efforts of the Company related to transactions for
which the Company has entered into a letter of intent to either acquire a controlling financial interest in the target
entity or divest a portion of our business. Acquisition and divestiture costs primarily include costs associated with (i)
buy-side and sell-side due diligence activities, (ii) compensation expenses associated with employee retention, and (iii)
legal and advisory fees, primarily associated with the acquisitions of Liberty IT Solutions, LLC ("Liberty"), Tracepoint
Holdings, LLC ("Tracepoint") and EverWatch Corp. ("EverWatch"), as well as the planned divestiture of our
management consulting business serving the Middle East and North Africa (the "MENA Divestiture"), as disclosed in
Note 5.
Reflects expenses associated with debt financing activities incurred during the first quarter of fiscal 2022.
Represents the supplemental contribution to employees' dependent care FSA accounts in response to COVID-19.
Amortization expense associated with acquired intangibles from significant acquisitions. Significant acquisitions
include acquisitions which the Company considers to be beyond the scope of our normal operations. Significant
acquisition amortization includes amortization expense associated with the acquisition of Liberty in the first quarter of
fiscal 2022.
Represents restructuring charges of $8.3 million incurred during the fourth quarter of fiscal 2022, net of approximately
$4.2 million of revenue recognized on recoverable expenses, associated with severance costs of a restructuring plan to
reduce certain executive administrative personnel costs.
Reflects the combination of Interest expense and Other income (expense), net from the consolidated statement of
operations.
Represents (i) a gain in the second quarter of fiscal 2022 associated with the Company's previously held equity method
investment in Tracepoint and (ii) a gain in the third quarter of fiscal 2022 associated with the divestiture of a
controlling financial interest of a certain product offering.
Reflects tax credits, net of reserves for uncertain tax positions, recognized in fiscal 2021 and 2020 related to an
increase in research and development credits available for fiscal years 2016 to 2019 and fiscal years 2016 to 2020,
respectively.
Release of pre-acquisition income tax reserves assumed by the Company in connection with the Carlyle Acquisition.
Reflects the loss on debt extinguishment resulting from the redemption of Booz Allen Hamilton Inc.'s 5.125% Senior
Notes due 2025 (the "2025 Senior Notes"), including $9.0 million of the premium paid at redemption, and write-off of
the unamortized debt issuance cost.
Reflects the income tax benefit associated with tax losses generated during fiscal 2021 as a result of a change in certain
tax methods of accounting. The Company intends to carry these losses back to fiscal 2016 and subsequent periods
under the Coronavirus Aid Relief and Economic Security Act and has re-measured the fiscal 2021 loss accordingly.
Reflects the tax effect of adjustments at an assumed effective tax rate of 26%, which approximates the blended federal
and state tax rates, and consistently excludes the impact of other tax credits and incentive benefits realized.
Excludes an adjustment of approximately $3.1 million, $3.5 million, and $1.6 million of net earnings for fiscal 2022,
2021, and 2020, respectively, associated with the application of the two-class method for computing diluted earnings
per share.
Factors and Trends Affecting Our Results of Operations
Our results of operations have been, and we expect them to continue to be, affected by the following factors, which may
cause our future results of operations to differ from our historical results of operations discussed under “—Results of
Operations.”
50
Business Environment and Key Trends in Our Markets
We believe that the following trends and developments in the U.S. government services industry and our markets may
influence our future results of operations:
•
•
•
•
•
•
•
•
•
•
•
uncertainty around the timing, extent, nature and effect of Congressional and other U.S. government actions
to approve funding of the U.S. government, address budgetary constraints, including caps on the discretionary
budget for defense and non-defense departments and agencies, as established by the Bipartisan Budget
Control Act of 2011 ("BCA") and subsequently adjusted by the American Taxpayer Relief Act of 2012, the
Bipartisan Budget Act of 2013, the Bipartisan Budget Act of 2015, the Bipartisan Budget Act of 2018, and
the Bipartisan Budget Act of 2019, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES
Act"), and the Consolidated Appropriations Act of 2021, and address the ability of Congress to determine
how to allocate the available budget authority and pass appropriations bills to fund both U.S. government
departments and agencies that are, and those that are not, subject to the caps;
budget deficits and the growing U.S. national debt increasing pressure on the U.S. government to reduce
federal spending across all federal agencies together with associated uncertainty about the size and timing of
those reductions;
cost-cutting and efficiency initiatives, current and future budget restrictions, continued implementation of
Congressionally mandated automatic spending cuts, and other efforts to reduce U.S. government spending
could cause clients to reduce or delay funding for orders for services or invest appropriated funds on a less
consistent or rapid basis or not at all, particularly when considering long-term initiatives and in light of
current uncertainty around Congressional efforts to craft a long-term agreement on the U.S. government's
ability to incur indebtedness in excess of its current limits, and generally in the current political environment,
there is a risk that clients will not issue task orders in sufficient volume to reach current contract ceilings, alter
historical patterns of contract awards, including the typical increase in the award of task orders or completion
of other contract actions by the U.S. government in the period before the end of the U.S. government's fiscal
year on September 30, delay requests for new proposals and contract awards, rely on short-term extensions
and funding of current contracts, or reduce staffing levels and hours of operation;
delays in the completion of future U.S. government’s budget processes, which have in the past and could in
the future delay procurement of the products, services, and solutions we provide;
changes in the relative mix of overall U.S. government spending and areas of spending growth, with lower
spending on homeland security, intelligence, defense-related programs as certain overseas operations end, and
continued increased spending on cybersecurity, Command, Control, Communications, Computers,
Intelligence, Surveillance, and Reconnaissance (C4ISR), advanced analytics, technology integration, and
healthcare, including as a result of the presidential and administration transition;
the extent, nature and effect of COVID-19, including the impact on federal budgets, current and pending
procurements, supply chains, demand for services, deployment and productivity of our employees and the
economic and societal impact of a pandemic, and the expected continued volatility in billable expenses, as
well as the impact of our Company policy requiring full COVID-19 vaccinations of all employees, except for
employees who qualify for medical or religious exemptions;
increased inflationary pressure that could impact the cost of doing business and/or reduce customer buying
power;
legislative and regulatory changes to limitations on the amount of allowable executive compensation
permitted under flexibly priced contracts following implementation of interim rules adopted by federal
agencies pursuant to the Bipartisan Budget Act of 2013, which substantially further reduce the amount of
allowable executive compensation under these contracts and extend these limitations to a larger segment of
our executives and our entire contract base;
efforts by the U.S. government to address organizational conflicts of interest and related issues and the impact
of those efforts on us and our competitors;
increased audit, review, investigation, and general scrutiny by U.S. government agencies of government
contractors' performance under U.S. government contracts and compliance with the terms of those contracts
and applicable laws;
the federal focus on refining the definition of “inherently governmental” work, including proposals to limit
contractor access to sensitive or classified information and work assignments, which will continue to drive
pockets of insourcing in various agencies, particularly in the intelligence market;
51
•
•
•
•
•
•
•
negative publicity and increased scrutiny of government contractors in general, including us, relating to U.S.
government expenditures for contractor services and incidents involving the mishandling of sensitive or
classified information;
U.S. government agencies awarding contracts on a technically acceptable/lowest cost basis, which could have
a negative impact on our ability to win certain contracts;
increased competition from other government contractors and market entrants seeking to take advantage of
certain of the trends identified above, and an industry trend towards consolidation, which may result in the
emergence of companies that are better able to compete against us;
cost cutting and efficiency and effectiveness efforts by U.S. civilian agencies with a focus on increased use of
performance measurement, “program integrity” efforts to reduce waste, fraud and abuse in entitlement
programs, and renewed focus on improving procurement practices for and interagency use of IT services,
including through the use of cloud based options and data center consolidation;
restrictions by the U.S. government on the ability of federal agencies to use lead system integrators, in
response to cost, schedule, and performance problems with large defense acquisition programs where
contractors were performing the lead system integrator role;
increasingly complex requirements and enforcement and reporting landscapes of the Department of Defense
and the U.S. intelligence community, including cybersecurity, managing federal health care cost growth,
competition, and focus on reforming existing government regulation of various sectors of the economy, such
as financial regulation and healthcare; and
increasing small business regulations across the Department of Defense and civilian agency clients continue
to gain traction, agencies are required to meet high small business set aside targets, and large business prime
contractors are required to subcontract in accordance with considerable small business participation goals
necessary for contract award.
Sources of Revenue
Substantially all of our revenue is derived from services provided under contracts and task orders with the U.S.
government, primarily by our client staff and, to a lesser extent, our subcontractors. Funding for our contracts and task orders is
generally linked to trends in budgets and spending across various U.S. government agencies and departments. We provide
services under a large portfolio of contracts and contract vehicles to a broad client base, and we believe that our diversified
contract and client base lessens potential volatility in our business; however, a reduction in the amount of services that we are
contracted to provide to the U.S. government or any of our significant U.S. government clients could have a material adverse
effect on our business and results of operations. In particular, the Department of Defense is one of our significant clients, and
the BCA originally required nine automatic spending cuts (referred to as “sequestration”) of $109 billion annually from 2013 to
2021, half of which was intended to come from defense programs, though less than $1 billion has been cut for defense
programs per year under the BCA. Mandatory sequestrations under the BCA were subsequently extended by the Bipartisan
Budget Act of 2013, the Bipartisan Budget Act of 2015, the Bipartisan Budget Act of 2018, the Bipartisan Budget Act of 2019,
the CARES Act and the Consolidated Appropriations Act of 2021, which did not specify an amount of savings required to be
achieved through sequestration after 2021 but apply an 8.3% reduction in defense spending in each year from 2021 to 2030.
This could result in a commensurate reduction in the amount of services that we are contracted to provide to the Department of
Defense and could have a material adverse effect on our business and results of operations, and given the uncertainty of when
and how these automatic reductions required by the BCA may return and/or be applied, we are unable to predict the nature or
magnitude of the potential adverse effect.
Contract Types
We generate revenue under the following three basic types of contracts:
•
Cost-Reimbursable Contracts. Cost-reimbursable contracts provide for the payment of allowable
costs incurred during performance of the contract, up to a ceiling based on the amount that has been
funded, plus a fixed fee or award fee. As we increase or decrease our spending on allowable costs,
our revenue generated on cost-reimbursable contracts will increase, up to the ceiling and funded
amounts, or decrease, respectively. We generate revenue under two general types of cost-
reimbursable contracts: cost-plus-fixed-fee and cost-plus-award-fee, both of which reimburse
allowable costs and provide for a fee. The fee under each type of cost-reimbursable contract is
generally payable upon completion of services in accordance with the terms of the contract. Cost-
plus-fixed-fee contracts offer no opportunity for payment beyond the fixed fee. Cost-plus-award-fee
contracts also provide for an award fee that varies within specified limits based upon the client’s
52
•
•
assessment of our performance against a predetermined set of criteria, such as targets for factors like
cost, quality, schedule, and performance.
Time-and-Materials Contracts. Under contracts in this category, we are paid a fixed hourly rate for
each direct labor hour expended, and we are reimbursed for billable material costs and billable out-
of-pocket expenses inclusive of allocable indirect costs. We assume the financial risk on time-and-
materials contracts because our costs of performance may exceed negotiated hourly rates. To the
extent our actual direct labor, including allocated indirect costs, and associated billable expenses
decrease or increase in relation to the fixed hourly billing rates provided in the contract, we will
generate more or less profit, respectively, or could incur a loss.
Fixed-Price Contracts. Under a fixed-price contract, we agree to perform the specified work for a
predetermined price. To the extent our actual direct and allocated indirect costs decrease or increase
from the estimates upon which the price was negotiated, we will generate more or less profit,
respectively, or could incur a loss. Some fixed-price contracts have a performance-based component,
pursuant to which we can earn incentive payments or incur financial penalties based on our
performance. Fixed-price level of effort contracts require us to provide a specified level of effort
(i.e., labor hours), over a stated period of time, for a fixed price.
The amount of risk and potential reward varies under each type of contract. Under cost-reimbursable contracts, there is
limited financial risk, because we are reimbursed for all allowable costs up to a ceiling. However, profit margins on this type of
contract tend to be lower than on time-and-materials and fixed-price contracts. Under time-and-materials contracts, we are
reimbursed for the hours worked using the predetermined hourly rates for each labor category. In addition, we are typically
reimbursed for other contract direct costs and expenses at cost. We assume financial risk on time-and-materials contracts
because our labor costs may exceed the negotiated billing rates. Profit margins on well-managed time-and-materials contracts
tend to be higher than profit margins on cost-reimbursable contracts as long as we are able to staff those contracts with people
who have an appropriate skill set. Under fixed-price contracts, we are required to deliver the objectives under the contract for a
predetermined price. Compared to time-and-materials and cost-reimbursable contracts, fixed-price contracts generally offer
higher profit margin opportunities because we receive the full benefit of any cost savings but generally involve greater financial
risk because we bear the impact of any cost overruns. In the aggregate, the contract type mix in our revenue for any given
period will affect that period's profitability. Changes in contract type as a result of re-competes and new business could
influence the percentage/mix in unanticipated ways.
The table below presents the percentage of total revenue for each type of contract:
Cost-reimbursable
Time-and-materials
Fixed-price
Contract Diversity and Revenue Mix
Fiscal Year Ended
March 31,
2021
56%
25%
19%
2022
54%
24%
22%
2020
57%
23%
20%
We provide services to our clients through a large number of single award contracts, contract vehicles, and multiple award
contract vehicles. Most of our revenue is generated under indefinite delivery/indefinite quantity, or IDIQ, contract vehicles,
which include multiple award government wide acquisition contract vehicles, or GWACs, and General Services Administration
Multiple Award Schedule Contracts, or GSA schedules, and certain single award contracts. GWACs and GSA schedules are
available to all U.S. government agencies. Any number of contractors typically competes under multiple award IDIQ contract
vehicles for task orders to provide particular services, and we earn revenue under these contract vehicles only to the extent that
we are successful in the bidding process for task orders. No single task order under any IDIQ contract represented more than
3.6% of our revenue in fiscal 2022. No single definite contract accounted for more than 3.0% of our revenue in fiscal 2022.
We generate revenue under our contracts and task orders through our provision of services as both a prime contractor and
subcontractor, as well as from the provision of services by subcontractors under contracts and task orders for which we act as
the prime contractor. For fiscal 2022, 2021, and 2020, 94%, 93%, and 92%, respectively, of our revenue was generated by
contracts and task orders for which we served as a prime contractor; 6%, 7%, and 8%, respectively, of our revenue was
generated by contracts and task orders for which we served as a subcontractor; and 24%, 25%, and 24%, respectively, of our
revenue was generated by services provided by our subcontractors. The mix of these types of revenue affects our operating
margin. Substantially all of our operating margin is derived from direct client staff labor as the portion of our operating margin
derived from fees we earn on services provided by our subcontractors is not significant. We view growth in direct client staff
53
labor as the primary driver of earnings growth. Direct client staff labor growth is driven by client staff headcount growth, after
attrition, and total backlog growth.
Our People
Revenue from our contracts is derived from services delivered by client staff and, to a lesser extent, from our
subcontractors. Our ability to hire, retain, and deploy talent with skills appropriately aligned with client needs is critical to our
ability to grow our revenue. We continuously evaluate whether our talent base is properly sized and appropriately compensated,
and contains an optimal mix of skills to be cost competitive and meet the rapidly evolving needs of our clients. We seek to
achieve that result through recruitment and management of capacity and compensation. As of March 31, 2022, 2021, and 2020,
we employed approximately 29,300, 27,700, and 27,200 people, respectively, of which approximately 26,300, 24,800, and
24,200, respectively, were client staff.
Contract Backlog
We define backlog to include the following three components:
•
•
•
Funded Backlog. Funded backlog represents the revenue value of orders for services under existing contracts
for which funding is appropriated or otherwise authorized less revenue previously recognized on these
contracts.
Unfunded Backlog. Unfunded backlog represents the revenue value of orders (including optional orders) for
services under existing contracts for which funding has not been appropriated or otherwise authorized.
Priced Options. Priced contract options represent 100% of the revenue value of all future contract option
periods under existing contracts that may be exercised at our clients’ option and for which funding has not
been appropriated or otherwise authorized.
Our backlog does not include contracts that have been awarded but are currently under protest and also does not include
any task orders under IDIQ contracts, except to the extent that task orders have been awarded to us under those contracts.
The following table summarizes the value of our contract backlog at the respective dates presented:
Backlog:
Funded
Unfunded
Priced options
Total backlog
2022
Fiscal Year Ended
March 31,
2021
(In millions)
2020
$
$
3,710 $
9,925
15,612
29,247 $
3,510 $
6,086
14,436
24,032 $
3,415
4,518
12,796
20,729
(1) Backlog presented as of March 31, 2022 includes backlog acquired from the Company's acquisitions made during the
twelve months ended March 31, 2022. Total backlog acquired was approximately $2.6 billion as of March 31, 2022
Our total backlog consists of remaining performance obligations, certain orders under contracts for which the period of
performance has expired, and unexercised option period and other unexercised optional orders. As of March 31, 2022 and
March 31, 2021, the Company had $7.4 billion and $6.7 billion of remaining performance obligations, respectively, and we
expect to recognize approximately 70% of the remaining performance obligations as of March 31, 2022 as revenue over the
next 12 months, and approximately 85% over the next 24 months. The remainder is expected to be recognized thereafter.
However, given the uncertainties discussed below, as well as the risks described in "Item 1A. Risk Factors", we can give no
assurance that we will be able to convert our backlog into revenue in any particular period, if at all. Our backlog includes orders
under contracts that in some cases extend for several years. The U.S. Congress generally appropriates funds for our clients on a
yearly basis, even though their contracts with us may call for performance that is expected to take a number of years to
complete. As a result, contracts typically are only partially funded at any point during their term and all or some of the work to
be performed under the contracts may remain unfunded unless and until the U.S. Congress makes subsequent appropriations
and the procuring agency allocates funding to the contract.
We view growth in total backlog and client staff headcount as the two key measures of our potential business growth.
Growing and deploying client staff is the primary means by which we are able to achieve profitable revenue growth. To the
extent that we are able to hire additional client staff and deploy them against funded backlog, we generally recognize increased
revenue. Total backlog increased by 21.7% from March 31, 2021 to March 31, 2022 and increased by 15.9% from March 31,
54
2020 to March 31, 2021. Additions to funded backlog during fiscal 2022 and 2021 totaled $8.6 billion and $8.0 billion
respectively, as a result of the conversion of unfunded backlog to funded backlog, the award of new contracts and task orders
under which funding was appropriated, and the exercise and subsequent funding of priced options. We report internally on our
backlog on a monthly basis and review backlog upon occurrence of certain events to determine if any adjustments are
necessary.
We cannot predict with any certainty the portion of our backlog that we expect to recognize as revenue in any future
period and we cannot guarantee that we will recognize any revenue from our backlog. The primary risks that could affect our
ability to recognize such revenue on a timely basis or at all are: program schedule changes, contract modifications, and our
ability to assimilate and deploy new client staff against funded backlog; cost-cutting initiatives and other efforts to reduce U.S.
government spending, which could reduce or delay funding for orders for services; and delayed funding of our contracts due to
delays in the completion of the U.S. government's budgeting process and the use of continuing resolutions by the U.S.
government to fund its operations. The amount of our funded backlog is also subject to change, due to, among other factors:
changes in congressional appropriations that reflect changes in U.S. government policies or priorities resulting from various
military, political, economic, or international developments; changes in the use of U.S. government contracting vehicles, and
the provisions therein used to procure our services and adjustments to the scope of services, or cancellation of contracts, by the
U.S. government at any time. In our recent experience, none of the following additional risks have had a material negative
effect on our ability to realize revenue from our funded backlog: the unilateral right of the U.S. government to cancel multi-year
contracts and related orders or to terminate existing contracts for convenience or default; in the case of unfunded backlog, the
potential that funding will not be made available; and, in the case of priced options, the risk that our clients will not exercise
their options.
In addition, contract backlog includes orders under contracts for which the period of performance has expired, and we
may not recognize revenue on the funded backlog that includes such orders due to, among other reasons, the tardy submission
of invoices by our subcontractors and the expiration of the relevant appropriated funding in accordance with a predetermined
expiration date such as the end of the U.S. government's fiscal year. The revenue value of orders included in contract backlog
that has not been recognized as revenue due to period of performance expirations has not exceeded approximately 5.1% of total
backlog as of March 31, 2022 and any of the four preceding fiscal quarters.
We expect to recognize revenue from a substantial portion of funded backlog as of March 31, 2022 within the next twelve
months. However, given the uncertainties discussed above, as well as the risks described in "Item 1A. Risk Factors", we can
give no assurance that we will be able to convert our backlog into revenue in any particular period, if at all.
Operating Costs and Expenses
Costs associated with compensation and related expenses for our people are the most significant component of our
operating costs and expenses. The principal factors that affect our costs are additional people as we grow our business and are
awarded new contracts, task orders, and additional work under our existing contracts, and the hiring of people with specific skill
sets and security clearances as required by our additional work.
Our most significant operating costs and expenses are described below.
•
•
•
•
Cost of Revenue. Cost of revenue includes direct labor, related employee benefits, and overhead. Overhead
consists of indirect costs, including indirect labor relating to infrastructure, management and administration,
and other expenses.
Billable Expenses. Billable expenses include direct subcontractor expenses, travel expenses, and other
expenses incurred to perform on contracts.
General and Administrative Expenses. General and administrative expenses include indirect labor of
executive management and corporate administrative functions, marketing and bid and proposal costs, and
other discretionary spending.
Depreciation and Amortization. Depreciation and amortization includes the depreciation of computers,
leasehold improvements, furniture and other equipment, and the amortization of internally developed
software, as well as third-party software that we use internally, and of identifiable long-lived intangible assets
over their estimated useful lives.
Seasonality
The U.S. government's fiscal year ends on September 30 of each year. While not certain, it is not uncommon for U.S.
government agencies to award extra tasks or complete other contract actions in the weeks before the end of its fiscal year in
order to avoid the loss of unexpended fiscal year funds. In addition, we also have historically experienced higher bid and
proposal costs in the months leading up to the U.S. government's fiscal year end as we pursue new contract opportunities being
awarded shortly after the U.S. government fiscal year end as new opportunities are expected to have funding appropriated in the
55
U.S. government's subsequent fiscal year. We may continue to experience this seasonality in future periods, and our future
periods may be affected by it. While not certain, changes in the government's funding and spending patterns have altered
historical seasonality trends, supporting our approach to managing the business on an annual basis.
Seasonality is just one of a number of factors, many of which are outside of our control, which may affect our results in
any period. See "Item 1A. Risk Factors."
Critical Accounting Estimates and Policies
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial
statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements in
accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingencies at the date of the consolidated financial statements as well as the reported amounts
of revenue and expenses during the reporting period. Management evaluates these estimates and assumptions on an ongoing
basis. Our estimates and assumptions have been prepared on the basis of the most current reasonably available information.
Actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies, including the critical policies and practices listed below, are more fully described and
discussed in the notes to the consolidated financial statements. We consider the following accounting policies to be critical to an
understanding of our financial condition and results of operations because these policies require the most difficult, subjective or
complex judgments on the part of our management in their application, often as a result of the need to make estimates about the
effect of matters that are inherently uncertain.
Revenue Recognition and Cost Estimation
Our revenues from contracts with customers (clients) are derived from offerings that include consulting, analytics, digital
solutions, engineering, and cyber services, substantially with the U.S. government and its agencies, and to a lesser extent,
subcontractors. We also serve foreign governments, as well as domestic and international commercial clients. We perform
under various types of contracts, which include cost-reimbursable-plus-fee contracts, time-and-materials contracts, and fixed-
price contracts.
We consider a contract with a customer to exist under Topic 606 when there is approval and commitment from us and
the customer, the rights of the parties and payment terms are identified, the contract has commercial substance, and
collectability of consideration is probable. We will also consider whether two or more contracts entered into with the same
customer should be combined and accounted for as a single contract. Furthermore, in certain transactions with commercial
clients and with the U.S. government, we may commence providing services prior to receiving a formal approval from the
customer. In these situations, we will consider the factors noted above, the risks associated with commencing the work, and
legal enforceability in determining whether a contract with the customer exists under Topic 606.
Customer contracts are often modified to change the scope, price, specifications or other terms within the existing
arrangement. Contract modifications are evaluated by management to determine whether the modification should be accounted
for as part of the original performance obligation(s) or as a separate contract. If the modification adds distinct goods or services
and increases the contract value proportionate to the stand-alone selling price of the additional goods or services, it will be
accounted for as a separate contract. Generally, our contract modifications do not include goods or services which are distinct,
and therefore are accounted for as part of the original performance obligation(s) with any impact on transaction price or
estimated costs at completion being recorded as through a cumulative catch-up adjustment to revenue.
We evaluate each service deliverable contracted with the customer to determine whether it represents promises to transfer
distinct goods or services. Under Topic 606, these are referred to as performance obligations. One or more service deliverables
often represent a single performance obligation. This evaluation requires significant judgment and the impact of combining or
separating performance obligations may change the time over which revenue from the contract is recognized. Our contracts
generally provide a set of integrated or highly interrelated tasks or services and are therefore accounted for as a single
performance obligation. However, in cases where we provide more than one distinct good or service within a customer contract,
the contract is separated into individual performance obligations which are accounted for discretely.
Contracts with the U.S. government are generally subject to the FAR and are priced based on estimated or actual costs of
providing the goods or services. We derive a majority of our revenue from contracts awarded through a competitive bidding
process. Pricing for non-U.S. government agencies and commercial customers is based on discrete negotiations with each
customer. Certain of our contracts contain award fees, incentive fees or other provisions that may increase or decrease the
transaction price. These variable amounts generally are awarded upon achievement of certain performance metrics, program
milestones or cost targets and may be based upon customer discretion. Management estimates variable consideration as the
most likely amount that we expect to achieve based on our assessment of the variable fee provisions within the contract, prior
experience with similar contracts or clients, and management’s evaluation of the performance on such contracts. We may
perform work under a contract that has not been fully funded if the work has been authorized by the management and the
56
customer to proceed. We evaluate unfunded amounts as variable consideration in estimating the transaction price. We include
the estimated variable consideration in our transaction price to the extent that it is probable that a significant reversal of revenue
will not occur upon the ultimate settlement of the variable fee provision. In the limited number of situations where our contracts
with customers contain more than one performance obligation, we allocate the transaction price of a contract between the
performance obligations in the proportion to their respective stand-alone selling prices. We generally estimate the stand-alone
selling price of performance obligations based on an expected cost-plus margin approach as allowed under Topic 606. Our U.S.
government contracts generally contain FAR provisions that enable the customer to terminate a contract for default or for the
convenience of the U.S. government.
We recognize revenue for each performance obligation identified within our customer contracts when, or as, the
performance obligation is satisfied by transferring the promised goods or services. Revenue may either be recognized over time
or at a point in time. We generally recognize revenue over time as our contracts typically involve a continuous transfer of
control to the customer. A continuous transfer of control under contracts with the U.S. government and its agencies is evidenced
by clauses which require us to be paid for costs incurred plus a reasonable margin in the event that the customer unilaterally
terminates the contract for convenience. For contracts where we recognize revenue over time, a contract cost-based input
method is generally used to measure progress towards satisfaction of the underlying performance obligation(s). Contract costs
include direct costs such as materials, labor and subcontract costs, as well as indirect costs identifiable with, or allocable to, a
specific contract that are expensed as incurred. We do not incur material incremental costs to acquire or fulfill contracts. Under
a contract cost-based input method, revenue is recognized based on the proportion of contract costs incurred to the total
estimated costs expected to be incurred upon completion of the underlying performance obligation. We generally include both
funded and unfunded portions of customer contracts in this estimation process.
For interim financial reporting periods, contract revenue attributable to indirect costs is recognized based upon agreed-
upon annual forward-pricing rates established with the U.S. government at the start of each fiscal year. Forward pricing rates
are estimated and agreed upon between us and the U.S. government and represent indirect contract costs required to execute and
administer contract obligations. The impact of any agreed-upon changes, or changes in the estimated annual forward-pricing
rates, are recorded in the interim financial reporting period when such changes are identified. These changes relate to the
interim financial reporting period differences between the actual indirect costs incurred and allocated to customer contracts
compared to the estimated amounts allocated to contracts using the estimated annual forward-pricing rates established with the
U.S. government.
On certain contracts, principally time-and-materials and cost-reimbursable-plus-fee contracts, revenue is recognized using
the right-to-invoice practical expedient as we are contractually able to invoice the customer based on the control transferred.
However, we did not elect to use the practical expedient which would allow us to exclude contracts recognized using the right-
to-invoice practical expedient from the remaining performance obligations disclosed below. Additionally, for stand-ready
performance obligations to provide services under fixed-price contracts, revenue is recognized over time using a straight-line
measure of progress as the control of the services is provided to the customer ratably over the term of the contract. If a contract
does not meet the criteria for recognition of revenue over time, we recognize revenue at the point in time when control of the
good or service is transferred to the customer. Determining a measure of progress towards the satisfaction of performance
obligations requires management to make judgments that may affect the timing of revenue recognition.
Many of our contracts recognize revenue under a contract cost-based input method and require an Estimate-at-Completion
(EAC) process, which management uses to review and monitor the progress towards the completion of our performance
obligations. Under this process, management considers various inputs and assumptions related to the EAC, including, but not
limited to, progress towards completion, labor costs and productivity, material and subcontractor costs, and identified risks.
Estimating the total cost at completion of performance obligations is subjective and requires management to make assumptions
about future activity and cost drivers under the contract. Changes in these estimates can occur for a variety of reasons and, if
significant, may impact the profitability of our contracts. Changes in estimates related to contracts accounted for under the EAC
process are recognized in the period when such changes are made on a cumulative catch-up basis. If the estimate of contract
profitability indicates an anticipated loss on a contract, we recognize the total loss at the time it is identified. For fiscal 2022,
2021, and 2020, the aggregate impact of adjustments in contract estimates was not material.
Remaining performance obligations represent the transaction price of exercised contracts for which work has not yet been
performed, irrespective of whether funding has or has not been authorized and appropriated as of the date of exercise.
Remaining performance obligations do not include negotiated but unexercised options or the unfunded value of expired
contracts.
57
Business Combinations
The accounting for the Company's business combinations consists of allocating the purchase price to tangible and
intangible assets acquired and liabilities assumed based on their fair values, with the excess recorded as goodwill. Certain fair
value measurements include inputs that are unobservable, requiring management to make judgments and estimates that can be
affected by contract performance and other factors that may cause final amounts to differ materially from original estimates. We
have up to one year from the acquisition date to use additional information obtained to adjust the fair value of the acquired
assets and liabilities which may result in changes to the recorded values with an offsetting adjustment to goodwill.
Goodwill and Intangible Assets Impairment
We test goodwill and trade name for impairment at least annually as of January 1 of each year and more frequently if
interim indicators of impairment exist. We perform our impairment testing of goodwill at the reporting level. As our business is
highly integrated and all of our components have similar economic characteristics, we conclude that we have one reporting unit
at the consolidated entity level, which is the same as our single operating segment. We test goodwill for impairment using the
quantitative method (primarily based on market capitalization). We test the trade name for impairment using the relief from
royalty method that requires management to make significant amount of judgments and estimates in the valuation. We do not
consider goodwill, trade name, or any other amortizable intangible assets at risk of impairment. A 10% change in our enterprise
value would not result in a goodwill or trade name impairment.
Amortizable intangible assets are tested for impairment when an event occurs or circumstances change indicating that the
carrying amount of the asset may not be recoverable. A significant amount of management judgment is required to determine if
an event representing an impairment indicator has occurred during the year, including but not limited to: a decline in forecasted
cash flows; a sustained, material decline in the stock price and market capitalization; a significant adverse change in the
business climate or economy; or unanticipated competition. An adverse change in any of these factors could have a significant
impact on the recoverability of other intangible assets.
During the fiscal years ended March 31, 2022, March 31, 2021, and March 31, 2020, the Company did not record any
impairment of goodwill and intangible assets.
Accounting for Income Taxes
Provisions for federal, state, and foreign income taxes are calculated from the income reported on our consolidated
financial statements based on current tax law and also include the cumulative effect of any changes in tax rates from those
previously used in determining deferred tax assets and liabilities. Such provisions differ from the amounts currently receivable
or payable because certain items of income and expense are recognized in different time periods for purposes of preparing
consolidated financial statements than for income tax purposes.
Significant judgment is required in determining income tax provisions and evaluating tax positions. We establish reserves
for uncertain tax positions when, despite the belief that our tax positions are supportable, there remains uncertainty in a tax
position taken in our previously filed income tax returns. For tax positions where it is more likely than not that a tax benefit will
be sustained, we record the largest amount of tax benefit with a greater than 50% likelihood of being realized upon settlement
with a taxing authority that has full knowledge of all relevant information. To the extent we prevail in matters for which
accruals have been established or are required to pay amounts in excess of reserves, our effective tax rate in a given
consolidated financial statement period may be materially impacted.
The carrying value of our net deferred tax assets assumes that we will be able to generate sufficient future taxable income
in certain tax jurisdictions to realize the value of these assets. If we are unable to generate sufficient future taxable income in
these jurisdictions, a valuation allowance is recorded when it is more likely than not that the value of the deferred tax assets is
not realizable.
Recent Accounting Pronouncements
See Note 2 to our accompanying audited consolidated financial statements for information related to our adoption of new
accounting standards and for information on our anticipated adoption of recently issued accounting standards.
Segment Reporting
We report operating results and financial data in one operating and reportable segment. We manage our business as a
single profit center in order to promote collaboration, provide comprehensive functional service offerings across our entire
client base, and provide incentives to employees based on the success of the organization as a whole. Although certain
information regarding served markets and functional capabilities is discussed for purposes of promoting an understanding of
our complex business, we manage our business and allocate resources at the consolidated level of a single operating segment.
58
Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned
subsidiaries, and have been prepared in accordance with GAAP, and the rules and regulations of the U.S. Securities and
Exchange Commission, or SEC. All intercompany balances and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements and notes of the Company include its subsidiaries, and the joint
ventures and partnerships over which the Company has a controlling financial interest. The Company uses the equity method to
account for investments in entities that it does not control if it is otherwise able to exert significant influence over the entities'
operating and financial policies.
The Company’s fiscal year ends on March 31 and unless otherwise noted, references to fiscal year or fiscal are for fiscal
years ended March 31. The accompanying consolidated financial statements present the financial position of the Company as of
March 31, 2022 and 2021 and the Company’s results of operations for fiscal 2022, fiscal 2021, and fiscal 2020.
Certain amounts reported in the Company's prior year consolidated financial statements have been reclassified to conform
to the current year presentation.
Results of Operations
The following table sets forth items from our consolidated statements of operations for the periods indicated:
Fiscal Year Ended March 31,
2022
2021
2020
Fiscal 2022
Versus
Fiscal 2021
Fiscal 2021
Versus
Fiscal 2020
(In thousands)
$
8,363,700 $
7,858,938 $
7,463,841
6.4 %
3,899,622
2,474,163
1,158,987
145,747
7,678,519
685,181
(92,352)
11,214
604,043
137,466
3,657,530
2,325,888
1,036,834
84,315
3,379,180
2,298,413
1,035,965
81,081
7,104,567
6,794,639
754,371
(81,270)
(10,662)
662,439
53,481
669,202
(96,960)
7,192
579,434
96,831
482,603
—
$
$
$
466,577 $
608,958 $
(163) $
— $
466,740 $
608,958 $
482,603
6.6 %
6.4 %
11.8 %
72.9 %
8.1 %
(9.2) %
13.6 %
NM
(8.8) %
157.0 %
(23.4) %
NM
(23.4) %
5.3 %
8.2 %
1.2 %
0.1 %
4.0 %
4.6 %
12.7 %
(16.2) %
NM
14.3 %
(44.8) %
26.2 %
NM
26.2 %
Revenue
Operating costs and expenses:
Cost of revenue
Billable expenses
General and administrative expenses
Depreciation and amortization
Total operating costs and expenses
Operating income
Interest expense
Other income (expense), net
Income before income taxes
Income tax expense
Net income
Net loss attributable to non-controlling interest
Net income attributable to common stockholders
NM - Not meaningful
Fiscal 2022 Compared to Fiscal 2021
Revenue
Revenue increased to $8,363.7 million from $7,858.9 million, or a 6.4% increase, primarily driven by the impact of
acquisitions during fiscal 2022 of approximately $340.1 million and strong demand, partially offset by reduced staff utilization.
Cost of Revenue
Cost of revenue increased to $3,899.6 million from $3,657.5 million, or a 6.6% increase, and remained relatively flat as a
percentage of revenue at 46.6% and 46.5% for fiscal 2022 and 2021, respectively. This increase was primarily due to an
increase in salaries and salary-related benefits of $251.8 million, driven by an increase in headcount (including the impact of
acquisitions) and annual base salary increases, as well as increases in other direct costs of $29.3 million.
Billable Expenses
Billable expenses increased to $2,474.2 million from $2,325.9 million, or a 6.4% increase, and remained flat as a
percentage of revenue at 29.6%. This increase was primarily attributable to an increase in the use of subcontractors driven by
59
client demand and timing of client needs as well as increases in expenses from contracts that require the Company to incur other
direct expenses and travel on behalf of clients as compared to the prior year.
General and Administrative Expenses
General and administrative expenses increased to $1,159.0 million from $1,036.8 million, or an 11.8% increase and
increased as a percentage of revenue to 13.9% from 13.2%. General and administrative expenses were impacted by
approximately $95.5 million of acquisition costs primarily associated with our acquisitions of Liberty and Tracepoint incurred
during fiscal 2022. In addition, salaries and salary related benefits increased $34.7 million, driven by an increase in headcount
and annual base salary increases.
Depreciation and Amortization
Depreciation and amortization expense increased to $145.7 million from $84.3 million, or a 72.9% increase, primarily
due to increases in intangible amortization related to the acquisitions in fiscal 2022, and depreciation expense resulting from the
implementation of our new financial management systems on April 1, 2021.
Interest Expense
Interest expense increased to $92.4 million from $81.3 million, or a 13.6% increase, primarily due to increased expense
related to the issuance of the Senior Notes due 2029 in fiscal 2022 and the Senior Notes due 2028 in fiscal 2021.
Other (Income) Expense, net
Other (income) expense, net increased to an $11.2 million net other income from $10.7 million of net other expense
primarily due to the following:
•
•
•
A net gain of $7.1 million recognized from a transaction in the third quarter of fiscal 2022 in which the Company
transferred all assets related to SnapAttack™ to a new cyber threat hunting and detection company and disposed of the
controlling interest to an unrelated third party and retained an equity method investment;
A $5.7 million gain from the Company’s remeasurement of its previously held equity method investment in Tracepoint
in the second quarter of fiscal 2022; and
A $13.2 million loss on debt extinguishment resulting from the redemption of Booz Allen Hamilton Inc.'s 5.125%
Senior Notes due 2025 (the "2017 Senior Notes") recognized in the second quarter of fiscal 2021, not present in the
current year.
Income Tax Expense
Income tax expense increased to $137.5 million from $53.5 million. The effective tax rate increased to 22.8% in fiscal
2022 from 8.1% in fiscal 2021. The increase was primarily due to a $76.8 million income tax benefit recognized in the fourth
quarter of fiscal 2021 related to the re-measurement of net operating losses that were carried back to fiscal 2016 and subsequent
years.
Liquidity and Capital Resources
As of March 31, 2022, our total liquidity was $1.7 billion, consisting of $695.9 million of cash and cash equivalents and
$999.0 million available under the Revolving Credit Facility. To date, COVID-19 has not had a significant impact on our
liquidity, cash flows or capital resources. However, COVID-19 has led to disruption and volatility in the global capital markets,
which, depending on future developments, could impact our capital resources and liquidity in the future. In the opinion of
management, we will be able to meet our liquidity and cash needs through a combination of cash flows from operating
activities, available cash balances, and available borrowing under the Revolving Credit Facility. If these resources need to be
augmented, additional cash requirements would likely be financed through the issuance of debt or equity securities.
60
The following table presents selected financial information for the periods presented:
Cash and cash equivalents
Total debt
Net cash provided by operating activities
Net cash (used in) investing activities
Net cash (used in) provided by financing activities
Total (decrease) increase in cash and cash equivalents
Fiscal Year Ended
March 31,
2022
2021
2020
(In thousands)
695,910 $
2,800,072 $
990,955 $
2,356,596 $
741,901
2,185,844
736,526 $
(867,725)
(163,846)
(295,045) $
718,684 $
(158,284)
(311,346)
249,054 $
551,428
(128,079)
34,562
457,911
$
$
$
$
From time to time we evaluate alternative uses for excess cash resources once our operating cash flow and required debt
servicing needs have been met. Some of the possible uses of our remaining excess cash at any point in time may include
funding strategic acquisitions, further investment in our business, and returning value to shareholders through share
repurchases, quarterly dividends, and special dividends. While the timing and financial magnitude of these possible actions are
currently indeterminable, the Company expects to be able to manage and adjust its capital structure in the future to meet its
liquidity needs.
Historically, we have been able to generate sufficient cash to fund our operations, mandatory debt and interest payments,
capital expenditures, and discretionary funding needs. However, due to fluctuations in cash flows, including as a result of the
trends and developments described above under "—Factors and Trends Affecting Our Results of Operations" relating to U.S.
government shutdowns, U.S. government cost-cutting, reductions or delays in the U.S. government appropriations and spending
process and other budgetary matters, it may be necessary from time-to-time in the future to borrow under our Secured Credit
Facility to meet cash demands. While the timing and financial magnitude of these possible actions are currently indeterminable,
we expect to be able to manage and adjust our capital structure to meet our liquidity needs. Our expected liquidity and capital
structure may also be impacted by discretionary investments and acquisitions that we could pursue. We anticipate that cash
provided by operating activities, existing cash and cash equivalents, and borrowing capacity under our Revolving Credit
Facility will be sufficient to meet our anticipated cash requirements for the next twelve months, which primarily include:
•
•
•
•
•
•
•
operating expenses, including salaries;
working capital requirements to fund both organic and inorganic growth of our business;
capital expenditures which primarily relate to the purchase of computers, business systems, furniture and
leasehold improvements to support our operations;
the on-going maintenance around all financial management systems;
commitments and other discretionary investments;
debt service requirements for borrowings under our Secured Credit Facility and interest payments for the
Senior Notes; and
cash taxes to be paid.
Our ability to fund our operating needs depends, in part, on our ability to continue to generate positive cash flows from
operations or, if necessary, raise cash in the capital markets. In addition, from time to time we evaluate conditions to
opportunistically access the financing markets to secure additional debt capital resources and improve the terms of our
indebtedness.
In the fourth quarter of fiscal 2022, the Company announced that it had entered into a definitive agreement to acquire
EverWatch Corp., a leading provider of advanced solutions to the defense and intelligence communities for approximately
$440.0 million, subject to customary adjustments. The Company expects to fund the acquisition with cash on hand. The
transaction is expected to close in fiscal 2023.
61
Cash Flows
Cash received from clients, either from the payment of invoices for work performed or for advances in excess of costs
incurred, is our primary source of cash. We generally do not begin work on contracts until funding is appropriated by the client.
Billing timetables and payment terms on our contracts vary based on a number of factors, including whether the contract type is
cost-reimbursable, time-and-materials, or fixed-price. We generally bill and collect cash more frequently under cost-
reimbursable and time-and-materials contracts, as we are authorized to bill as the costs are incurred or work is performed. In
contrast, we may be limited to bill certain fixed-price contracts only when specified milestones, including deliveries, are
achieved. In addition, a number of our contracts may provide for performance-based payments, which allow us to bill and
collect cash prior to completing the work.
Accounts receivable is the principal component of our working capital and is generally driven by revenue growth with
other short-term fluctuations related to the payment practices of our clients. Our accounts receivable reflects amounts billed to
our clients as of each balance sheet date. Our clients generally pay our invoices within 30 days of the invoice date, although we
experience a longer billing and collection cycle with our global commercial customers. At any month-end, we also include in
accounts receivable the revenue that was recognized in the preceding month, which is generally billed early in the following
month. Finally, we include in accounts receivable amounts related to revenue accrued in excess of amounts billed, primarily on
our fixed-price and cost-reimbursable-plus-award-fee contracts. The total amount of our accounts receivable can vary
significantly over time, but is generally sensitive to revenue levels and customer mix.
Operating Cash Flow
Net cash provided by operations is primarily affected by the overall profitability of our contracts, our ability to invoice
and collect cash from clients in a timely manner, our ability to manage our vendor payments, and the timing of cash paid for
income taxes. Continued uncertainty in global economic conditions may also affect our business as customers and suppliers
may decide to downsize, defer, or cancel contracts, which could negatively affect the operating cash flows. Net cash provided
by operations was $736.5 million in fiscal 2022 compared to $718.7 million in fiscal 2021, or a 2.5% increase. The increase in
operating cash flow over the prior year was primarily driven by strong working capital management, partially offset by
approximately $97.5 million of acquisition costs incurred and paid during fiscal 2022, primarily associated with our
acquisitions of Liberty and Tracepoint.
Effective fiscal 2023, the Tax Cuts and Jobs Act of 2017 requires the capitalization of research and development costs for
tax purposes, which can then be amortized over five years and 15 years for domestic and foreign costs, respectively. Congress
has proposed tax legislation to delay the effective date of this change to 2026, but it is uncertain whether the proposed delay
will ultimately be enacted into law. Based upon the analysis performed to date and our interpretation of the legislation, the
Company estimates that we will incur approximately $150.0 million in cash taxes in fiscal 2023 if the current effective date
remains in place, but our deferred tax liability would be offset by a corresponding amount.
Investing Cash Flow
Net cash used in investing activities was $867.7 million in fiscal 2022 compared to $158.3 million in the prior year. The
increase in net cash used in investing activities was primarily due to the Company's acquisitions of Liberty and Tracepoint,
partially offset by the initial 40% minority investment in Tracepoint of $74.2 million in the prior year.
Financing Cash Flow
Net cash used in financing activities was $163.8 million in fiscal 2022 compared to $311.3 million in the prior year, or a
47.4% decrease. The decrease in net cash used in financing activities was primarily due to the following:
•
•
•
•
An increase of $152.2 million in net proceeds from the issuance of bonds in fiscal 2022 (Senior Notes due 2029) as
compared to fiscal 2021 (Senior Notes due 2028);
A decrease of $25.6 million in payments on the Company's Term Loans;
A $100.0 million net repayment on the Revolving Credit Facility paid in the prior year;
The above was partially offset by an increase in share repurchases of $105.5 million and an increase in dividends paid
of $28.0 million as compared to the prior year.
Dividends and Share Repurchases
The Company paid $1.54 in dividends per share to shareholders of record in fiscal 2022. On May 20, 2022, the Company
announced a regular quarterly cash dividend in the amount of $0.43 per share. The quarterly dividend is payable on June 30,
2022 to stockholders of record on June 15, 2022.
62
The following table summarizes the cash distributions recognized in the consolidated statement of cash flows:
Recurring dividends (1)
Fiscal Year Ended
March 31,
2022
2021
2020
(In thousands)
$ 209,057 $ 181,066 $ 146,602
(1) Amounts represent recurring dividends that were declared and paid for during each quarter of fiscal 2022, 2021, and 2020,
respectively.
On December 12, 2011, the Board of Directors approved a share repurchase program, which was most recently increased
to $2,160.0 million in January 26, 2022. The Company may repurchase shares pursuant to the program by means of open
market repurchases, directly negotiated repurchases or through agents acting pursuant to negotiated repurchase agreements.
During fiscal 2022 and 2021, the Company purchased 4.7 million and 3.8 million shares of the Company’s Class A Common
Stock, respectively, for an aggregate of $389.9 million and $293.4 million, respectively. As of March 31, 2022, the Company
had approximately $651.6 million remaining under the repurchase program.
Any determination to pursue one or more of the above alternative uses for excess cash is subject to the discretion of our
Board of Directors, and will depend upon various factors, including our results of operations, financial condition, liquidity
requirements, restrictions that may be imposed by applicable law, our contracts, and our Credit Agreement, as amended, and
other factors deemed relevant by our Board of Directors.
Indebtedness
Our debt totaled $2.8 billion and $2.4 billion as of March 31, 2022 and 2021, respectively. Our debt bears interest at
specified rates (see Note 10 to our consolidated financial statements).
On June 24, 2021, Booz Allen Hamilton Inc. ("Booz Allen Hamilton"), Booz Allen Hamilton Investor Corporation
("Investor"), and certain wholly-owned subsidiaries of Booz Allen Hamilton, entered into the eighth amendment (the "Eighth
Amendment") to the Credit Agreement dated as of July 31, 2012, as amended (the "Existing Credit Agreement" and, as
amended, the "Credit Agreement"), with certain institutional lenders and Bank of America, N.A., as Administrative Agent and
Collateral Agent. The Eighth Amendment added an additional tier in the pricing grid and extended the maturity applicable to
both the Term Loan A ("Term Loan A") and revolving credit facility (the "Revolving Credit Facility") to June 24, 2026,
increased the aggregate principal amount of the Revolving Credit Facility and the letter of credit sublimit thereunder, and made
certain other amendments to the financial covenants and other terms under the Existing Credit Agreement. The interest rate and
maturity date applicable to Term Loan B ("Term Loan B" and, together with Term Loan A, the "Term Loans") remained
unchanged.
Prior to the Eighth Amendment, approximately $1,289.8 million was outstanding under Term Loan A (the "Existing
Tranche A Term Loans"). Pursuant to the Eighth Amendment, certain lenders under the Existing Credit Agreement converted
their Existing Tranche A Term Loans into a new tranche of tranche A term loans (the “New Refinancing Tranche A Term
Loans”) in an aggregate amount, along with the New Refinancing Tranche A Term Loans advanced by certain new lenders, of
approximately $1,289.8 million. The proceeds from the new lenders were used to prepay in full all of the Existing Tranche A
Term Loans that were not converted into the New Refinancing Tranche A Term Loans. Voluntary prepayments of the New
Refinancing Tranche A Term Loans are permitted at any time, in minimum principal amounts, without premium or penalty. The
other terms of the New Refinancing Tranche A Term Loans are generally the same as the Existing Tranche A Term Loans prior
to the Eighth Amendment.
Prior to the Eighth Amendment, approximately $500.0 million of revolving commitments (the “Existing Revolving
Commitments”) were available under the Existing Credit Agreement, with a sublimit for letters of credit of $100.0 million.
Pursuant to the Eighth Amendment, certain lenders under the Existing Credit Agreement converted their Existing Revolving
Commitments into a new tranche of revolving commitments (the “New Revolving Commitments” and the revolving credit
loans made thereunder, the “New Revolving Loans”) in an aggregate amount, along with the New Revolving Commitments of
certain new lenders, of $1,000 million, with a sublimit for letters of credit of $200.0 million.
As of March 31, 2022, the Credit Agreement provided Booz Allen Hamilton with a $1,241.4 million Term Loan A, a
$380.3 million Term Loan B, and $1,000 million Revolving Credit Facility with a sub-limit for letters of credit of $200.0
million (collectively, the "Secured Credit Facility"). As of March 31, 2022, the maturity date of Term Loan A and the
termination date for the Revolving Credit Facility was June 24, 2026 and the maturity date of Term Loan B was November 26,
2026. Booz Allen Hamilton’s obligations and the guarantors’ guarantees under the Credit Agreement are secured by a first
priority lien on substantially all of the assets (including capital stock of subsidiaries) of Booz Allen Hamilton, Investor and the
subsidiary guarantors, subject to certain exceptions set forth in the Credit Agreement and related documentation. Subject to
specified conditions, without the consent of the then-existing lenders (but subject to the receipt of commitments), the Term
63
Loans or the Revolving Credit Facility may be expanded (or a new term loan facility or revolving credit facility added to the
existing facilities) by up to (i) the greater of (x) $909 million and (y) 100% of consolidated EBITDA of Booz Allen Hamilton,
as of the end of the most recently ended four quarter period for which financial statements have been delivered pursuant to the
Credit Agreement plus (ii) the aggregate principal amount under which pro forma consolidated net secured leverage remains
less than or equal to 3.50:1.00.
At Booz Allen Hamilton's option, borrowings under the Secured Credit Facility bear interest based either on LIBOR
(adjusted for maximum reserves, and subject to a floor of zero) for the applicable interest period or, a base rate equal to the
highest of (x) the administrative agent’s prime corporate rate, (y) the overnight federal funds rate plus 0.50% and (z) three-
month LIBOR (adjusted for maximum reserves, and subject to a floor of zero) plus 1.00%), in each case plus an applicable
margin, payable at the end of the applicable interest period and in any event at least quarterly. The applicable margin for Term
Loan A and borrowings under the Revolving Credit Facility ranges from 1.13% to 2.00% for LIBOR loans and 0.13% to 1.00%
for base rate loans, in each case based on Booz Allen Hamilton’s consolidated total net leverage ratio. The applicable margin
for Term Loan B is 1.75% for LIBOR loans and 0.75% for base rate loans. Unused commitments under the Revolving Credit
Facility are subject to a quarterly fee ranging from 0.18% to 0.35% based on Booz Allen Hamilton’s consolidated total net
leverage ratio.
Booz Allen Hamilton occasionally borrows under the Revolving Credit Facility in anticipation of cash demands. During
fiscal 2022, Booz Allen Hamilton accessed no amounts of its $500.0 million Revolving Credit Facility. During fiscal 2021,
Booz Allen Hamilton accessed a total of $100.0 million of its $500.0 million Revolving Credit Facility. As of March 31, 2022,
there was no outstanding balance on the Revolving Credit Facility. As of March 31, 2021,$100.0 million was outstanding on
the Revolving Credit Facility, which was repaid in June 2021.
The Credit Agreement requires quarterly principal payments of 1.25% of the stated principal amount of Term Loan A
until maturity, and quarterly principal payments of 0.25% of the stated principal amount of Term Loan B until maturity.
Booz Allen Hamilton also has agreed to pay customary letter of credit and agency fees. As of March 31, 2022 and 2021,
Booz Allen Hamilton was contingently liable under open standby letters of credit and bank guarantees issued by its banks in
favor of third parties that totaled $8.4 million and $9.8 million, respectively. These letters of credit and bank guarantees
primarily support insurance and bid and performance obligations. For both March 31, 2022 and 2021, approximately $1.0
million, of these instruments reduced our available borrowings under the Revolving Credit Facility. The remainder is
guaranteed under a separate $20.0 million facility, of which $12.6 million and $11.1 million, respectively, was available to
Booz Allen Hamilton at March 31, 2022 and 2021. As of March 31, 2022, we had $999.0 million of capacity available for
additional borrowings under the Revolving Credit Facility.
The Credit Agreement contains customary representations and warranties and customary affirmative and negative
covenants. The negative covenants include limitations on the following, in each case subject to certain exceptions:
(i) indebtedness and liens; (ii) mergers, consolidations or amalgamations, liquidations, wind-ups or dissolutions, and disposition
of all or substantially all assets; (iii) dispositions of property; (iv) restricted payments; (v) investments; (vi) transactions with
affiliates; (vii) change in fiscal periods; (viii) negative pledges; (ix) restrictive agreements; (x) line of business; and
(xi) speculative hedging. The events of default include the following, in each case subject to certain exceptions: (a) failure to
make required payments under the Secured Credit Facility; (b) material breaches of representations or warranties under the
Secured Credit Facility; (c) failure to observe covenants or agreements under the Secured Credit Facility; (d) failure to pay or
default under certain other material indebtedness; (e) bankruptcy or insolvency; (f) certain Employee Retirement Income
Security Act, or ERISA, events; (g) certain material judgments; (h) actual or asserted invalidity of the Guarantee and Collateral
Agreements or the other security documents or failure of the guarantees or perfected liens thereunder; and (i) a change of
control. In addition, we are required to meet certain financial covenants at each quarter end, namely Consolidated Net Total
Leverage and Consolidated Net Interest Coverage Ratios. As of March 31, 2022, we were compliant with these covenants.
During fiscal 2022, interest payments of $19.6 million and $7.2 million were made for the Term Loan A and Term Loan
B facilities, respectively. During fiscal 2021, interest payments of $23.6 million and $7.8 million were made for the Term Loan
A and Term Loan B facilities, respectively.
The total outstanding debt balance is recorded in the accompanying consolidated balance sheets net of unamortized
discount and debt issuance costs of $21.6 million and $17.4 million as of March 31, 2022 and 2021, respectively.
On August 24, 2020, Booz Allen Hamilton issued $700 million aggregate principal amount of its Senior Notes under
an Indenture, dated as of August 24, 2020, among Booz Allen Hamilton, certain subsidiaries of Booz Allen Hamilton, as
guarantors (the “Subsidiary Guarantors”), and Wilmington Trust, National Association as trustee (the “Trustee”), as
supplemented by the First Supplemental Indenture, dated as of August 24, 2020, among Booz Allen Hamilton, the Subsidiary
Guarantors and the Trustee. A portion of the net proceeds from the sale of the Senior Notes was used to redeem in full
$350 million aggregate principal amount of the outstanding 2017 Senior Notes at a redemption price of 102.56% of the
principal amount thereof, plus accrued and unpaid interest thereon to (but excluding) the redemption date, and to pay all fees
64
and expenses related to the foregoing. Booz Allen Hamilton intends to use the remaining net proceeds from the sale of the
Senior Notes for working capital and other general corporate purposes (see Note 10 in our consolidated financial statements).
For fiscal 2022 and 2021, total interest payments of $37.9 million and $28.7 million were made for the Senior Notes,
respectively.
Borrowings under the Term Loans and, if used, the Revolving Credit Facility, incur interest at a variable rate. In
accordance with our risk management strategy between April 6, 2017 and April 4, 2019, Booz Allen Hamilton executed a series
of interest rate swaps. As of March 31, 2022, we had interest rate swaps with an aggregate notional amount of $700.0 million.
These instruments hedge the variability of cash outflows for interest payments on the floating portion of our debt. The
Company's objectives in using cash flow hedges are to reduce volatility due to interest rate movements and to add stability to
interest expense (see Note 11 in our consolidated financial statements).
Capital Structure and Resources
Our stockholders’ equity amounted to $1,046.7 million as of March 31, 2022, a decrease of $25.1 million compared to
stockholders’ equity of $1,071.2 million as of March 31, 2021. The decrease was primarily due to $419.3 million in treasury
stock resulting from the repurchase of shares of our Class A Common Stock and $209.2 million in aggregate quarterly dividend
payments in fiscal 2022, partially offset by net income of $466.6 million in fiscal 2022 and stock-based compensation expense
of $69.8 million.
Capital Expenditures
Since we do not own any of our facilities, our capital expenditure requirements primarily relate to the purchase of
computers, management systems, furniture, and leasehold improvements to support our operations. Direct facility and
equipment costs billed to clients are not treated as capital expenses. Our capital expenditures for fiscal 2022 and 2021 were
$80.0 million and $87.2 million, respectively. The decrease in capital expenditures was primarily driven by lower spend related
to the implementation of our new financial management system on April 1, 2021 as compared to the prior year period, as well
as lower facilities expenses reflecting the investment in technology and tools needed to support the virtual work environment.
Commitments and Contingencies
We are subject to a number of reviews, investigations, claims, lawsuits, and other uncertainties related to our business. For
a discussion of these items, refer to Note 20 to our consolidated financial statements.
65
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Market risk is the potential loss arising from adverse changes in market rates and market prices such as those related to
interest rates. Due to the wide-ranging adverse impacts on global financial markets and the current economic crisis caused by
COVID-19, we may be exposed to greater interest rate volatility and market risk in the near future. We actively monitor these
exposures and manage such risks through our regular financing activities and through the use of derivative financial
instruments.
Our exposure to market risk for changes in interest rates relates primarily to our outstanding debt, cash equivalents, which
consist primarily of funds invested in U.S. government money-market funds, our cash flow hedges and our Rabbi trust.
Our exposure to market risk for changes in interest rates related to our outstanding debt will impact our Secured Credit
Facility. The interest expense associated with our term loans and any loans under our Revolving Credit Facility will vary with
market rates. A hypothetical interest rate increase of 25 basis points would have increased interest expense related to the term
facilities under our Secured Credit Facility by approximately $4.8 million in fiscal 2022 and $2.9 million in fiscal 2021, and
likewise decreased our income and cash flows. The year over year increase in interest expense was primarily due to the June
2021 issuance of the Senior Notes due 2029.
As of March 31, 2022 and 2021, we had $695.9 million and $991.0 million, respectively, in cash and cash equivalents.
Due to a near zero interest rate environment over the last 12 months, the interest income returns on our cash and cash
equivalents balances were nominal on a comparative basis. As of March 31, 2022 and 2021 the interest income on balance sheet
cash was less than 1%. Therefore, the corresponding impact to our interest income, and likewise to our income and cash flow,
was not material.
Pursuant to our interest rate risk management strategies, we use interest rate cash flow hedges to add stability to our
incurrence of interest rate expense and to manage our exposure to related interest rate movement. See Note 11 to our
consolidated financial statements for further discussion. As of March 31, 2022, we had interest rate swaps with an aggregate
notional amount of $700.0 million. These derivative instruments hedge the variability of cash outflows for interest payments on
our variable rate debt and are recorded at fair value on our consolidated balance sheet. As of March 31, 2022, a 25 basis point
increase in interest rates would increase the fair value of our interest rate swaps by approximately $3.0 million and a 25 basis
point decrease in interest rates would decrease the fair value of our interest rate swaps by approximately $3.0 million.
During fiscal 2019, we established a Rabbi trust to provide for the payment of benefits under our non-qualified deferred
compensation plan. As of March 31, 2022, fund assets totaled $16.5 million which include mutual fund investments that are
subject to fluctuations in market prices and interest rates. Cash distributions made to plan participants are recognized as
operating cash flows in the consolidated statement of cash flows and have the effect of lowering both fund assets and the
corresponding fund liabilities on a one-for-one basis. Changes in fair value on fund liabilities offset the changes in fair value of
fund assets, and changes in fair value on both fund assets and fund liabilities are recognized in earnings on our consolidated
statements of operations. See Note 18 to our consolidated financial statements for further discussion.
66
Item 8. Financial Statements and Supplementary Data
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID#00042)
Consolidated Balance Sheets as of March 31, 2022 and 2021
Consolidated Statements of Operations for the Fiscal Years Ended March 31, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Income for the Fiscal Years Ended March 31, 2022, 2021 and 2020
Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 2022, 2021 and 2020
Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended March 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
Page
2
6
7
8
9
10
11
F-1
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
Booz Allen Hamilton Holding Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Booz Allen Hamilton Holding Corporation (the Company)
as of March 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders' equity
and cash flows for each of the three years in the period ended March 31, 2022, and the related notes (collectively referred to as
the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company at March 31, 2022 and 2021, and the results of its operations and its cash flows
for each of the three years in the period ended March 31, 2022, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of March 31, 2022, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated May 20, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
F-2
Description of
the Matter
Revenue recognition related to the cost-based input method and variable consideration
As described in Notes 2 and 3 to the consolidated financial statements, the Company generally
recognizes revenue over time as services are provided, as most of its contracts involve a
continuous transfer of control to the customer. For certain of these contracts, revenue is
recognized under a cost-based input method that requires an estimate of total costs at completion
of the performance obligation, and certain contracts include variable consideration (e.g., award or
incentive fees) that require estimates of the amounts that are probable. Estimates of costs at
completion and variable consideration are highly subjective to develop and can change over the
contract performance period for a variety of reasons and, if significant, these changes could have a
material effect on the Company’s results of operations.
Auditing revenue recognition based on the cost-based input method involved subjective auditor
judgment because the Company’s estimates include costs at completion. The estimates of costs at
completion are based on management’s assessment of the stage of completion of the performance
obligations and the time and materials necessary to fulfill its performance obligations under the
contracts. Auditing variable consideration involved subjective auditor judgement because the
Company’s estimates include an expectation of award and incentive fees. The estimates of
variable consideration for a contract are based on, among other things, the Company’s historical
experience earning award or incentive fees on that contract or other similar contracts.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of
controls over revenue recognition under the cost-based input method and for variable
consideration. For example, we tested controls over the determination of significant assumptions
regarding the estimation of costs to be incurred for the performance obligations, controls
evaluating the appropriateness of changes in estimated future costs, and controls over estimating
the portion of award or incentive fees probable to be earned.
Description of
the Matter
To test the recognition of revenue under the cost-based input method, our audit procedures
included among others, reviewing management’s projected costs for consistency with contract
terms, obtaining an understanding of the stage of completion through review of customer
correspondence, evidence of stage of completion including discussion with program teams, and
comparing actual results to prior management estimates. To test the estimates of the portion of
award or incentive fees probable to be earned, our audit procedures included among others,
agreeing data from the Company’s calculation to contract documentation supporting fees
previously awarded for a contract or other similar contracts, inspecting customer correspondence
and considering the sensitivity of the estimates based on the range of historical experience earning
award or incentive fees.
Government Contracting Matters - Provision for Claimed Indirect Costs
As discussed in Note 20 to the consolidated financial statements, in the ordinary course of
business, agencies of the U.S. government, including the Defense Contract Audit Agency
(DCAA), routinely audit the Company’s indirect costs and business practices for compliance with
the Cost Accounting Standards and the Federal Acquisition Regulation. Such audits may result in,
and have historically resulted in, the Company’s inability to retain certain claimed indirect costs,
including executive and employee compensation, due to differing views of the allowability and
reasonableness of such costs. As of March 31, 2022, years subsequent to the Company’s fiscal
year 2011 remained subject to audit and final resolution. The Company recognized a liability of
$290.4 million for estimated adjustments to claimed indirect costs based on its historical DCAA
audit results, including the final resolution of such audits with the Defense Contract Management
Agency (DCMA) (the provision for claimed indirect costs).
Auditing the provision for claimed indirect costs was complex due to the inherently judgmental
nature of management’s estimate of adjustments to claimed indirect costs based on the number of
years that remain open to audit and expected final resolution by agencies of the U.S. government.
Significant changes in management’s estimate could have a material effect on the Company’s
results of operations.
F-3
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of
controls over the Company’s determination of its provision for claimed indirect costs. For
example, we tested controls over the application of the available historical information from
resolution of audits and communications from agencies of the U.S. government utilized in the
determination of the estimate. We also tested management’s controls over the completeness and
accuracy of the data used.
Description of
the Matter
To test the provision for claimed indirect costs, we performed audit procedures that included,
among others, testing the clerical accuracy of the estimates and the completeness and accuracy of
the data utilized in determining the provision. We inspected communications with the DCAA or
DCMA including prior audit reports and final resolutions. We also engaged our government
contracting specialists to assist in identifying trends and recent experience in DCAA audits to
evaluate the data the Company used to estimate the provision for claimed indirect costs.
Unrecognized Tax Benefits
As discussed in Notes 2 and 13 to the consolidated financial statements, the Company is subject to
federal, state and foreign taxation in various jurisdictions. The Company reserves for uncertain tax
positions related to unrecognized income tax benefits where it is not more likely than not that the
Company’s tax position will be sustained. As of March 31, 2022, the Company has recorded
$79.9 million of reserves for uncertain tax positions. These reserves involve considerable
judgment and estimation and are evaluated by management based on available information.
Auditing the unrecognized tax benefits was complex due to the significant judgment in applying
the tax law and inherent uncertainty involved in predicting the ultimate resolution of the matter
with the taxing authority.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of
controls over the Company’s accounting for uncertain tax positions. For example, we tested
controls over management’s review of the application of the tax law and the analysis performed to
determine the unrecognized tax benefits. We also tested management’s controls over the
completeness and accuracy of the data used in the calculation of the liabilities recorded.
To test the unrecognized tax benefits, we performed audit procedures that included, among others,
understanding the application of the tax law and rationale used by management and evaluating
whether the uncertain tax position met the “more likely than not” recognition threshold. For
example, we verified our understanding of the relevant facts by reading the Company's analysis of
the application of the tax law. We involved our tax subject matter resources in the assessment of
the technical merits of the Company’s tax positions, considering the applicable tax laws, and the
methodology applied. We assessed the mathematical accuracy of management’s calculations,
reviewed contracts and other source documents and performed sensitivity analyses related to
management’s estimate.
Valuation of acquired intangible assets
Description of
the Matter
As discussed in Note 5 to the consolidated financial statements, the Company acquired Liberty IT
Solutions and Tracepoint Holdings on June 11, 2021 and September 10, 2021, respectively. The
Company’s accounting for the acquisition included determining the fair value of the intangible
assets acquired, which primarily included customer relationships and backlog. The Company
recognized acquired intangible assets of $399.5 million, using income approach methodologies to
determine the fair value.
Auditing the Company’s accounting for the acquired intangible assets was challenging due to the
estimation required in management’s determination of the fair value of the intangible assets. The
estimation was primarily due to the sensitivity of the fair values to underlying assumptions
including discount rates and projections of revenues and expenses, which include assumptions
around contract renewals and recompetes.
es and expenses, which include assumptions around contract renewals and recompetes.
F-4
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of
controls over the Company’s process for accounting for acquired intangible assets. For example,
we tested controls over management’s review of the valuation of intangible assets, including the
review of the valuation model and significant assumptions used in the valuation.
To test the fair value of the acquired intangible assets, our audit procedures included, among
others, evaluating the Company’s use of valuation methodologies, evaluating the projected
revenues and expenses used in the valuation, and testing the completeness and accuracy of
underlying data. We involved our valuation specialists to assist in assessing the methodologies
and testing the significant assumptions used to value the acquired intangible asset. For example,
we compared the significant assumptions to current industry, market, and economic trends,
historical results of the acquired businesses, and to other relevant factors. We also performed
sensitivity analyses of the significant assumptions to evaluate the change in fair value resulting
from changes in the assumptions.
/s/ Ernst & Young LLP
We have served as the Company's auditor since 2006
Tysons, Virginia
May 20, 2022
F-5
BOOZ ALLEN HAMILTON HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net
Prepaid expenses and other current assets
Total current assets
Property and equipment, net of accumulated depreciation
Operating lease right-of-use assets
Intangible assets, net of accumulated amortization
Goodwill
Other long-term assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt
Accounts payable and other accrued expenses
Accrued compensation and benefits
Operating lease liabilities
Other current liabilities
Total current liabilities
Long-term debt, net of current portion
Operating lease liabilities, net of current portion
Deferred tax liabilities
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 20)
Stockholders’ equity:
Common stock, Class A — $0.01 par value — authorized, 600,000,000 shares; issued,
164,372,545 shares at March 31, 2022 and 162,950,606 shares at March 31, 2021;
outstanding, 132,584,348 shares at March 31, 2022 and 136,246,029 shares at March
31, 2021
Treasury stock, at cost — 31,788,197 shares at March 31, 2022 and 26,704,577 shares
at March 31, 2021
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Total Booz Allen stockholders’ equity
Non-controlling interest
Total stockholders’ equity
Total liabilities and stockholders’ equity
March 31,
2022
March 31,
2021
(Amounts in thousands, except
share and per share data)
$
695,910 $
$
$
1,622,989
126,777
2,445,676
202,229
227,231
646,682
2,021,931
481,826
6,025,575 $
68,379 $
902,616
438,634
52,334
71,991
1,533,954
2,731,693
247,070
239,602
226,535
4,978,854
990,955
1,411,894
233,323
2,636,172
204,642
239,374
307,128
1,581,160
531,125
5,499,601
77,865
666,971
425,615
54,956
65,698
1,291,105
2,278,731
263,144
364,461
230,984
4,428,425
1,646
1,629
(1,635,454)
656,222
2,015,071
8,585
1,046,070
651
1,046,721
6,025,575 $
(1,216,163)
557,957
1,757,524
(29,771)
1,071,176
—
1,071,176
5,499,601
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-6
BOOZ ALLEN HAMILTON HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Year Ended
March 31,
2022
2021
2020
Revenue
Operating costs and expenses:
Cost of revenue
Billable expenses
General and administrative expenses
Depreciation and amortization
Total operating costs and expenses
Operating income
Interest expense
Other income (expense), net
Income before income taxes
Income tax expense
Net income
Net loss attributable to non-controlling interest
Net income attributable to common stockholders
Earnings per share of common stock (Note 4):
Basic
Diluted
$
$
$
$
$
(Amounts in thousands, except per share data)
8,363,700 $
7,858,938 $
7,463,841
3,899,622
2,474,163
1,158,987
145,747
7,678,519
685,181
(92,352)
11,214
604,043
137,466
466,577
3,657,530
2,325,888
1,036,834
84,315
7,104,567
754,371
(81,270)
(10,662)
662,439
53,481
608,958
(163) $
466,740 $
— $
608,958 $
3,379,180
2,298,413
1,035,965
81,081
6,794,639
669,202
(96,960)
7,192
579,434
96,831
482,603
—
482,603
3.46 $
3.44 $
4.40 $
4.37 $
3.43
3.41
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-7
BOOZ ALLEN HAMILTON HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income
Other comprehensive income, net of tax:
Change in unrealized gain (loss) on derivatives designated as cash flow
hedges
Change in postretirement plan costs
Total other comprehensive (loss) income, net of tax
Comprehensive income
$
$
$
Fiscal Year Ended
March 31,
2022
2021
2020
(Amounts in thousands)
608,958 $
466,577 $
482,603
27,983
10,373
38,356 $
504,933 $
13,665
2,565
16,230 $
625,188 $
(39,752)
4,941
(34,811)
447,792
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-8
BOOZ ALLEN HAMILTON HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Year Ended
March 31,
2021
(Amounts in thousands)
2020
2022
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$
466,577 $
608,958 $
482,603
Depreciation and amortization
Noncash lease expense
Stock-based compensation expense
Deferred income taxes
Amortization of debt issuance costs
Loss on debt extinguishment
(Gains) losses on dispositions, and other
Gains associated with equity method investment activities
Changes in assets and liabilities:
Accounts receivable, net
Income taxes receivable / payable
Prepaid expenses and other current and long-term assets
Accrued compensation and benefits
Accounts payable and other accrued expenses
Other current and long-term liabilities
Net cash provided by operating activities
Cash flows from investing activities
Purchases of property, equipment, and software
Payments for business acquisitions, net of cash acquired
Proceeds from sales of assets, net of payment
Payment for minority investment in entity
Payments for cost method investments
Other investing activities
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of common stock
Stock option exercises
Repurchases of common stock
Cash dividends paid
Debt extinguishment costs
Repayments on revolving credit facility, term loans, and Senior Notes
Net proceeds from debt issuance
Payment of deferred payment obligation
Proceeds from revolving credit facility
Other financing activities
Net cash (used in) provided by financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents––beginning of year
Cash and cash equivalents––end of year
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest
Income taxes
Supplemental disclosures of non-cash investing and financing activities
Share repurchases transacted but not settled and paid
Noncash financing activities
145,747
55,881
69,784
(130,197)
4,619
2,515
(3,388)
(12,759)
(154,652)
132,029
(19,489)
12,620
194,827
(27,588)
736,526
(79,964)
(780,334)
—
—
(7,000)
(427)
(867,725)
84,315
53,202
59,844
231,998
4,395
13,239
(3,322)
—
47,081
(363,396)
(5,069)
71,713
(31,506)
(52,768)
718,684
(87,210)
—
3,094
(74,168)
—
—
(158,284)
23,371
5,929
(418,859)
(209,057)
—
(112,257)
487,027
—
60,000
—
(163,846)
(295,045)
990,955
695,910 $
19,408
11,747
(313,397)
(181,066)
(8,971)
(527,865)
691,496
—
—
(2,698)
(311,346)
249,054
741,901
990,955 $
81,081
55,096
43,290
65,434
4,688
1,451
1,772
—
(129,107)
(122,977)
(13,506)
18,044
48,260
15,299
551,428
(128,079)
—
—
—
—
—
(128,079)
14,987
8,925
(182,224)
(146,602)
—
(76,922)
497,891
(80,000)
—
(1,493)
34,562
457,911
283,990
741,901
64,699 $
127,069 $
60,955 $
176,711 $
84,125
109,754
15,839 $
— $
15,408 $
178 $
10,736
3,920
$
$
$
$
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-9
BOOZ ALLEN HAMILTON HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands, except
share data)
Balance at March 31, 2019
Issuance of common stock
Stock options exercised
Repurchase of common stock
Recognition of liability related to future restricted stock units
vesting
Net income
Other comprehensive income, net of tax
Dividends paid of $1.04 per share of common stock
Stock-based compensation expense
Balance at March 31, 2020
Issuance of common stock
Stock options exercised
Repurchase of common stock
Recognition of liability related to future restricted stock units
vesting
Net income
Topic 326 adoption impact
Other comprehensive income, net of tax
Dividends paid of $1.30 per share of common stock
Stock-based compensation expense
Balance at March 31, 2021
Issuance of common stock
Stock options exercised
Repurchase of common stock
Recognition of liability related to future restricted stock units
vesting
Net income
Other comprehensive income, net of tax
Dividends paid of $1.54 per share of common stock
Stock-based compensation expense
Contribution to non-controlling interest
Balance at March 31, 2022
Class A
Common Stock
Shares
Amount
159,924,825 $ 1,599
8
6
833,258
575,890
Treasury
Stock
Shares
(19,896,972) $
—
—
Additional
Paid-In
Capital
Retained
Earnings
Amount
(711,450) $ 401,596 $ 994,811 $
14,979
8,919
—
—
—
—
Accumulated
Other
Comprehensive
Income (Loss)
(11,190)
—
—
Non-
Controlling
Interest
Total
Stockholders’
Equity
675,366
14,987
8,925
— $
—
—
—
—
(2,717,080)
(186,645)
—
—
—
—
(186,645)
—
—
—
—
—
—
—
—
—
—
161,333,973 $ 1,613
11
5
—
1,112,183
504,450
—
—
—
—
—
—
(22,614,052) $
—
—
(4,090,525)
—
—
—
—
—
—
482,603
—
(146,602)
—
(757)
—
—
—
43,290
(898,095) $ 468,027 $ 1,330,812 $
18,803
11,742
—
—
—
(318,068)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
162,950,606 $ 1,629
15
2
—
1,224,207
197,732
—
—
—
—
—
—
—
—
—
—
—
—
—
(456)
—
—
—
—
59,841
—
608,958
(1,180)
—
(181,066)
—
(26,704,577) $ (1,216,163) $ 557,957 $ 1,757,524 $
—
—
(5,083,620)
—
—
(419,291)
22,155
5,927
—
—
—
—
—
—
—
—
—
—
—
—
—
— $ —
164,372,545 $ 1,646
—
—
—
—
—
— $
—
—
466,740
—
—
—
(209,193)
—
—
—
— $
— $
(31,788,197) $ (1,635,454) $ 656,222 $ 2,015,071 $
1,213
—
—
—
69,784
(814) $
—
—
(34,811)
—
—
(46,001)
—
—
—
—
—
—
16,230
—
—
(29,771)
—
—
—
—
38,356
—
—
— $
8,585
—
—
—
—
—
— $
—
—
—
(757)
482,603
(34,811)
(146,602)
43,290
856,356
18,814
11,747
(318,068)
(456)
—
608,958
—
(1,180)
—
16,230
—
(181,066)
—
—
59,841
— $ 1,071,176
22,170
—
5,929
—
(419,291)
—
1,213
—
466,577
(163)
38,356
—
(209,193)
—
69,784
—
814 $
—
651 $ 1,046,721
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-10
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
March 31, 2022
1. BUSINESS OVERVIEW
Our Business
Booz Allen Hamilton Holding Corporation, including its wholly owned subsidiaries, or the Company, we, us, and our,
was incorporated in Delaware in May 2008. The Company provides management and technology consulting, analytics,
engineering, digital solutions, mission operations, and cyber services to U.S. and international governments, major
corporations, and not-for-profit organizations. The Company reports operating results and financial data in one reportable
segment. The Company is headquartered in McLean, Virginia, with approximately 29,300 employees as of March 31, 2022.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries that are
majority-owned or otherwise controlled by the Company and have been prepared in accordance with accounting principles
generally accepted in the United States, or U.S. GAAP, and the rules and regulations of the U.S. Securities and Exchange
Commission, or SEC. All intercompany balances and transactions have been eliminated in consolidation.
The consolidated financial statements and notes of the Company include its subsidiaries and other entities over which the
Company has a controlling financial interest or where the company is a primary beneficiary. The Company uses the equity
method to account for investments in entities that it does not control if it is otherwise able to exert significant influence over the
entities' operating and financial policies. Equity investments in entities over which the Company does not have the ability to
exercise significant influence and whose securities do not have a readily determinable fair value are carried at cost or cost net of
other-than-temporary impairments.
The Company’s fiscal year ends on March 31 and unless otherwise noted, references to fiscal year or fiscal are for fiscal
years ended March 31. The accompanying consolidated financial statements present the financial position of the Company as of
March 31, 2022 and 2021 and the Company’s results of operations for fiscal 2022, 2021, and 2020.
Certain amounts reported in the Company's prior year consolidated financial statements have been reclassified to conform
to the current year presentation.
Accounting Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods.
Areas of the consolidated financial statements where estimates may have the most significant effect include the provision for
claimed indirect costs, valuation and expected lives of tangible and intangible assets, impairment of long-lived assets, accrued
liabilities, revenue recognition, including the accrual of indirect costs, bonus and other incentive compensation, stock-based
compensation, reserves for uncertain tax positions and valuation allowances on deferred tax assets, provisions for income taxes,
postretirement obligations, collectability of receivables, and loss accruals for litigation. Actual results experienced by the
Company may differ materially from management's estimates.
Revenue Recognition
The Company's revenues from contracts with customers (clients) are derived from offerings that include consulting,
analytics, digital solutions, engineering, and cyber services, substantially with the U.S. government and its agencies, and to a
lesser extent, subcontractors. The Company also serves foreign governments, as well as domestic and international commercial
clients. The Company performs under various types of contracts, which include cost-reimbursable-plus-fee contracts, time-and-
materials contracts, and fixed-price contracts.
The Company considers a contract with a customer to exist under Accounting Standards Codification (ASC) No. 606,
Revenue from Contracts with Customers (Topic 606), when there is approval and commitment from both the Company and the
F-11
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
customer, the rights of the parties and payment terms are identified, the contract has commercial substance, and collectability of
consideration is probable. The Company also will consider whether two or more contracts entered into with the same customer
should be combined and accounted for as a single contract. Furthermore, in certain transactions with commercial clients and
with the U.S. government, the Company may commence providing services prior to receiving a formal approval from the
customer. In these situations, the Company will consider the factors noted above, the risks associated with commencing the
work and legal enforceability in determining whether a contract with the customer exists under Topic 606.
Customer contracts are often modified to change the scope, price, specifications or other terms within the existing
arrangement. Contract modifications are evaluated by management to determine whether the modification should be accounted
for as part of the original performance obligation(s) or as a separate contract. If the modification adds distinct goods or services
and increases the contract value proportionate to the stand-alone selling price of the additional goods or services, it will be
accounted for as a separate contract. Generally, the Company’s contract modifications do not include goods or services which
are distinct, and therefore are accounted for as part of the original performance obligation(s) with any impact on transaction
price or estimated costs at completion being recorded as through a cumulative catch-up adjustment to revenue.
The Company evaluates each service deliverable contracted with the customer to determine whether it represents promises
to transfer distinct goods or services. Under Topic 606, these are referred to as performance obligations. One or more service
deliverables often represent a single performance obligation. This evaluation requires significant judgment and the impact of
combining or separating performance obligations may change the time over which revenue from the contract is recognized. The
Company’s contracts generally provide a set of integrated or highly interrelated tasks or services and are therefore accounted
for as a single performance obligation. However, in cases where we provide more than one distinct good or service within a
customer contract, the contract is separated into individual performance obligations which are accounted for discretely.
Contracts with the U.S. government are generally subject to the FAR and are priced based on estimated or actual costs of
providing the goods or services. The Company derives a majority of its revenue from contracts awarded through a competitive
bidding process. Pricing for non-U.S. government agencies and commercial customers is based on discrete negotiations with
each customer. Certain of the Company’s contracts contain award fees, incentive fees or other provisions that may increase or
decrease the transaction price. These variable amounts generally are awarded upon achievement of certain performance metrics,
program milestones or cost targets and may be based upon customer discretion. Management estimates variable consideration
as the most likely amount that we expect to achieve based on our assessment of the variable fee provisions within the contract,
prior experience with similar contracts or clients, and management’s evaluation of the performance on such contracts. The
Company may perform work under a contract that has not been fully funded if the work has been authorized by management
and the customer to proceed. The Company evaluates unfunded amounts as variable consideration in estimating the transaction
price. We include the estimated variable consideration in our transaction price to the extent that it is probable that a significant
reversal of revenue will not occur upon the ultimate settlement of the variable fee provision. In the limited number of situations
where our contracts with customers contain more than one performance obligation, the Company allocates the transaction price
of a contract between the performance obligations in the proportion to their respective stand-alone selling prices. The Company
generally estimates the stand-alone selling price of performance obligations based on an expected cost-plus margin approach as
allowed under Topic 606. Our U.S. government contracts generally contain FAR provisions that enable the customer to
terminate a contract for default or for the convenience of the U.S. government.
The Company recognizes revenue for each performance obligation identified within our customer contracts when, or as,
the performance obligation is satisfied by transferring the promised goods or services. Revenue may either be recognized over
time or at a point in time. The Company generally recognizes revenue over time as our contracts typically involve a continuous
transfer of control to the customer. A continuous transfer of control under contracts with the U.S. government and its agencies
is evidenced by clauses which require the Company to be paid for costs incurred plus a reasonable margin in the event that the
customer unilaterally terminates the contract for convenience. For contracts where the Company recognizes revenue over time,
a contract cost-based input method is generally used to measure progress towards satisfaction of the underlying performance
obligation(s). Contract costs include direct costs such as materials, labor and subcontract costs, as well as indirect costs
identifiable with, or allocable to, a specific contract that are expensed as incurred. The Company does not incur material
incremental costs to acquire or fulfill contracts. Under a contract cost-based input method, revenue is recognized based on the
proportion of contract costs incurred to the total estimated costs expected to be incurred upon completion of the underlying
performance obligation. The Company generally includes both funded and unfunded portions of customer contracts in this
estimation process.
For interim financial reporting periods, contract revenue attributable to indirect costs is recognized based upon agreed-
upon annual forward-pricing rates established with the U.S. government at the start of each fiscal year. Forward pricing rates
F-12
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
are estimated and agreed upon between the Company and the U.S. government and represent indirect contract costs required to
execute and administer contract obligations. The impact of any agreed-upon changes, or changes in the estimated annual
forward-pricing rates, are recorded in the interim financial reporting period when such changes are identified. These changes
relate to the interim financial reporting period differences between the actual indirect costs incurred and allocated to customer
contracts compared to the estimated amounts allocated to contracts using the estimated annual forward-pricing rates established
with the U.S. government.
On certain contracts, principally time-and-materials and cost-reimbursable-plus-fee contracts, revenue is recognized using
the right-to-invoice practical expedient as the Company is contractually able to invoice the customer based on the control
transferred. However, we did not elect to use the practical expedient which would allow the Company to exclude contracts
recognized using the right-to-invoice practical expedient from the remaining performance obligations disclosed below.
Additionally, for stand-ready performance obligations to provide services under fixed-price contracts, revenue is recognized
over time using a straight-line measure of progress as the control of the services is provided to the customer ratably over the
term of the contract. If a contract does not meet the criteria for recognition of revenue over time, we recognize revenue at the
point in time when control of the good or service is transferred to the customer. Determining a measure of progress towards the
satisfaction of performance obligations requires management to make judgments that may affect the timing of revenue
recognition.
Many of our contracts recognize revenue under a contract cost-based input method and require an Estimate-at-Completion
(EAC) process, which management uses to review and monitor the progress towards the completion of our performance
obligations. Under this process, management considers various inputs and assumptions related to the EAC, including, but not
limited to, progress towards completion, labor costs and productivity, material and subcontractor costs, and identified risks.
Estimating the total cost at completion of performance obligations is subjective and requires management to make assumptions
about future activity and cost drivers under the contract. Changes in these estimates can occur for a variety of reasons and, if
significant, may impact the profitability of the Company’s contracts. Changes in estimates related to contracts accounted for
under the EAC process are recognized in the period when such changes are made on a cumulative catch-up basis. If the estimate
of contract profitability indicates an anticipated loss on a contract, the Company recognizes the total loss at the time it is
identified. For fiscal 2022, 2021 and 2020, the aggregate impact of adjustments in contract estimates was not material.
Remaining performance obligations represent the transaction price of exercised contracts for which work has not yet been
performed, irrespective of whether funding has or has not been authorized and appropriated as of the date of exercise.
Remaining performance obligations do not include negotiated but unexercised options or the unfunded value of expired
contracts.
Cash and Cash Equivalents
Cash and cash equivalents include operating cash on hand and highly liquid investments having a weighted average
maturity of 60 days or less and a weighted average life of 120 days or less. The Company’s cash equivalents consist primarily
of government money market funds and money market deposit accounts. The Company maintains its cash and cash equivalents
in bank accounts that, at times, exceed the federally insured FDIC limits. The Company has not experienced any losses in such
accounts.
Valuation of Accounts Receivable
The Company maintains allowances for doubtful accounts against certain accounts receivables based upon the latest
information regarding whether specific charges are recoverable or invoices are ultimately collectible. Assessing the
recoverability of charges and collectability of customer receivables requires management judgment. The Company determines
its allowance for doubtful accounts by specifically analyzing individual accounts receivable, historical bad debts, customer
credit-worthiness, current economic conditions, accounts receivable aging trends for billed receivables, availability of funding,
compliance with contractual terms and conditions, client satisfaction with work performed, and other factors impacting
accounts receivables. Valuation reserves are periodically re-evaluated and adjusted as more information about the ultimate
recoverability and collectability of accounts receivable becomes available. Upon determination that a receivable is
uncollectible, the receivable balance and any associated reserve are written off.
F-13
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash
equivalents and accounts receivable. The Company’s cash equivalents are generally invested in U.S. government money market
funds and money market deposit accounts. The Company believes that credit risk for accounts receivable is limited as the
receivables are primarily with the U.S. government.
Property and Equipment
Property and equipment are recorded at cost, and the balances are presented net of accumulated depreciation.
Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Furniture and equipment
is depreciated over five to ten years, and computer equipment is depreciated over four years. Leasehold improvements are
amortized over the shorter of the useful life of the asset or the lease term. Maintenance and repairs are charged to expense as
incurred.
Business Combinations
The accounting for the Company’s business combinations consists of allocating the purchase price to tangible and
intangible assets acquired and liabilities assumed based on their estimated fair values, with the excess recorded as goodwill.
The Company has up to one year from the acquisition date to use information as of each acquisition date to adjust the fair value
of the acquired assets and liabilities which may result in material changes to their recorded values with an offsetting adjustment
to goodwill.
Intangible Assets
Intangible assets primarily consist of programs and contracts assets, channel relationships, the Company's trade name,
customer relationships, software and other amortizable intangible assets. The Company capitalizes the following costs
associated with developing internal-use computer software pertaining to upgrades in our business and financial systems:
(i) external direct costs of materials and services consumed in developing or obtaining internal-use computer software and
(ii) certain payroll and payroll-related costs for Company employees who are directly associated with the development of
internal-use software, to the extent of the time spent directly on the project. Programs and contract assets, channel relationships,
and other amortizable intangible assets are generally amortized on an accelerated basis over the expected life based on projected
future cash flows of approximately two to twelve years. Software purchased or developed for internal use is amortized over one
to five years. The majority of the Company's trade name intangible assets are not amortized, but are tested for impairment on at
least an annual basis as of January 1 and more frequently if interim indicators of impairment exist. The trade name is
considered to be impaired if the carrying value exceeds its estimated fair value. The Company uses the relief from royalty
method to estimate the fair value. The fair value of the asset is the present value of the license fees avoided by owning the asset,
or the royalty savings. During the fiscal years ended March 31, 2022, 2021, and 2020, the Company did not record any
impairment of intangible assets.
Goodwill
The Company assesses goodwill for impairment on at least an annual basis on January 1 unless interim indicators of
impairment exist. Goodwill is considered to be impaired when the net book value of a reporting unit exceeds its estimated fair
value. The Company operates as a single operating segment and as a single reporting unit for the purpose of evaluating
goodwill. As of January 1, 2022, the Company performed its annual impairment test of goodwill by comparing the fair value of
the Company (based on market capitalization) to the carrying value of the Company's net equity, and concluded that the fair
value of the reporting unit was significantly greater than the carrying amount. During the fiscal years ended March 31, 2022,
2021, and 2020, the Company did not record any impairment of goodwill.
Long-Lived Assets
The Company reviews its long-lived assets, including property and equipment, amortizable intangible assets, and right-
of-use (ROU) assets, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the
assets may not be fully recoverable. If the total of the expected undiscounted future net cash flows is less than the carrying
amount of the asset, a loss is recognized for any excess of the carrying amount over the fair value of the asset. During the fiscal
years ended March 31, 2022, 2021, and 2020, the Company did not record any impairment charges.
F-14
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
Leases
At contract inception, the Company determines whether the contract is, or contains, a lease, which exists when the contract
conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration.
Operating lease balances are included in operating lease right-of-use ("ROU") assets, operating lease liabilities, and operating
lease liabilities, net of current portion in our consolidated balance sheet. Cash payments arising from operating leases are
classified within operating activities in the consolidated statement of cash flows. As of March 31, 2022, the Company had no
finance leases.
The Company's leases are generally for facilities and office space and the Company recognizes ROU assets and lease
liabilities at the lease commencement date for those arrangements. The initial lease liability is equal to the present value of the
future minimum lease payments over the lease term. The initial measurement of the ROU asset is equal to the initial lease
liability plus any initial direct costs and prepaid lease payments, less any lease incentives. At the lease commencement date, the
Company estimates its collateralized incremental borrowing rate based on publicly available yields adjusted for Company-
specific considerations and the Company's varying lease terms in determining the present value of future payments. Certain of
the Company’s leases contain options to renew or to terminate the lease which are included in the determination of the ROU
assets and lease liabilities when it is reasonably certain that the Company will exercise the option. The Company's leases may
also include variable lease payments, such as an escalation clause based on consumer price index rates, maintenance costs, and
utilities. Variable lease payments that depend on an index or a rate are included in the determination of ROU assets and lease
liabilities using the index or rate at the lease commencement date, whereas variable lease-related payments that do not depend
on an index or rate are recorded as lease expense in the period incurred. ROU assets are evaluated for impairment in a manner
consistent with the treatment of other long-lived assets.
As permitted under Topic 842, the Company elected not to recognize ROU assets and lease liabilities for leases with an
initial term of 12 months or less; lease expense from these leases is recognized on a straight-line basis over the lease term. As
further permitted under Topic 842, for all material classes of leased assets, the Company elected to not separate lease
components from non-lease components, and instead account for both components as a single lease component. As of
March 31, 2022, the Company did not have any lease agreements with residual value guarantees or material restrictions or
covenants.
Income Taxes
The Company provides for income taxes as a “C” corporation on income earned from operations. The Company is
subject to federal, state, and foreign taxation in various jurisdictions.
Deferred tax assets and liabilities are recorded to recognize the expected future tax benefits or costs of events that have
been, or will be, reported in different years for financial statement purposes than for tax purposes. Deferred tax assets and
liabilities are computed based on the difference between the consolidated financial statement carrying amount and tax basis of
assets and liabilities using enacted tax rates and laws for the years in which these items are expected to reverse. If management
determines that some portion or all of a deferred tax asset is not “more likely than not” to be realized, a valuation allowance is
recorded as a component of the income tax provision to reduce the deferred tax asset to an appropriate level in that period. In
determining the need for a valuation allowance, management considers all positive and negative evidence, including historical
earnings, projected future taxable income, future reversals of existing taxable temporary differences, taxable income in prior
carryback periods, and prudent, feasible tax-planning strategies.
The Company periodically assesses its tax positions for all periods open to examination by tax authorities based on the
latest available information. Those positions are evaluated to determine whether they will more likely than not be sustained
upon examination by the Internal Revenue Service (“IRS”) or other taxing authorities. The Company reserves for these
uncertain tax positions related to unrecognized income tax benefits where it is not more likely than not that the Company’s tax
position will be sustained on examination and settlement with the various taxing authorities. Liabilities for unrecognized tax
benefits are measured based on the largest amount of benefit that is greater than 50% likely of being realized upon ultimate
settlement. These unrecognized tax benefits are recorded as a component of income tax expense. As uncertain tax positions in
periods open to examination are closed out, or as new information becomes available, the resulting change is reflected in the
recorded liability and income tax expense. Penalties and interest recognized related to the reserves for uncertain tax positions
are recorded as a component of income tax expense.
F-15
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
Stock-Based Compensation
Stock-based compensation to employees is recognized in the consolidated statements of operations based on the grant
date fair values with the expense for time vested awards recognized on an accelerated basis over the vesting period. The
Company estimates forfeitures anticipated to occur during the vesting period for the purposes of recognizing costs associated
with stock-based compensation. The expense for performance awards is estimated at each reporting date using management's
expectation of the probable achievement of the specified performance criteria and is recognized straight line over the vesting
period. The Company uses the Black-Scholes option-pricing model to determine the fair value of its option awards at the time
of grant.
Defined Benefit Plan, Other Post-Retirement Benefits and Long-term Disability Plan
The Company recognizes the underfunded status of defined benefit plans and other post-retirement benefits on the
consolidated balance sheets within other long-term liabilities. Gains and losses, and prior service costs and credits that have not
yet been recognized through net periodic benefit cost are recognized in accumulated other comprehensive loss, net of tax
effects, and will be amortized as a component of net periodic cost in future periods. The measurement date, the date at which
the benefit obligations are measured, is the Company’s fiscal year-end.
The Company also offers medical and dental benefits to inactive employees (and their eligible dependents) on long-term
disability. The Company accrues the costs of the benefits at the date the inactive employee becomes disability eligible and
elects to participate in the benefit. The accrued cost for such benefits is calculated using an actuarial estimate of the present
value of all future benefit payments for obligations at the end of the fiscal year.
Self-Funded Medical Plans
The Company maintains self-funded medical insurance. Self-funded plans include Consumer Driven Health Plans with a
Health Savings Account option and traditional choice plans. Further, self-funded plans also include prescription drug and dental
benefits. The Company records an incurred but unreported claim liability in the accrued compensation and benefits line of the
consolidated balance sheets for self-funded plans based on an actuarial valuation. The estimate of the incurred but unreported
claim liability was provided by a third-party valuation firm, primarily based on claims and participant data for the medical,
dental, and pharmacy related costs.
Recently Adopted Accounting Standards
In November 2020, the SEC issued Release No. 33-10890, Amendments to Management's Discussion and Analysis,
Selected Financial Data, and Supplementary Financial Information, to simplify, modernize and enhance certain financial
disclosure requirements in Regulation S-K. The Company updated its disclosures throughout this Annual Report on Form 10-K
to comply with these amendments. The Company’s adoption only impacted the Company's disclosures and did not impact the
consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets
and Contract Liabilities from Contracts with Customers, which amends the accounting for acquired revenue contracts with
customers in a business combination to address recognition of an acquired contract liability and payment terms, and their effect
on subsequent revenue recognized by the acquirer. ASU 2021-08 is effective for annual periods beginning after December 15,
2022 on a prospective basis. Early adoption is permitted. The Company early adopted the requirements of ASU 2021-08 to
apply the amendments prospectively to all business combinations that occurred on or after April 1, 2022.
Recent Accounting Pronouncements Not Yet Adopted
Other recent accounting pronouncements issued during fiscal 2022 and through the filing date are not expected to have a
material impact on the Company's present or historical consolidated financial statements.
F-16
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
3. REVENUE
The Company's revenues from contracts with customers (clients) are derived from offerings that include management
and technology consulting services, analytics, digital solutions, engineering, mission operations, and cyber services,
substantially with the U.S. government and its agencies, and to a lesser extent, subcontractors. The Company also serves
foreign governments, as well as domestic and international commercial clients. The Company performs under various types of
contracts, which include cost-reimbursable-plus-fee contracts, time-and-materials contracts, and fixed-price contracts.
Disaggregation of Revenue
We disaggregate our revenue from contracts with customers by contract type, customer, as well as whether the Company
acts as prime contractor or sub-contractor, as we believe these categories best depict how the nature, amount, timing and
uncertainty of our revenue and cash flows are affected by economic factors. The following series of tables presents our
revenue disaggregated by these categories.
Revenue by Contract Type:
We generate revenue under the following three basic types of contracts:
•
•
•
Cost-Reimbursable Contracts: Cost-reimbursable contracts provide for the payment of allowable
costs incurred during performance of the contract, up to a ceiling based on the amount that has been
funded, plus a fixed fee or award fee.
Time-and-Materials Contracts: Under contracts in this category, we are paid a fixed hourly rate for
each direct labor hour expended, and we are reimbursed for billable material costs and billable out-
of-pocket expenses inclusive of allocable indirect costs. We assume the financial risk on time-and-
materials contracts because our costs of performance may exceed negotiated hourly rates.
Fixed-Price Contracts: Under a fixed-price contract, we agree to perform the specified work for a
predetermined price. To the extent our actual direct and allocated indirect costs decrease or increase
from the estimates upon which the price was negotiated, we will generate more or less profit,
respectively, or could incur a loss.
The table below presents the total revenue for each type of contract:
Cost-reimbursable
Time-and-materials
Fixed-price
Total Revenue
Fiscal Year Ended March 31,
2022
2021
2020
$
4,514,262
54% $
4,419,533
56% $
4,211,592
57%
2,017,094
24%
1,962,999
25%
1,737,414
23%
1,832,344
22%
1,476,406
19%
1,514,835
20%
$
8,363,700 100% $
7,858,938 100% $
7,463,841 100%
F-17
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
Revenue by Customer Type:
U.S. government(1):
Defense Clients
Intelligence Clients
Civil Clients
Total U.S. government
Global Commercial Clients
Total Revenue
Fiscal Year Ended March 31,
2022
2021
2020
$
3,955,473
47% $
3,920,503
49% $
3,596,081
47%
1,573,037
19%
1,549,417
20%
1,580,925
22%
2,618,914
31%
2,183,184
28%
2,020,320
27%
8,147,424
97%
7,653,104
97%
7,197,326
96%
216,276
3%
205,834
3%
266,515
4%
$
8,363,700 100% $
7,858,938 100% $
7,463,841 100%
(1) Certain contracts were reassigned between the various verticals of our U.S. government business shown in the table
above to better align our operations to the customers we serve within each market. Prior year revenue by customer type has
been recast to reflect the changes.
Revenue by Whether the Company Acts as a Prime Contractor or a Sub-Contractor:
Prime Contractor
Sub-contractor
Total Revenue
Performance Obligations
Fiscal Year Ended March 31,
2022
2021
2020
$
7,864,273
94% $
7,311,313
93% $
6,884,763
92%
499,427
6%
547,625
7%
579,078
8%
$
8,363,700 100% $
7,858,938 100% $
7,463,841 100%
Remaining performance obligations represent the transaction price of exercised contracts for which work has not yet
been performed, irrespective of whether funding has or has not been authorized and appropriated as of the date of exercise.
Remaining performance obligations exclude negotiated but unexercised options, the unfunded value of expired contracts, and
certain variable consideration which the Company does not expect to recognize as revenue.
As of March 31, 2022 and 2021, the Company had $7.4 billion and $6.7 billion of remaining performance obligations,
respectively. We expect to recognize approximately 70% of the remaining performance obligations as of March 31, 2022 as
revenue over the next 12 months, and approximately 85% over the next 24 months. The remainder is expected to be
recognized thereafter.
Contract Balances
As discussed in Note 2, the Company's performance obligations are typically satisfied over time and revenue is generally
recognized using a cost-based input method. Fixed-price contracts are typically billed to the customer using milestone or fixed
monthly payments, while cost-reimbursable-plus-fee and time-and-materials contracts are typically billed to the customer at
periodic intervals (e.g. monthly or weekly) as indicated by the terms of the contract. Disparities between the timing of revenue
recognition and customer billings and cash collections result in net contract assets or liabilities being recognized at the end of
each reporting period.
F-18
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
Contract assets primarily consist of unbilled receivables typically resulting from revenue recognized exceeding the
amount billed to the customer and right to payment is not just subject to the passage of time. Unbilled amounts represent
revenues for which billings have not yet been presented to customers. These amounts are generally billed and collected within
one year subject to various conditions including, without limitation, appropriated and available funding. Long-term unbilled
receivables not anticipated to be billed and collected within one year, which are primarily related to retainage, holdbacks, and
long-term rate settlements to be billed at contract closeout, are included in other long-term assets in the accompanying
condensed consolidated balance sheets. Contract liabilities primarily consist of advance payments, billings in excess of costs
incurred and deferred revenue. Contract assets and liabilities are reported on a net contract basis at the end of each reporting
period. The Company maintains an allowance for credit losses to provide for an estimate of uncollectible receivables. Benefit
for credit losses recognized were $(1.5) million, $(2.6) million, and $(6.4) million for fiscal 2022, 2021, and 2020,
respectively.
The following table summarizes the contract assets and liabilities, and accounts receivable, net of allowance recognized
on the Company’s condensed consolidated balance sheets:
Current assets:
Accounts receivable–billed
Accounts receivable–unbilled (contract assets)
Allowance for credit losses
Accounts receivable, net
Other long-term assets:
Accounts receivable–unbilled (contract assets)
Total accounts receivable, net
Other current liabilities
Advance payments, billings in excess of costs incurred and deferred
revenue (contract liabilities)
March 31,
2022
2021
$
465,322 $
1,157,667
—
1,622,989
375,383
1,037,968
(1,457)
1,411,894
64,339
1,687,328 $
63,869
1,475,763
26,747 $
15,906
$
$
Changes in contract assets and contract liabilities are primarily due to the timing difference between the Company’s
performance of services and payments from customers. For fiscal 2022, 2021 and 2020, we recognized revenue of $14.9
million, $24.5 million and $18.9 million, respectively, related to our contract liabilities on April 1, 2021, 2020 and 2019,
respectively. To determine revenue recognized from contract liabilities during the reporting periods, the Company allocates
revenue to individual contract liability balances and applies revenue recognized during the reporting periods first to the
beginning balances of contract liabilities until the revenue exceeds the balances.
F-19
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
4. EARNINGS PER SHARE
The Company computes basic and diluted earnings per share amounts based on net income for the periods presented. The
Company uses the weighted average number of shares of common stock outstanding during the period to calculate basic
earnings per share, or EPS. Diluted EPS adjusts the weighted average number of shares outstanding to include the dilutive
effect of outstanding common stock options and other stock-based awards.
The Company currently has outstanding shares of Class A Common Stock. Holders of unvested Class A Restricted
Common Stock are entitled to participate in non-forfeitable dividends or other distributions. These unvested restricted shares
participated in the Company's dividends declared and paid in each quarter of fiscal 2022, 2021, and 2020. As such, EPS is
calculated using the two-class method whereby earnings are reduced by distributed earnings as well as any available
undistributed earnings allocable to holders of these unvested restricted shares. A reconciliation of the income used to compute
basic and diluted EPS for the periods presented are as follows:
Earnings for basic computations (1)
Weighted-average of common stock shares outstanding for basic
computations
Earnings for diluted computations (1)
Dilutive stock options and restricted stock
Weighted-average of common stock shares outstanding for
diluted computations
Earnings per share of common stock
Basic
Diluted
Fiscal Year Ended
March 31,
2022
2021
2020
463,626 $
605,437 $
481,085
134,134,034
137,722,589
140,059,494
463,635 $
605,455 $
716,774
980,631
481,092
1,178,641
134,850,808
138,703,220
141,238,135
3.46 $
3.44 $
4.40 $
4.37 $
3.43
3.41
$
$
$
$
(1) During fiscal 2022, 2021, and 2020 approximately 0.9 million, 0.8 million, and 0.4 million shares of participating securities
were paid dividends totaling $1.4 million, $1.0 million, and $0.7 million, respectively. There were undistributed earnings of
$1.7 million, $2.5 million, and $0.9 million allocated to the participating class of securities in both basic and diluted earnings
per share of common stock for fiscal 2022, 2021, and 2020, respectively. The allocated undistributed earnings and the dividends
paid comprise the difference between net income presented on the consolidated statements of operations and earnings for basic
and diluted computations for fiscal 2022, 2021, and 2020. The impact of any anti-dilutive options included in the calculation of
EPS was not material.
F-20
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
5. ACQUISITIONS AND DIVESTITURES
Acquisitions
Tracepoint Holdings, LLC
On September 10, 2021, the Company acquired the remaining 60% equity interest in Tracepoint Holdings, LLC
("Tracepoint"), an industry-leading digital forensics and incident response company serving public and private sector clients,
for cash consideration of approximately $120.3 million, net of adjustments (the "Tracepoint Transaction"). As a result of the
transaction, Tracepoint and Tracepoint, LLC became wholly owned subsidiaries of Booz Allen Hamilton Inc. The acquisition
complements the Company’s existing cybersecurity portfolio and expands its position in the private sector cyber market.
Prior to the closing of the Tracepoint Transaction, the Company held a 40% interest in Tracepoint, which was accounted
for as an equity method investment. The equity method investment associated with Tracepoint was remeasured at fair value on
the closing date of the Tracepoint Transaction, resulting in a gain of $5.7 million. This gain is presented as a component of
Other Income on the Consolidated Statement of Operations for fiscal 2022. The fair value of the previously held equity method
investment was determined based upon valuations of the Tracepoint business and future business outlook using projected future
cash flows.
As a result of the Tracepoint transaction, the Company recognized $90.5 million of intangible assets which primarily
consists of channel relationships. Channel relationships were valued using the excess earnings method discounted cash flow
approach, incorporating Level 3 inputs as described under the fair value hierarchy of ASC No. 820, Fair Value Measurement
(Topic 820). These unobservable inputs reflect the Company's own judgment about which assumptions market participants
would use in pricing an asset on a non-recurring basis. The intangible asset is expected to be amortized over the estimated
useful life of 10 years. The goodwill of $94.3 million is largely attributable to Tracepoint's specialized workforce. During the
fourth quarter of fiscal 2022, the Company finalized Tracepoint's post-closing working capital.
Liberty IT Solutions, LLC
On June 11, 2021, the Company acquired Liberty IT Solutions, LLC ("Liberty") for cash consideration of approximately
$669.1 million, net of adjustments related to working capital, and transaction costs incurred as part of the acquisition, including
compensation expenses paid by the Company that were associated with employee retention. As a result of the transaction,
Liberty became a wholly owned subsidiary of Booz Allen Hamilton Inc. Liberty is a leading digital partner driving
transformation across the federal IT ecosystem. The acquisition complements the Company’s digital transformation portfolio
resulting in a deeper range of advanced technology solutions.
The Company recognized $309.0 million of intangible assets which consist of programs and contracts assets, and were
valued using the excess earnings method discounted cash flow approach, incorporating Level 3 inputs as described under the
fair value hierarchy of Topic 820. These unobservable inputs reflect the Company's own judgment about which assumptions
market participants would use in pricing an asset on a non-recurring basis. The intangible assets are expected to be amortized
over the estimated useful life of 12 years. The goodwill of $346.5 million is primarily attributable to Liberty's specialized
workforce and the expected synergies between the Company and Liberty. During the third quarter of fiscal 2022, the Company
finalized Liberty's post-closing working capital.
F-21
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
Purchase Price Allocation
The following table summarizes the cumulative consideration paid and the allocation of the purchase price paid for
Tracepoint and Liberty:
Cash consideration (gross of cash acquired and including net adjustments)
Fair value of non-controlling interest
Total purchase consideration
Purchase price allocation:
Cash
Current assets
Operating lease right-of-use asset
Other long-term assets
Intangible assets
Current liabilities
Operating lease liabilities-current
Operating lease liabilities-long term
Total fair value of identifiable net assets acquired
Goodwill
$
789,429
80,063
869,492
9,096
57,519
2,532
2,825
399,500
(40,217)
(1,017)
(1,516)
428,722
440,770
$
$
The acquisitions of Liberty and Tracepoint were accounted for under the acquisition method of accounting, which requires
the total acquisition consideration to be allocated to the assets acquired and liabilities assumed based on an estimate of the
acquisition date fair value, with the difference reflected in goodwill. As of March 31, 2022, the Company had completed the
determination of fair values of the acquired assets and liabilities assumed. Pro forma results of operations for these acquisitions
in the aggregate are not presented because these acquisitions are not material to the Company's consolidated results of
operations.
EverWatch
In the fourth quarter of fiscal 2022, the Company announced that it had entered into a definitive agreement to acquire
EverWatch Corp. ("EverWatch"), a leading provider of advanced solutions to the defense and intelligence communities for
approximately $440.0 million, subject to customary adjustments. The Company expects to fund the acquisition with cash on
hand. The transaction is expected to close in fiscal 2023.
Divestitures
In April 2022, the Company entered into an agreement with Oliver Wyman, a global management consulting firm and a
business of Marsh McLennan, to divest the Company's management consulting business serving the Middle East and North
Africa (MENA) region, which is substantially comprised of the contracts associated with the MENA business and the team of
management consultants that provide services under those contracts. The Company concluded that the assets and liabilities
associated with the MENA business met the criteria to be reported as held for sale on the consolidated balance sheet as of
March 31, 2022. As of March 31, 2022, $23.6 million of accounts receivable, $0.7 million of other assets, $1.7 million of
deferred revenue, and $0.2 million of accounts payable were included in other current assets and other current liabilities on the
consolidated balance sheet. The transaction is expected to close in fiscal 2023, subject to customary closing conditions,
including regulatory approvals.
F-22
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
6. GOODWILL AND INTANGIBLE ASSETS
Goodwill
Goodwill was $2,021.9 million and $1,581.2 million as of March 31, 2022 and March 31, 2021, respectively. The increase
in the carrying amount of goodwill was attributable to the Company's acquisitions of Liberty and Tracepoint, and the majority
of goodwill is expected to be deductible for tax purposes. Approximately $10.0 million of goodwill was allocated to the assets
held for sale related to the Company's divestiture of its MENA business noted above.The Company performed an annual
impairment test of the goodwill as of January 1, 2022 and 2021, and did not identify any impairment.
Intangible Assets
Intangible assets consisted of the following:
March 31, 2022
March 31, 2021
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Amortizable intangible assets:
Programs and contract assets,
channel relationships, and other
amortizable intangible assets (1)
Software
$ 483,294 $
101,584 $ 381,710
$ 82,400 $
50,503 $ 31,897
119,398
44,626
74,772
114,972
29,941
85,031
Total amortizable intangible assets
$ 602,692 $
146,210 $ 456,482
$ 197,372 $
80,444 $ 116,928
Unamortizable intangible assets:
Trade name
Total
$ 190,200 $
— $ 190,200
$ 190,200 $
— $ 190,200
$ 792,892 $
146,210 $ 646,682
$ 387,572 $
80,444 $ 307,128
(1)The increase in the carrying amount of programs and contracts, channel relationships, and other amortizable
intangible assets was attributable to the Company's acquisitions of Liberty and Tracepoint.
Programs and contract assets, channel relationships, and other amortizable intangible assets are generally amortized on an
accelerated basis over periods ranging from 2 years to 12 years, and those related to software are generally amortized on a
straight line basis over periods ranging from 1 years to 5 years.
The Company performed an annual impairment test of the trade name as of January 1, 2022 and 2021, and did not identify
any impairment.
Amortization expense for fiscal 2022, 2021, and 2020 was $76.2 million, $19.3 million, and $22.3 million, respectively.
The following table summarizes the estimated annual amortization expense for future periods, which does not reflect
amortization expense for certain intangible assets that are not yet placed in service:
For the Fiscal Year Ended March 31,
2023
2024
2025
2026
2027
Thereafter
Total estimated amortization expense
F-23
$ 85,776
71,149
60,811
53,552
43,585
141,609
$ 456,482
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
7. PROPERTY AND EQUIPMENT, NET
The components of property and equipment, net were as follows:
Furniture and equipment
Computer equipment
Leasehold improvements
Total
Less: Accumulated depreciation and amortization
Property and equipment, net
March 31,
2022
117,250 $
104,296
235,342
456,888
(254,659)
202,229 $
2021
117,430
97,571
225,132
440,133
(235,491)
204,642
$
$
Depreciation and amortization expense relating to property and equipment for fiscal 2022, 2021, and 2020 was $69.5
million, $65.0 million, and $58.8 million, respectively. During fiscal 2022 and 2021, the Company reduced the gross cost and
accumulated depreciation and amortization by $55.0 million and $100.3 million, respectively, for zero net book value assets
deemed no longer in service.
8. ACCOUNTS PAYABLE AND OTHER ACCRUED EXPENSES
Accounts payable and other accrued expenses consisted of the following:
Vendor payables
Accrued expenses
Total accounts payable and other accrued expenses
March 31,
2022
539,524 $
363,092
902,616 $
2021
371,744
295,227
666,971
$
$
Accrued expenses consisted primarily of the Company’s provision for claimed indirect costs, which was approximately
$290.4 million and $263.2 million as of March 31, 2022 and 2021, respectively. Refer to Note 20 for further discussion of this
provision.
9. ACCRUED COMPENSATION AND BENEFITS
Accrued compensation and benefits consisted of the following:
Bonus
Retirement
Vacation
Other
Total accrued compensation and benefits
March 31,
2022
2021
$
96,040 $
130,565
48,169
206,199
88,226
44,474
202,100
48,476
$
438,634 $
425,615
F-24
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
10. DEBT
Debt consisted of the following:
Term Loan A
Term Loan B
Revolver
Senior Notes due 2028
Senior Notes due 2029
Less: Unamortized debt issuance costs and discount on debt
Total
Less: Current portion of long-term debt
Long-term debt, net of current portion
Credit Agreement
March 31, 2022
March 31, 2021
Interest
Rate
Outstanding
Balance
Interest
Rate
Outstanding
Balance
1.71 % $ 1,241,398
1.61 % $ 1,289,764
2.21 %
380,321
1.86 %
384,212
— %
3.88 %
4.00 %
—
700,000
500,000
(21,647)
2,800,072
(68,379)
— %
—
3.88 %
700,000
— %
—
(17,380)
2,356,596
(77,865)
$ 2,731,693
$ 2,278,731
On June 24, 2021, Booz Allen Hamilton Inc. ("Booz Allen Hamilton"), Booz Allen Hamilton Investor Corporation
("Investor"), and certain wholly-owned subsidiaries of Booz Allen Hamilton, entered into the eighth amendment (the "Eighth
Amendment") to the Credit Agreement dated as of July 31, 2012, as amended (the "Existing Credit Agreement" and, as
amended, the "Credit Agreement"), with certain institutional lenders and Bank of America, N.A., as Administrative Agent and
Collateral Agent. The Eighth Amendment added an additional tier in the pricing grid and extended the maturity applicable to
both the Term Loan A ("Term Loan A") and revolving credit facility (the "Revolving Credit Facility") to June 24, 2026,
increased the aggregate principal amount of the Revolving Credit Facility and the letter of credit sublimit thereunder, and made
certain other amendments to the financial covenants and other terms under the Existing Credit Agreement. The interest rate and
maturity date applicable to Term Loan B ("Term Loan B" and, together with Term Loan A, the "Term Loans") remained
unchanged.
Prior to the Eighth Amendment, approximately $1,289.8 million was outstanding under Term Loan A (the "Existing
Tranche A Term Loans"). Pursuant to the Eighth Amendment, certain lenders under the Existing Credit Agreement converted
their Existing Tranche A Term Loans into a new tranche of tranche A term loans (the “New Refinancing Tranche A Term
Loans”) in an aggregate amount, along with the New Refinancing Tranche A Term Loans advanced by certain new lenders, of
approximately $1,289.8 million. The proceeds from the new lenders were used to prepay in full all of the Existing Tranche A
Term Loans that were not converted into the New Refinancing Tranche A Term Loans. Voluntary prepayments of the New
Refinancing Tranche A Term Loans are permitted at any time, in minimum principal amounts, without premium or penalty. The
other terms of the New Refinancing Tranche A Term Loans are generally the same as the Existing Tranche A Term Loans prior
to the Eighth Amendment.
Prior to the Eighth Amendment, approximately $500.0 million of revolving commitments (the “Existing Revolving
Commitments”) were available under the Existing Credit Agreement, with a sublimit for letters of credit of $100.0 million.
Pursuant to the Eighth Amendment, certain lenders under the Existing Credit Agreement converted their Existing Revolving
Commitments into a new tranche of revolving commitments (the “New Revolving Commitments” and the revolving credit
loans made thereunder, the “New Revolving Loans”) in an aggregate amount, along with the New Revolving Commitments of
certain new lenders, of $1,000 million, with a sublimit for letters of credit of $200.0 million.
As of March 31, 2022, the Credit Agreement provided Booz Allen Hamilton with a $1,241.4 million Term Loan A, a
$380.3 million Term Loan B and a $1,000 million revolving credit facility (the “Revolving Credit Facility”) with a sub-limit for
letters of credit of $200.0 million (collectively, the "Secured Credit Facility"). As of March 31, 2022, the maturity date of Term
Loan B was November 26, 2026. Booz Allen Hamilton’s obligations and the guarantors’ guarantees under the Credit
Agreement (the "Guarantee") are secured by a first priority lien on substantially all of the assets (including capital stock of
subsidiaries) of Booz Allen Hamilton, Investor, and the subsidiary guarantors, subject to certain exceptions set forth in the
Credit Agreement and related documentation. Subject to specified conditions, without the consent of the then-existing lenders
(but subject to the receipt of commitments), the Term Loans or the Revolving Credit Facility may be expanded (or a new term
loan facility or revolving credit facility added to the existing facilities) by up to (i) the greater of (x) $909 million and (y) 100%
F-25
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
of consolidated EBITDA of Booz Allen Hamilton, as of the end of the most recently ended four quarter period for which
financial statements have been delivered pursuant to the Credit Agreement plus (ii) the aggregate principal amount under which
pro forma consolidated net senior secured leverage remains less than or equal to 3.50:1.00.
At Booz Allen Hamilton’s option, borrowings under the Secured Credit Facility bear interest based either at LIBOR
(adjusted for maximum reserves, and subject to a floor of zero) for the applicable interest period or a base rate (equal to the
highest of (x) the administrative agent’s prime corporate rate, (y) the overnight federal funds rate plus 0.50% and (z) three-
month LIBOR (adjusted for maximum reserves, and subject to a floor of zero) plus 1.00%), in each case plus an applicable
margin, payable at the end of the applicable interest period and in any event at least quarterly. The applicable margin for Term
Loan A and borrowings under the Revolving Credit Facility ranges from 1.125% to 2.00% for LIBOR loans and 0.125% to
1.00% for base rate loans, in each case based on Booz Allen Hamilton’s consolidated total net leverage ratio. Unused
commitments under the Revolving Credit Facility are subject to a quarterly fee ranging from 0.175% to 0.35% based on Booz
Allen Hamilton’s consolidated total net leverage ratio. The applicable margin for Term Loan B is 1.75% for LIBOR loans and
0.75% for base rate loans.
The Credit Agreement requires quarterly principal payments of 1.25% of the stated principal amount of Term Loan A
until maturity, and quarterly principal payments of 0.25% of the stated principal amount of Term Loan B until maturity.
The Credit Agreement contains customary representations and warranties and customary affirmative and negative
covenants. The negative covenants include limitations on the following, in each case subject to certain exceptions:
(i) indebtedness and liens; (ii) mergers, consolidations or amalgamations, liquidations, wind-ups or dissolutions, and disposition
of all or substantially all assets; (iii) dispositions of property; (iv) restricted payments; (v) investments; (vi) transactions with
affiliates; (vii) change in fiscal periods; (viii) negative pledges; (ix) restrictive agreements; (x) line of business; and
(xi) speculative hedging. The events of default include the following, in each case subject to certain exceptions: (a) failure to
make required payments under the Secured Credit Facility; (b) material breaches of representations or warranties under the
Secured Credit Facility; (c) failure to observe covenants or agreements under the Secured Credit Facility; (d) failure to pay or
default under certain other material indebtedness; (e) bankruptcy or insolvency; (f) certain Employee Retirement Income
Security Act, or ERISA events; (g) certain material judgments; (h) actual or asserted invalidity of the Guarantee and collateral
agreements or the other security documents or failure of the guarantees or perfected liens thereunder; and (i) a change of
control. In addition, Booz Allen Hamilton is required to meet certain financial covenants at each quarter end, namely
Consolidated Net Total Leverage and Consolidated Net Interest Coverage Ratios. As of March 31, 2022 and 2021, Booz Allen
Hamilton was in compliance with all financial covenants associated with its debt and debt-like instruments.
During fiscal 2022, interest payments of $19.6 million and $7.2 million were made for Term Loan A and Term Loan B,
respectively. During fiscal 2021, interest payments of $23.6 million and $7.8 million were made for Term Loan A and Term
Loan B, respectively.
Borrowings under the Term Loans, and if used, the Revolving Credit Facility, incur interest at a variable rate. In
accordance with Booz Allen Hamilton's risk management strategy, between April 6, 2017 and April 4, 2019, Booz Allen
Hamilton executed a series of interest rate swaps. As of March 31, 2022, Booz Allen Hamilton had interest rate swaps with an
aggregate notional amount of $700 million. These instruments hedge the variability of cash outflows for interest payments on
the Term Loans and the Revolving Credit Facility. The Company's objectives in using cash flow hedges are to reduce volatility
due to interest rate movements and to add stability to interest expense (see Note 11 in our consolidated financial statements).
Senior Notes
On June 17, 2021, Booz Allen Hamilton issued $500.0 million aggregate principal amount of its 4.000% Senior Notes due
July 1, 2029 (the “Senior Notes due 2029”) under an Indenture, dated as of June 17, 2021, among Booz Allen Hamilton, certain
subsidiaries of Booz Allen Hamilton, as guarantors (the “2029 Subsidiary Guarantors”), and Wilmington Trust, National
Association (in such capacity, the “2029 Trustee”), as supplemented by the First Supplemental Indenture, dated as of June 17,
2021, among Booz Allen Hamilton, the 2029 Subsidiary Guarantors and the 2029 Trustee. The Senior Notes due 2029 and the
related guarantees are Booz Allen Hamilton’s and each 2029 Subsidiary Guarantors’ senior unsecured obligations and rank
equally in right of payment with all of Booz Allen Hamilton’s and the 2029 Subsidiary Guarantors’ existing and future senior
indebtedness and rank senior in right of payment to any of Booz Allen Hamilton’s and the 2029 Subsidiary Guarantors’ future
subordinated indebtedness. The net proceeds from the sale of the Senior Notes due 2029 were used to fund the acquisition of
Liberty and to pay related fees and expenses.
F-26
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
Booz Allen Hamilton may redeem some or all of the Senior Notes due 2029 at any time prior to July 1, 2024, at a price
equal to 100.00% of the principal amount of the Senior Notes due 2029 redeemed, plus accrued and unpaid interest, if any, to
(but not including) the redemption date, plus an applicable “make-whole premium.” Booz Allen Hamilton may redeem the
Senior Notes due 2029 at its option, in whole at any time or in part from time to time, upon certain required notice, at any time
(i) on and after July 1, 2024, at a price equal to 102.00% of the principal amount of the Senior Notes due 2029 redeemed, (ii) on
or after July 1, 2025, at a price equal to 101.00% of the principal amount of the Senior Notes due 2029 redeemed, and (iii) on
July 1, 2026 and thereafter, at a price equal to 100.00% of the principal amount of the Senior Notes due 2029 redeemed, in each
case, plus accrued and unpaid interest, if any, to (but not including) the applicable redemption date. In addition, at any time on
or prior to July 1, 2024, Booz Allen Hamilton may redeem up to 40.00% of the Senior Notes due 2029 with an amount equal to
the net cash proceeds of certain equity offerings at a redemption price equal to 104.00%, plus accrued and unpaid interest, if
any, to (but not including) the redemption date, provided, however, that at least 50.00% of the original aggregate principal
amount of the Senior Notes due 2029 must remain outstanding after each such redemption; and provided, further, that such
redemption shall occur within 180 days after the date on which any such equity offering is consummated.
Interest is payable on the Senior Notes due 2029 semi-annually in cash in arrears on July 1 and January 1 of each year,
beginning on January 1, 2022. In connection with the issuance of the Senior Notes due 2029, the Company recognized
$6.5 million of issuance costs, which were recorded as an offset against the carrying value of debt and will be amortized to
interest expense over the term of the Senior Notes due 2029.
On August 24, 2020, Booz Allen Hamilton issued $700.0 million aggregate principal amount of its 3.875% Senior Notes
due 2028 (the “Senior Notes due 2028”, and, together with the Senior Notes due 2029, the "Senior Notes") under an Indenture,
dated as of August 24, 2020, among Booz Allen Hamilton, certain subsidiaries of Booz Allen Hamilton, as guarantors (the
“2028 Subsidiary Guarantors”), and Wilmington Trust, National Association as trustee (in such capacity, the “2028 Trustee”),
as supplemented by the First Supplemental Indenture, dated as of August 24, 2020, among Booz Allen Hamilton, the 2028
Subsidiary Guarantors and the 2028 Trustee. Each of Booz Allen Hamilton's existing and future restricted subsidiaries that
guarantee its obligations under the Secured Credit Facility or certain other indebtedness guarantee the Senior Notes due 2028 on
a senior unsecured basis. The Senior Notes due 2028 and the guarantees are Booz Allen Hamilton’s and each 2028 Subsidiary
Guarantors’ senior unsecured obligations and rank equally in right of payment with all of Booz Allen Hamilton’s and the 2028
Subsidiary Guarantors’ existing and future senior indebtedness and rank senior in right of payment to any of Booz Allen
Hamilton’s and the Subsidiary Guarantors’ future subordinated indebtedness.
Booz Allen Hamilton may redeem some or all of the Senior Notes due 2028 at any time prior to September 1, 2023, at a
price equal to 100.00% of the principal amount of the Senior Notes due 2028 redeemed, plus accrued and unpaid interest, if
any, to (but not including) the redemption date, plus an applicable “make-whole premium.” Booz Allen Hamilton may redeem
the Senior Notes due 2028 at its option, in whole at any time or in part from time to time, upon certain required notice, at any
time (i) on and after September 1, 2023, at a price equal to 101.94% of the principal amount of the Senior Notes due 2028, (ii)
on or after September 1, 2024, at a price equal to 100.97% of the principal amount of the Senior Notes due 2028, and (iii) on
September 1, 2025 and thereafter, at a price equal to 100.00% of the principal amount of the Senior Notes due 2028, in each
case, plus accrued and unpaid interest, if any, to (but not including) the applicable redemption date. In addition, at any time on
or prior to September 1, 2023, Booz Allen Hamilton may redeem up to 40.00% of the original aggregate principal amount of
the Senior Notes due 2028 with the net cash proceeds of certain equity offerings at a redemption price equal to 103.88% of the
principal amount of the Senior Notes due 2028, plus accrued and unpaid interest, if any, to (but not including) the redemption
date, provided that at least 50.00% of the original aggregate principal amount of the Senior Notes due 2028 remains outstanding
after each such redemption; and the redemption occurs within 180 days of the closing date of such equity offering.
Interest is payable on the Senior Notes due 2028 semi-annually on March 1 and September 1 of each year, beginning on
March 1, 2021, and principal is due at maturity on September 1, 2028. In connection with the issuance of the Senior Notes due
2028, the Company recognized $9.2 million of issuance costs, which were recorded as an offset against the carrying value of
debt and will be amortized to interest expense over the term of the Senior Notes due 2028.
F-27
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
The following table summarizes required future debt principal repayments:
Payments Due By March 31,
Term Loan A
Term Loan B
Senior Notes 2028
Senior Notes 2029
Interest on indebtedness
Total
Total
$1,241,398
380,321
700,000
500,000
446,697
$3,268,416
2023
$64,488
3,891
—
—
76,677
$145,056
2024
$64,488
3,891
—
—
75,550
$143,929
2025
$64,488
3,891
—
—
74,270
$142,649
2026
$64,488
3,891
—
—
73,067
$141,446
2027
$983,446
364,757
—
—
56,445
$1,404,648
Thereafter
—
—
700,000
500,000
90,688
$1,290,688
Interest on debt and debt-like instruments consisted of the following:
Term Loan A Interest Expense
Term Loan B Interest Expense
Interest on Revolving Credit Facility
Senior Notes Interest Expense
Deferred Payment Obligation Interest (1)
Amortization of Debt Issuance Costs (DIC) and Original Issue
Discount (OID) (2)
Interest Swap Expense
Other
Total Interest Expense
Fiscal Year Ended March 31,
2022
2021
2020
19,570 $
7,207
25
42,902
—
4,619
17,535
494
92,352 $
23,541 $
7,787
799
23,476
—
4,396
20,558
713
81,270 $
50,080
15,739
92
17,938
5,740
4,688
2,094
589
96,960
$
$
(1) In connection with Carlyle Group indirectly acquiring all of the issued and outstanding stock of the Company on July 31,
2008, the Company established a Deferred Payment Obligation, payable 8.5 years after the closing date, or until settlement of
all outstanding claims, less any settled claims. All remaining potential claims outstanding that were able to be indemnified
under the Deferred Payment Obligation related to former officers and stockholders' lawsuits, were all settled as of December
31, 2019. Interest payments on the Deferred Payment Obligation were made twice a year in January and July. The final
payment was made during fiscal 2020.
(2) DIC and OID on the Term Loans and Senior Notes are recorded as a reduction of long-term debt in the consolidated balance
sheet and are amortized ratably over the life of the related debt using the effective rate method. DIC on the Company's
Revolving Credit Facility is recorded as a long-term asset on the consolidated balance sheet and amortized ratably over the term
of the Revolving Credit Facility.
11. DERIVATIVES
The Company utilizes derivative financial instruments to manage interest rate risk related to its variable rate debt. The
Company’s objectives in using these interest rate derivatives, which were designated as cash flow hedges, are to manage its
exposure to interest rate movements and reduce volatility of interest expense. The aggregate notional amount of all interest rate
swap agreements was $700.0 million as of March 31, 2022. The swaps have staggered maturities, ranging from June 30, 2022
to June 30, 2025. These swaps mature within the last tranche of the Company's floating rate debt (November 26, 2026).
The floating-to-fixed interest rate swaps involve the exchange of variable interest amounts from a counterparty for the
Company making fixed-rate interest payments over the life of the agreements without exchange of the underlying notional
amount and effectively converting a portion of the variable rate debt into fixed interest rate debt.
Derivative instruments are recorded in the consolidated balance sheet on a gross basis at estimated fair value. As of
March 31, 2022, $4.1 million, $4.3 million and $39 thousand were classified as other long term assets, other current liabilities
and other long-term liabilities, respectively, on the consolidated balance sheet. As of March 31, 2021, $17.2 million and $21.0
F-28
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
million were classified as other current liabilities, and other long-term liabilities, respectively, on the consolidated balance
sheet.
For interest rate swaps designated as cash flow hedges, the changes in the fair value of derivatives is recorded in
Accumulated Other Comprehensive Income (Loss), net of taxes, and is subsequently reclassified into interest expense in the
period that the hedged forecasted interest payments are made on the Company's variable-rate debt. Over the next 12 months,
the Company estimates that $4.4 million will be reclassified as an increase to interest expense. Cash flows associated with
periodic settlements of interest rate swaps will be classified as operating activities in the consolidated statement of cash flows.
The effect of derivative instruments on the accompanying consolidated financial statements is as follows:
Fiscal year ended March 31,
Derivatives in Cash Flow
Hedging Relationships
Location of Gain or Loss
Recognized in Income on
Derivatives
Amount of Gain (Loss) Recognized in
AOCI on Derivatives
2022
2021
2020
Amount of Loss Reclassified from
AOCI into Income (1)
2021
2022
2020
Interest rate swaps
Interest expense
$
20,352 $
(2,071) $
(55,871) $
(17,535) $
(20,558) $
(2,094)
(1) The reclassifications from accumulated other comprehensive gain (loss) to net income was reduced by taxes of $4.6
million, $5.4 million and $0.5 million for fiscal 2022, 2021 and 2020.
The Company is subject to counterparty risk in connection with its interest rate swap derivative contracts. Credit risk
related to a derivative financial instrument represents the possibility that the counterparty will not fulfill the terms of the
contract. The Company mitigates this credit risk by entering into agreements with credit-worthy counterparties and regularly
reviews its credit exposure and the creditworthiness of the counterparties.
12. LEASES
The Company's leases are generally for facilities and office space. The Company adopted ASU 2016-02, Leases (Topic
842) on April 1, 2019 using the modified retrospective transition approach, and as a result did not recast comparative prior
period information and presented prior period amounts and disclosures under ASC 840, Leases (Topic 840).
The Company’s total lease cost is recorded primarily within general and administrative expenses on the consolidated
statement of operations and consisted of the following:
Operating lease cost
Short-term lease cost
Variable lease cost
Total operating lease costs
Fiscal Year Ended
March 31,
2022
2021
2020
$
69,831 $
585
11,641
68,702 $
3,780
12,843
$
82,057 $
85,325 $
71,067
9,657
11,657
92,381
F-29
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
Future minimum operating lease payments for noncancelable operating leases as of March 31, 2022 are as follows:
For the Fiscal Year Ending March 31,
Operating Lease Payments
2023
2024
2025
2026
2027
Thereafter
Total future lease payments
Less: imputed interest
Total lease liabilities
Supplemental cash flow information related to leases was as follows:
$
$
64,528
74,462
70,907
52,065
30,400
45,537
337,899
(38,495)
299,404
Fiscal Year Ended
March 31,
2022
2021
2020
Cash paid for amounts included in the measurement of lease liabilities
$
76,100 $
69,320 $
Operating lease liabilities arising from obtaining ROU assets (1)
41,206
52,454
53,741
26,378
(1) Includes all noncash increases and decreases arising from new or remeasured operating lease arrangements
Other information related to leases was as follows:
Weighted average remaining lease term (in years)
Weighted average discount rate
13. INCOME TAXES
The components of income tax expense were as follows:
March 31,
2022
2021
5.0
4.5 %
5.5
4.6 %
Current
U.S. Federal
State and local
Foreign
Total current
Deferred
U.S. Federal
State and local
Foreign
Total deferred
Total
2022
Fiscal Year Ended March 31,
2021
2020
$
$
232,844 $
26,333
8,486
267,663
(146,581)
11,781
4,603
(130,197)
137,466 $
(227,309) $
39,542
9,250
(178,517)
245,624
(13,626)
—
231,998
53,481 $
(2,638)
18,410
15,625
31,397
59,856
5,578
—
65,434
96,831
F-30
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
A reconciliation of the provision for income tax to the amount computed by applying the statutory federal income tax rate
to income from continuing operations before income taxes for each of the three years ended March 31 is as follows:
Income tax expense computed at U.S. federal statutory rate
$
126,981 $
139,112 $
121,681
Fiscal Year Ended March 31,
2022
2021
2020
Increases (reductions) resulting from:
State and local income taxes, net of federal tax
Foreign income taxes, net of federal tax
Meals and entertainment
Re-measurement of current year losses under CARES Act
Excess tax benefits from stock-based compensation
Research and development and other federal credits
Executive compensation -162(m)
Foreign-Derived Intangible Income (FDII)
Changes in uncertain tax positions
Other
Income tax expense from operations
28,762
9,243
343
—
(4,227)
(34,080)
3,614
(9,115)
16,938
(993)
137,466 $
$
17,586
6,679
653
(76,767)
(8,556)
(30,313)
3,813
(4,536)
6,793
(983)
53,481 $
20,031
12,344
1,761
—
(10,265)
(90,898)
2,346
(4,915)
44,621
125
96,831
For the fiscal 2021 tax year, the Company generated a tax loss for U.S. Federal and state tax purposes resulting from the
treatment of costs associated with property, plant, and equipment. As a result of a provision in the Coronavirus Aid, Relief and
Economic Security Act ("CARES Act"), taxpayers are allowed to carry net operating losses generated in fiscal 2019, 2020 and
2021 back to the five prior tax years (fiscal years 2016 - 2020). Accordingly, the Company recorded a long-term income tax
receivable in fiscal 2021 which was largely offset by a corresponding deferred tax liability reflected within the property and
equipment deferred tax liability in the Company's significant components of deferred income tax assets and liabilities. The
corporate tax rate for the Company was 35% during fiscal 2016 and 2017, 31.5% during fiscal 2018, and 21% since fiscal 2019.
Carrying the loss back to these years with higher tax rates resulted in an income tax benefit in fiscal 2021 of $76.8 million
related to the re-measurement of the loss for the applicable carryback fiscal years. The receivable remained outstanding at the
end of fiscal 2022. For state tax purposes, an incremental net operating loss carryforward of $89.6 million that was generated
was used in fiscal 2022 and will continue to be utilized in fiscal 2023 to offset state taxes. Including the impact of these state
carryforwards, this transaction resulted in an incremental state deferred tax asset of $11.8 million.
The Company has both income tax receivables and income tax payable on its consolidated balance sheet as follows:
Current income tax receivable
Long term income tax receivable
Current income tax payable
March 31,
2022
2021
$
$
$
47,142 $
341,738 $
34,324 $
175,541
333,188
30,694
The current income tax receivable as of March 31, 2022 represents estimated payments made in fiscal 2022 and prior
periods that will be applied to the Company’s future U.S. federal and state tax returns. This amount is classified as prepaid
expenses and other current assets on the consolidated balance sheet. The current income tax payable as of March 31, 2022
represents current liabilities associated with the Company’s amended fiscal 2020 U.S. state returns that the Company intends to
file in fiscal 2023. This amount is classified as other current liabilities on the consolidated balance sheet. The long-term income
tax receivable as of March 31, 2022 represents the carryback claim for the fiscal 2021 net operating loss and the amended U.S.
federal return refund claims for research and development tax credits. This amount is classified as other long-term assets on the
consolidated balance sheet.
F-31
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
The significant components of the Company’s deferred income tax assets and liabilities were as follows:
Deferred income tax assets:
Accrued expenses
Deferred compensation
Stock-based compensation
Pension and postretirement benefits
Net operating loss carryforwards
Extended disability benefits
Interest rate swaps
Federal tax credits
State tax credits
Operating lease liabilities
Other
Total gross deferred income tax assets
Less: Valuation allowance
Total net deferred income tax assets
Deferred income tax liabilities:
Unbilled receivables
Intangible assets
Debt issuance costs
Property and equipment
Operating lease right-of-use assets
Internally developed software
Other
Total deferred income tax liabilities
Net deferred income tax liability
March 31,
2022
2021
$
$
80,344 $
56,361
9,783
30,797
44,118
2,426
75
—
24,268
82,799
—
330,971
(8,715)
322,256
(209,753)
(56,657)
(1,435)
(198,940)
(59,401)
—
(3,345)
(529,531)
(207,275) $
78,005
52,191
5,724
32,881
98,471
2,838
9,955
12,582
27,243
86,046
3,378
409,314
(6,165)
403,149
(245,809)
(69,519)
(1,488)
(336,321)
(62,442)
(20,309)
—
(735,888)
(332,739)
Deferred tax balances arise from temporary differences between the carrying amount of assets and liabilities and their tax
basis and are stated at the enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation
allowance is provided against deferred tax assets when it is more likely than not that some or all of the deferred tax asset will
not be realized. In determining if the Company's deferred tax assets are realizable, management considers all positive and
negative evidence, including the history of generating financial reporting earnings, future reversals of existing taxable
temporary differences, projected future taxable income, as well as any tax planning strategies.
As of March 31, 2022 and 2021, the Company had available federal, state, and foreign net operating loss ("NOL
carryforwards") of $44.1 million and $98.5 million, respectively, that may be applied against future taxable income. The federal
net operating loss of $1.4 million is primarily attributable to an acquisition and will begin to expire in fiscal 2037. The state net
operating loss of $36.6 million is primarily attributable to the fiscal 2021 loss. The foreign net operating loss is primarily
attributable to operations in jurisdictions where the Company is expanding its business. The Company recorded a partial
valuation allowance against those federal, state and foreign net operating losses it believes will expire prior to utilization.
F-32
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
Uncertain Tax Positions
The Company maintains reserves for uncertain tax positions related to unrecognized income tax benefits. These reserves
involve considerable judgment and estimation and are evaluated by management based on the best information available
including changes in tax laws and other information. As of March 31, 2022, 2021, and 2020, the Company has recorded $79.9
million, $62.9 million, and $56.1 million, respectively, of reserves for uncertain tax positions which includes potential tax
benefits of $78.5 million, $62.7 million, and $55.2 million, respectively, that, when recognized, impact the effective tax rate.
As of March 31, 2022 and 2021, $3.1 million and $11.1 million, respectively, of the reserve is reflected as a reduction to
deferred taxes and the remaining balance is recorded as a component of other long-term liabilities in the consolidated balance
sheet.
A reconciliation of the beginning and ending amount of potential tax benefits for the periods presented is as follows:
Beginning of year
Increases in prior year position
Increases in current year position
Decreases in prior year position
Settlements with taxing authorities
Lapse of statute of limitations
End of year
2022
March 31,
2021
2020
62,742 $
2,620
13,530
(373)
—
—
78,519 $
55,221 $
5,018
12,753
—
—
(10,250)
62,742 $
11,083
34,001
10,970
(765)
—
(68)
55,221
$
$
During fiscal 2022, the Company recognized an increase in reserves for uncertain tax positions of approximately $13.5
million related to an increase in research and development tax credits available for fiscal years 2022 and prior years. The
Company recognized accrued interest and penalties of $1.7 million, $0.3 million and $0.5 million for fiscal 2022, 2021, and
2020, respectively, related to the reserves for uncertain tax positions in the income tax provision. Included in the total reserve
for uncertain tax positions are accrued penalties and interest of approximately $2.9 million, $1.2 million and $0.9 million at
March 31, 2022, 2021, and 2020, respectively.
The Company is subject to taxation in the United States and various state and foreign jurisdictions. As of March 31, 2022,
the Company's tax years ended March 31, 2016 and forward are open and subject to examination by the federal tax authorities.
The other jurisdictions' currently open or under examination are not considered to be material.
The Company is currently contesting tax assessments from the District of Columbia Office of Tax and Revenue ("DC
OTR") for fiscal years 2013 through 2015. The assessment relates to $11.7 million of taxes, net of federal tax benefits, as of
March 31, 2022. During fiscal 2022, the Company received notification that the District of Columbia Office of Administrative
Hearings ruled in favor of the DC OTR. The Company is currently appealing the decision with the District of Columbia Court
of Appeals ("DC COA"). In the fourth quarter of fiscal year 2022, the DC COA filed the briefing order, indicating that the
Company's brief is due May 9, 2022 and, absent the DC OTR requesting an extension, DC OTR's response brief is due June 8,
2022. The Company filed its brief on May 9, 2022.
As a result of the ruling in favor of the DC OTR, the Company made an $8.6 million payment during the second quarter
of fiscal 2022 related to these assessments, consisting of $3.7 million of tax related to fiscal 2014 and 2015, as well as
$4.9 million of penalties and interest. This payment was made under protest and, given the Company's belief that it will be
recovered, the payment has been recorded as a long term income tax-receivable (a component of other long-term assets) on its
consolidated balance sheet. There has been no impact to income tax expense during fiscal 2022 related to this payment.
The Company has taken similar tax positions with respect to subsequent fiscal years. As of March 31, 2022, the Company
does not maintain reserves for any uncertain tax positions related to the contested tax benefits related to 2013 through 2015, nor
does it maintain reserves for the similar tax positions taken in the subsequent fiscal years. Management continues to evaluate
this position quarterly to determine if a change in estimate is needed. If an adverse final resolution were to occur with respect to
uncertain tax positions related to the contested tax benefits or the similar tax positions taken for fiscal years 2013 through 2020,
the total potential future tax expense that would arise would be approximately $40.2 million to $55.8 million, net of federal
benefit.
F-33
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
Effective fiscal 2023, the Tax Cuts and Jobs Act of 2017 requires the capitalization of research and development costs for
tax purposes, which can then be amortized over five years and 15 years for domestic and foreign costs, respectively. Congress
has proposed tax legislation to delay the effective date of this change to 2026, but it is uncertain whether the proposed delay
will ultimately be enacted into law. If the current effective date remains in place, the Company's initial assessment is that the
Company would experience a material decrease in cash from operations, but that the deferred tax liability would be offset by a
corresponding amount.
The Company has a significant long-term income tax receivable as of March 31, 2022, which primarily represents the
amended U.S. federal return refund claims for research and development tax credits and the carryback claim for the fiscal 2021
net operating loss. The Company is currently under federal audit by the Internal Revenue Service (“IRS”) for fiscal years 2016,
2017 and 2019 and the receipt of our U.S federal return refund claims is contingent upon the completion of the ongoing IRS
audits.
14. EMPLOYEE BENEFIT PLANS
Defined Contribution Plan
The Company sponsors the Employees’ Capital Accumulation Plan, or ECAP, which is a qualified defined contribution
plan that covers eligible U.S. and certain international employees. ECAP provides for distributions to participants by reason of
retirement, death, disability, or termination of employment. The Company provides an annual matching contribution of up to
6% of eligible annual compensation. Total expense recognized under ECAP for fiscal 2022, 2021, and 2020 was $176.8
million, $166.3 million, and $151.0 million, respectively and the Company-paid contributions were $171.6 million, $163.0
million, and $146.5 million, respectively.
Post Retirement Benefit Plans
The Company provides postretirement healthcare benefits to former officers under a medical indemnity insurance plan,
with premiums paid by the Company. This plan is referred to as the Officer Medical Plan. The Company recognizes a liability
for the defined benefit plans' underfunded status, measures the defined benefit plans' obligations that determine its funded status
as of the end of the fiscal year, and recognizes as a component of accumulated other comprehensive income the changes in the
defined benefit plans' funded status that are not recognized as components of net periodic benefit cost.
The components of net postretirement medical expense for the Officer Medical Plan were as follows:
Service cost
Interest cost
Total postretirement medical expense
Fiscal Year Ended March 31,
2022
2021
2020
$
$
6,505 $
4,063
10,568 $
5,657 $
4,237
9,894 $
4,955
4,859
9,814
The service cost component of net periodic benefit cost is included in cost of revenue and general and administrative
expenses, and the non-service cost components of net periodic benefit cost (interest cost and net actuarial loss) are included as
part of other income (expense), net in the accompanying consolidated statements of operations.
The weighted-average discount rate used to determine the year-end benefit obligation for the Officer Medical Plan were
3.75%, 3.40% and 3.60% for fiscal 2022, 2021, and 2020, respectively.
Assumed healthcare cost trend rates for the Officer Medical Plan at March 31, 2022 and 2021 were as follows:
Pre-65 initial rate
Healthcare cost trend rate assumed for next year
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
Year that the rate reaches the ultimate trend rate
2022
2021
6.30 %
4.50 %
2031
6.55 %
4.50 %
2029
F-34
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
Post-65 initial rate
Healthcare cost trend rate assumed for next year
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
Year that the rate reaches the ultimate trend rate
2022
2021
6.45 %
4.50 %
2031
6.75 %
4.50 %
2029
The changes in the benefit obligation, plan assets, and funded status of the Officer Medical Plan were as follows:
Benefit obligation, beginning of the year
Service cost
Interest cost
Net actuarial gain
Benefits paid
Benefit obligation, end of the year
Fiscal Year Ended March 31,
2022
2021
2020
121,518 $
6,505
4,063
(13,563)
(5,018)
113,505 $
119,609 $
5,657
4,237
(3,466)
(4,519)
121,518 $
120,341
4,955
4,859
(6,761)
(3,785)
119,609
$
$
The net actuarial gain related to the benefit obligation in fiscal 2022 was primarily due to favorable changes in estimated
medical costs and increases in discount rates, partially offset by updates to demographic assumptions and outlook of higher
future medical inflation. The net actuarial gain related to the benefit obligation in fiscal 2021 was primarily due to a favorable
medical cost experience, partially offset by the unfavorable impact from declines in discount rates as of March 31, 2021. The
net actuarial gain related to the benefit obligation in fiscal 2020 was due mainly to the repeal of excise tax on high cost health
plans in December 2019, partially offset by the unfavorable impact from declines in discount rates and changes in estimated
medical costs as of March 31, 2020.
Changes in plan assets
Fair value of plan assets, beginning of the year
Employer contributions
Benefits paid
Fair value of plan assets, end of the year
Fiscal Year Ended March 31,
2022
2021
2020
$
$
— $
5,018
(5,018)
— $
— $
4,519
(4,519)
— $
—
3,785
(3,785)
—
As of March 31, 2022 and 2021, the unfunded status of the Officer Medical Plan was $113.5 million and $121.5 million,
respectively, which is included in other long-term liabilities in the accompanying consolidated balance sheets.
F-35
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
The expected future medical benefit payments and related contributions are as follows:
For the Fiscal Year Ending March 31,
2023
2024
2025
2026
2027
2028 - 2032
Long-term Disability Benefits
$
$
$
$
$
$
4,001
4,304
4,546
4,931
5,239
31,203
The Company offers medical and dental benefits to inactive employees (and their eligible dependents) on long-term
disability. These benefits do not vary with an employee's years of service; therefore, the Company is required to accrue the
costs of the benefits at the date the inactive employee becomes disability eligible and elects to participate in the benefit. The
accrued cost for such benefits is calculated using an actuarial estimate. The accrued cost for these benefits was $9.3 million and
$10.9 million at March 31, 2022 and 2021, respectively, and are presented in other long-term liabilities in the accompanying
consolidated balance sheets.
15. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
All amounts recorded in other comprehensive loss are related to the Company's post-retirement plans and interest rate
swaps designated as cash flow hedges. The following table shows the changes in accumulated other comprehensive loss, net of
tax:
Fiscal Year Ended March 31, 2022
Derivatives
designated as cash
flow hedges
Post-
retirement
plans
Totals
Beginning of year
$
(1,562) $
(28,209) $
(29,771)
Other comprehensive income before reclassifications (1)
Amounts reclassified from accumulated other comprehensive loss
Net current-period other comprehensive income
End of year
10,294
79
10,373
8,811
15,032
12,951
27,983
(226)
25,326
13,030
38,356
8,585
(1) Changes in other comprehensive income (loss) before reclassification for derivatives designated as cash flow hedges are
recorded net of tax benefits of $5.3 million for the fiscal year ended March 31, 2022.
Fiscal Year Ended March 31, 2021
Derivatives
designated as cash
flow hedges
Post-
retirement
plans
Totals
Beginning of year
$
(4,127) $
(41,874) $
(46,001)
Other comprehensive income (loss) before reclassifications (2)
Amounts reclassified from accumulated other comprehensive loss
Net current-period other comprehensive income
2,481
84
2,565
(1,529)
15,194
13,665
952
15,278
16,230
End of year
$
(1,562) $
(28,209) $
(29,771)
(2) Changes in other comprehensive income (loss) before reclassification for derivatives designated as cash flow hedges are
recorded net of tax benefits of $0.5 million for the fiscal year ended March 31, 2021.
F-36
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
Fiscal Year Ended March 31, 2020
Derivatives
designated as cash
flow hedges
Post-
retirement
plans
Totals
Beginning of year
Other comprehensive income (loss) before reclassifications (3)
Amounts reclassified from accumulated other comprehensive loss
Net current-period other comprehensive income (loss)
End of year
$
(9,068) $
4,860
81
4,941
$
(4,127) $
(2,122) $
(41,300)
1,548
(39,752)
(41,874) $
(11,190)
(36,440)
1,629
(34,811)
(46,001)
(3) Changes in other comprehensive income (loss) before reclassification for derivatives designated as cash flow hedges are
recorded net of tax expenses of $14.6 million for the fiscal year ended March 31, 2020.
16. STOCKHOLDERS’ EQUITY
Common Stock
Holders of Class A Common Stock are entitled to one vote for each share. Each share of Class A Common is entitled to
participate equally in all dividends and other distributions declared on and payable with respect to the Class A Common Stock,
subject to the preferences and rights of any preferred stock and the General Corporation Law of the State of Delaware. The
Company’s ability to pay dividends to stockholders is limited as a practical matter by restrictions in the agreements governing
the Company's indebtedness.
The authorized and unissued shares of Class A Common Stock are available for future issuance upon stock option
exercises and vesting of restricted stock units without additional stockholder approval.
Share Repurchase Program
On December 21, 2011, the Board of Directors adopted a share repurchase program, which was most recently increased
on January 26, 2022 to authorize the repurchase of up to $2,160.0 million in shares of Class A Common Stock. A special
committee of the Board of Directors evaluates market conditions and other relevant factors and initiates repurchases under the
program from time to time. The share repurchase program may be suspended, modified or discontinued at any time at the
Company’s discretion without prior notice. During fiscal 2022, the Company purchased 4.7 million shares of Class A Common
Stock in a series of open market transactions for $389.9 million. During fiscal 2021, the Company purchased 3.8 million shares
of Class A Common Stock in a series of open market transactions for $293.4 million. As of March 31, 2022, the Company had
$651.6 million remaining under the share repurchase program.
Dividends
The following table summarizes the cash distributions recognized in the consolidated statement of cash flows:
Recurring dividends (1)
Fiscal Year Ended
March 31,
2022
2021
2020
$
209,057 $
181,066 $
146,602
(1) Amounts represent recurring quarterly dividends that were declared and paid for during each quarter of fiscal 2022, 2021,
and 2020.
F-37
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
17. STOCK-BASED COMPENSATION
The following table summarizes stock-based compensation expense recognized in the consolidated statements of
operations:
Fiscal Year Ended March 31,
2021
2020
2022
Cost of revenue
General and administrative expenses
Total
$
$
36,836 $
27,682 $
32,948
32,162
69,784 $
59,844 $
16,272
27,018
43,290
The following table summarizes the total stock-based compensation expense recognized in the consolidated statements of
operations by the following types of equity awards:
Equity Incentive Plan Options
Restricted Stock and Other Awards
Total
Fiscal Year Ended March 31,
2022
2021
2020
$
$
1,793 $
2,625 $
67,991
57,219
69,784 $
59,844 $
2,741
40,549
43,290
As of March 31, 2022 and 2021, there was $48.9 million and $43.3 million, respectively, of total unrecognized
compensation cost related to unvested stock-based compensation agreements. The unrecognized compensation cost as of
March 31, 2022 is expected to be fully amortized over the next 4.7 years. Absent the effect of forfeiture or acceleration of stock
compensation cost for any departures of employees, the following tables summarize the unrecognized compensation cost, the
weighted average period the cost is expected to be amortized, and the estimated annual compensation cost for the future periods
indicated below (excludes any future award):
Equity Incentive Plan Options
Restricted Stock and Other Awards
Total
Equity Incentive Plan Options
Restricted Stock and Other Awards
Total
Unrecognized
Compensation Cost
Weighted Average
Remaining Period to be
Recognized
March 31,
2022
March 31,
2021
March 31,
2022
March 31,
2021
$
$
2,359 $
46,528
48,887 $
3,426
39,881
43,307
3.2
1.7
3.5
1.9
Total Unrecognized Compensation Cost
Total
2023
2024
2025
2026
2027
$
2,359 $
1,274 $
681 $
312 $
46,528
30,448
$ 48,887 $ 31,722 $ 13,136 $
12,455
3,238
3,550 $
88 $
387
475 $
4
—
4
F-38
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
Equity Incentive Plan
Awards under the Company's Equity Incentive Plan, or EIP, may be made in the form of stock options; stock purchase
rights; restricted stock; restricted stock units; performance shares; performance units; stock appreciation rights; deferred share
units; dividend equivalents; and other stock-based awards. As of March 31, 2022 and 2021, there were 8.6 million and 9.3
million shares, respectively, available for future grant under the EIP.
Stock Options
Stock options under the EIP are granted at the discretion of the Board of Directors or its Compensation, Culture and
People Committee and expire ten years from the grant date. Stock options generally vest in equal installments over a five-year
period subject to the grantee’s continued service on each applicable vesting. All options under the EIP are exercisable, upon
vesting, for shares of Class A Common Stock of Holding.
During fiscal 2022 and 2021, the Company granted 0.1 million and 0.3 million options under the EIP, with an aggregate
grant date fair value of $1.6 million and $3.6 million, respectively.The total fair value of EIP options vested during both fiscal
2022 and 2021 were $2.4 million. The total intrinsic value of EIP options exercised during fiscal 2022 and 2021 was $11.4
million and $28.9 million, respectively.
As of March 31, 2022 and 2021, 0.3 million and 0.5 million options were unvested under the EIP, with a weighted
average grant date fair value of $12.73 and $11.64, respectively. There were 1.3 million and 1.4 million EIP options
outstanding as of March 31, 2022 and 2021, with a weighted average exercise price of $49.34 and $44.86, respectively.
Annual Incentive Plans
On October 1, 2010, the Board of Directors adopted an Annual Incentive Plan, or AIP, in connection with the initial
public offering to more appropriately align the Company’s compensation programs with those of similarly situated companies.
The amount of the annual incentive payment is determined based on performance targets established by the Board of Directors
and a portion of the bonus may be paid in the form of equity (including stock and other awards under the EIP). Such equity
awards vest over a three-year period subject to the employee’s continued service to the Company. The related expense is
recognized in the accompanying consolidated statements of operations based on grant date fair value over the vesting period of
three years.
The Company maintains annual incentive programs for officers and key employees. The equity compensation would be
issued in the form of restricted stock units of which a portion would vest based on the passage of time, and the other portion
would vest based on specified performance conditions to be achieved over a specified time period. A restricted stock unit
represents a contingent right to receive one share of Class A Common Stock upon vesting. Service-based restricted stock units
vest in equal installments over a three-year period subject to the grantee's continued service on each applicable vesting date and
are settled for shares of Class A Common Stock. Dividend equivalents are paid in respect of the service-based restricted stock
units when dividends are paid on the Company's Class A Common Stock. Performance-based awards vest at the end of a three-
year period subject to certain specified financial performance criteria and the grantee's continued service through the period.
These awards are settled for Class A Common Stock and dividend equivalents. Compensation expense for performance-based
awards during the performance period is estimated at each reporting date using management's expectation of the probable
achievement of the specified performance criteria.
The Company also maintains a program whereby certain non-officer employees would be eligible to receive a portion of
their annual bonus in equity. The equity compensation would be issued in the form of restricted stock units that would vest
immediately after issuance or over an applicable vesting period subject to the employee's continued service for the Company.
The associated expense will be recognized in the accompanying consolidated statements of operations based on grant date fair
value.
Grants of Class A Restricted Common Stock and Restricted Stock Units
During fiscal 2022, the Board of Directors granted an aggregate of 1.1 million Restricted Stock Units with service-based
and performance-based vesting conditions to existing officers, vice presidents, and other employees and non-employees of the
Company, as well as to newly promoted and hired partners and vice presidents. The awards will vest based on the applicable
vesting period for the specific award subject to the employees' continued employment with the Company. The Board of
Directors also granted Class A Restricted Common Stock to members of the Board of Directors during fiscal 2022. These
awards generally vest over one year.
The aggregate fair value of all awards issued during fiscal 2022 was $89.9 million and was based on the grant date stock
price, which ranged from $41.65 to $89.78. This amount will be recognized in the accompanying consolidated statements of
F-39
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
operations over the applicable vesting period of the awards. The total fair value of restricted stock shares vested during fiscal
2022 and 2021 was $59.6 million and $49.8 million, respectively.
As permitted under the terms of the EIP, the Compensation, Culture and People Committee, as Administrator of the Plan,
authorized the withholding of taxes not to exceed the minimum statutory withholding amount, through the surrender of shares
of Class A Common Stock issuable upon the vesting or accelerated vesting of Restricted Stock. As a result of these
transactions, the Company repurchased 0.3 million shares and recorded them as treasury shares at a total cost of $29.3 million
in fiscal 2022.
The following table summarizes unvested restricted stock activity for the periods presented:
Unvested Restricted Stock Awards
Unvested at March 31, 2021
Granted
Vested
Forfeited
Unvested at March 31, 2022
Employee Stock Purchase Plan
Number of
Shares
Weighted
Average
Grant Date
Fair Value
920,500 $
1,154,622
935,485
75,377
1,064,260 $
65.37
77.85
63.72
80.33
79.29
The Company offers a tax qualified Employee Stock Purchase Plan, or ESPP, which is designed to enable eligible
employees to periodically purchase shares of the Class A Common Stock at a five percent discount from the fair market value
of the Class A Common Stock. The ESPP provides for quarterly offering periods. For the year ended March 31, 2022, 0.3
million shares of Class A Common Stock were purchased by employees under the ESPP. Since the program's inception, 3.2
million shares have been purchased by employees of the total 10 million shares available.
18. FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. In determining fair value, we consider the principal or most
advantageous market in which the asset or liability would transact, and if necessary, consider assumptions that market
participants would use when pricing the asset or liability.
The accounting standard for fair value measurements establishes a three-tier value hierarchy, which prioritizes the inputs
used in measuring fair value as follows: observable inputs such as quoted prices in active markets (Level 1); inputs other than
quoted prices in active markets that are observable either directly or indirectly (Level 2); and unobservable inputs in which
there is little or no market data, which requires the Company to develop its own assumptions (Level 3).
F-40
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
A financial instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the
fair value measurement. The financial instruments measured at fair value in the accompanying consolidated balance sheets
consist of the following:
Assets:
Long term deferred compensation plan asset (1)
Long-term derivative instruments (3)
Total Assets
Liabilities:
Current derivative instruments (3)
Long-term derivative instruments (3)
Long term deferred compensation plan liability (1)
Total Liabilities
Assets:
Long term deferred compensation plan asset (1)
Total Assets
Liabilities:
Contingent consideration liability (2)
Current derivative instruments (3)
Long-term derivative instruments (3)
Long term deferred compensation plan liability (1)
Total liabilities
Recurring Fair Value Measurements
as of March 31, 2022
Level 1
Level 2
Level 3
Total
16,512
—
—
4,088
—
—
16,512
4,088
$
16,512 $
4,088 $
— $
20,600
—
—
16,512
4,324
39
—
—
—
—
4,324
39
16,512
$
16,512 $
4,363 $
— $
20,875
Recurring Fair Value Measurements
as of March 31, 2021
Level 1
Level 2
Level 3
Total
$
$
$
$
$
$
$
14,142 $
14,142 $
— $
— $
— $
14,142
— $
14,142
— $
— $
1,223 $
1,223
— $
17,163 $
— $
17,163
— $
20,999 $
— $
20,999
14,142 $
— $
— $
14,142
14,142 $
38,162 $
1,223 $
53,527
(1) Investments in this category consist of primarily of mutual funds whose fair values are determined by reference to the
quoted market price per unit in active markets multiplied by the number of units held without consideration of transaction costs.
These assets represent investments held in a consolidated trust to fund the Company's non-qualified deferred compensation plan
and are recorded in other long-term assets and other long-term liabilities on our consolidated balance sheets.
(2) The Company recognized a contingent consideration liability of $3.6 million in connection with the acquisition of Aquilent
in fiscal 2017. As of March 31, 2021, the estimated fair value of the contingent consideration liability was $1.2 million, and was
valued using probability-weighted cash flows, which is based on the use of Level 3 fair value measurement inputs. As of
March 31, 2022 the relevant statute of limitations pertaining to the contingent liability expired at which point the Company
wrote off the existing liability balance.
(3) The Company’s interest rate swaps are considered over-the-counter derivatives and fair value is estimated based on the
present value of future cash flows using a model-derived valuation that uses Level 2 observable inputs such as interest rate yield
curves. See Note 11 to the consolidated financial statements for further discussion on the Company’s derivative instruments
designated as cash flow hedges.
We did not have any material items that were measured at fair value on a non-recurring basis as of March 31, 2022, with
the exception of the assets and liabilities acquired through the acquisitions of Liberty and Tracepoint (see Note 5).
F-41
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
The fair value of the Company's cash and cash equivalents, which are Level 1 inputs, approximated its carrying values at
March 31, 2022 and 2021. The fair value of the Company's debt instruments approximated its carrying value at March 31, 2022
and 2021. The fair value of debt is determined using quoted prices or other market information obtained from recent trading
activity of each debt tranche in markets that are not active (Level 2 inputs). The fair value is corroborated by prices derived
from the interest rate spreads of recently completed leveraged loan transactions of a similar credit profile, industry, and terms to
that of the Company. The fair value of the Senior Notes due 2029 and Senior Notes due 2028 are determined using quoted
prices or other market information obtained from recent trading activity in the high-yield bond market (Level 2 inputs).
19. RELATED-PARTY TRANSACTIONS
Two of our directors served on the board of directors of a subcontractor to which the Company subcontracted $70.0
million, $85.9 million and $79.7 million of services for fiscal 2022, 2021 and 2020, respectively. The subcontractor was
acquired by another company in August 2021, at which point the two directors ceased to serve on the board of directors.
20. COMMITMENTS AND CONTINGENCIES
Letters of Credit and Third-Party Guarantees
As of March 31, 2022 and 2021, the Company was contingently liable under open standby letters of credit and bank
guarantees issued by our banks in favor of third parties that totaled $8.4 million and $9.8 million, respectively. These letters of
credit and bank guarantees primarily support insurance and bid and performance obligations. At March 31, 2022 and 2021,
approximately $1.0 million and $0.9 million of these instruments reduce the available borrowings under the Revolving Credit
Facility. The remainder is guaranteed under a separate $20.0 million facility of which $12.6 million and $11.1 million,
respectively, was available to the Company at March 31, 2022 and 2021.
Government Contracting Matters - Provision for Claimed Indirect Costs
For fiscal 2022, 2021, and 2020, approximately 97%, 97%, and 96%, respectively, of the Company’s revenue was
generated from contracts where the end user was an agency or department of the U.S. government, including contracts where
the Company performed either as a prime contractor or subcontractor, and regardless of the geographic location in which the
work was performed. U.S. government contracts and subcontracts are subject to extensive legal and regulatory requirements.
From time to time and in the ordinary course of business, agencies of the U.S. government audit our claimed indirect costs and
conduct inquiries and investigations of our business practices with respect to government contracts to determine whether the
Company’s operations are conducted in accordance with these requirements and the terms of the relevant contracts. U.S.
government agencies, including the Defense Contract Audit Agency (DCAA), routinely audit our claimed indirect costs, for
compliance with the Cost Accounting Standards and the Federal Acquisition Regulation. These agencies also conduct reviews
and investigations and make inquiries regarding our accounting and other systems in connection with our performance and
business practices with respect to our government contracts and subcontracts. U.S. government audits, inquiries, or
investigations of the Company, whether related to the Company’s U.S. government contracts or subcontracts or conducted for
other reasons, could result in administrative, civil, or criminal liabilities, including withholding of payments, suspension of
payments, repayments, fines, or penalties being imposed upon the Company, or could lead to suspension or debarment from
future U.S. government contracting. Management believes it has recorded the appropriate provision for claimed indirect costs
for any audit, inquiry, or investigation of which it is aware that may be subject to any reductions and/or penalties. As of
March 31, 2022 and 2021, the Company had recorded liabilities of approximately $290.4 million and $263.2 million,
respectively, for estimated adjustments to claimed indirect costs based on its historical DCAA audit results, including the final
resolution of such audits with the Defense Contract Management Agency, for claimed indirect costs incurred subsequent to
fiscal 2011, and for contracts not yet closed that are subject to audit and final resolution.
F-42
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
Litigation
Our performance under U.S. government contracts and compliance with the terms of those contracts and applicable laws
and regulations are subject to continuous audit, review, and investigation by the U.S. government, which may include such
investigative techniques as subpoenas or civil investigative demands. Given the nature of our business, these audits, reviews,
and investigations may focus, among other areas, on various aspects of procurement integrity, labor time reporting, sensitive
and/or classified information access and control, executive compensation, and post government employment restrictions. We
are not always aware of our status in such matters, but we are currently aware of certain pending audits and investigations
involving labor time reporting, procurement integrity, and classified information access. In addition, from time to time, we are
also involved in legal proceedings and investigations arising in the ordinary course of business, including those relating to
employment matters, relationships with clients and contractors, intellectual property disputes, and other business matters. These
legal proceedings seek various remedies, including claims for monetary damages in varying amounts, none of which are
considered material, or are unspecified as to amount. Although the outcome of any such matter is inherently uncertain and may
be materially adverse, based on current information, we do not expect any of the currently ongoing audits, reviews,
investigations, or litigation to have a material adverse effect on our financial condition and results of operations. As of
March 31, 2022 and 2021, there were no material amounts accrued in the consolidated financial statements related to these
proceedings.
On June 7, 2017, Booz Allen Hamilton Inc. was informed that the U.S. Department of Justice (DOJ) is conducting a civil
and criminal investigation of the Company. In connection with the investigation, the DOJ has requested information from the
Company relating to certain elements of the Company’s cost accounting and indirect cost charging practices with the U.S.
government. Since learning of the investigation, the Company has engaged a law firm experienced in these matters to represent
the Company in connection with this matter and respond to the government's requests. As is commonly the case with this type
of matter, the Company has also been in contact with other regulatory agencies and bodies, including the SEC, which notified
the Company that it is conducting an investigation that the Company believes relates to the matters that are also the subject of
the DOJ's investigation. The Company may receive additional regulatory or governmental inquiries related to the matters that
are the subject of the DOJ's investigation. In accordance with the Company's practice, the Company is cooperating with all
relevant government parties. On May 12, 2021, the Company was informed that the DOJ has closed its criminal investigation.
The total cost associated with these matters will depend on many factors, including the duration of these matters and any related
findings. At this stage, the Company is not able to reasonably estimate the expected amount or range of cost or any loss
associated with these matters.
On June 19, 2017, a purported stockholder of the Company filed a putative class action lawsuit in the United States
District Court for the Eastern District of Virginia styled Langley v. Booz Allen Hamilton Holding Corp., No. 17-cv-00696
naming the Company, its Chief Executive Officer and its Chief Financial Officer as defendants purportedly on behalf of all
purchasers of the Company’s securities from May 19, 2016 through June 15, 2017. On September 5, 2017, the court named two
lead plaintiffs, and on October 20, 2017, the lead plaintiffs filed a consolidated amended complaint. The complaint asserts
claims under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, alleging
misrepresentations or omissions by the Company purporting to relate to matters that are the subject of the DOJ investigation
described above. The plaintiffs seek to recover from the Company and the individual defendants an unspecified amount of
damages. The Company believes the suit lacks merit and intends to defend against the lawsuit. Motions to dismiss were argued
on January 12, 2018, and on February 8, 2018, the court dismissed the amended complaint in its entirety without prejudice. At
this stage of the lawsuit, the Company is not able to reasonably estimate the expected amount or range of cost or any loss
associated with the lawsuit.
On November 13, 2017, a Verified Shareholder Derivative Complaint was filed in the United States District Court for the
District of Delaware styled Celine Thum v. Rozanski et al., C.A. No. 17-cv-01638, naming the Company as a nominal
defendant and numerous current and former officers and directors as defendants. The complaint asserts claims for breach of
fiduciary duties, unjust enrichment, waste of corporate assets, abuse of control, gross mismanagement, and violations of
Sections 14(a), 10(b) and 20(a) of the Exchange Act, purportedly relating to matters that are the subject of the DOJ
investigation described above. The parties have stipulated to a stay of the proceedings pending the outcome of the securities
litigation (described above), which the court so ordered on January 24, 2018. On December 12, 2019, the court ordered that the
stay remain in effect and ordered the parties to submit periodic status reports. On May 27, 2020, November 23, 2020, May 24,
2021, and November 22, 2021, the parties submitted status reports stating that plaintiff believes the stay should remain in effect
and defendants do not object to the stay remaining in effect. At this stage of the lawsuit, the Company is not able to reasonably
estimate the expected amount or range of cost or any loss associated with the lawsuit.
F-43
BOOZ ALLEN HAMILTON HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except share and per share data or unless otherwise noted)
21. BUSINESS SEGMENT INFORMATION
The Company reports operating results and financial data in one operating and reportable segment. The Company
manages its business as a single profit center in order to promote collaboration, provide comprehensive functional service
offerings across its entire client base, and provide incentives to employees based on the success of the organization as a whole.
Although certain information regarding served markets and functional capabilities is discussed for purposes of promoting an
understanding of the Company’s complex business, the Company manages its business and allocates resources at the
consolidated level of a single operating segment.
22. SUBSEQUENT EVENTS
On May 20, 2022, the Company announced that its Board of Directors had declared a quarterly cash dividend of $0.43 per
share. Payment of the dividend will be made on June 30, 2022 to stockholders of record at the close of business on June 15,
2022.
F-44
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
The Company’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, has
evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as of the end of the period covered by this Annual Report. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Annual Report, our
disclosure controls and procedures were effective as of March 31, 2022.
Management’s Annual Report on Internal Control over Financial Reporting and Attestation Report of the Registered
Public Accounting Firm
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our
internal control system was designed to provide reasonable assurance to our management and the Board regarding the reliability
of financial reporting and the preparation of consolidated financial statements for external purposes.
Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of
March 31, 2022. This assessment was based on the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control — Integrated Framework (2013 framework). Based on this assessment, management
has concluded that, as of March 31, 2022, our internal control over financial reporting was effective.
Our independent registered public accounting firm has issued a report on the effectiveness of our internal control over
financial reporting, which is below.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f)
of the Securities Exchange Act of 1934, that occurred in the fourth fiscal quarter of the period covered by this Annual Report
that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
67
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
Booz Allen Hamilton Holding Corporation
Opinion on Internal Control Over Financial Reporting
We have audited Booz Allen Hamilton Holding Corporation’s internal control over financial reporting as of March 31, 2022,
based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Booz Allen Hamilton Holding
Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of March
31, 2022, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of March 31, 2022 and 2021, the related consolidated statements
of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended
March 31, 2022, and the related notes and our report dated May 20, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Tysons, Virginia
May 20, 2022
68
Item 9B.
Other Information.
On May 18, 2022, Kristine Martin Anderson, Executive Vice President and President of the Civil Sector of the Company,
was promoted to Chief Operating Officer (Principal Operating Officer) of the Company, effective June 1, 2022. As Executive
Vice President and Chief Operating Officer, Ms. Anderson will play a significant role in our market-focused strategy, taking
primary responsibility for accelerating firmwide operational performance and the transformation of our business model, in
collaboration with leaders across the firm.
Ms. Anderson, age 53, has led the Company’s Civil Sector since April 2018, after leading the Company’s civil health
business since April 2015. Prior to joining Booz Allen in 2006, she was Vice President for Operations and Strategy at
CareScience, a software solutions company. Ms. Anderson currently serves as treasurer of the Executives for Health Innovation
(formerly the eHealth Initiative) board of directors. In addition, she serves as co-chair of the Cost and Resource Use Standing
Committee of the National Quality Forum.
In connection with Ms. Anderson’s promotion to Executive Vice President and Chief Operating Officer of the Company,
Ms. Anderson’s target total direct compensation will be increased as follows: (a) annual base salary will be increased to
$900,000, (b) target annual cash incentive will be increased to $625,000, and (c) target long-term equity incentive will be
increased to $1,475,000, in each case, effective June 1, 2022. In addition, Ms. Anderson was granted a special one-time award
of time-based restricted stock units with a value equal to $2,250,000, effective May 19, 2022, which will vest in three equal
installments on each of June 1, 2023, June 1, 2024, and June 1, 2025, subject to Ms. Anderson’s continued employment through
each applicable vesting date, and the terms and conditions of the Company’s Third Amended and Restated Equity Incentive
Plan and the applicable award agreement.
Ms. Anderson has no family relationships with any of our directors or executive officers. There are no relationships
between the Company or its subsidiaries, on the one hand, and Ms. Anderson, on the other hand, that would require disclosure
pursuant to Item 404(a) of Regulation S-K, and there are no arrangements or understanding between Ms. Anderson and any
other person pursuant to which she was appointed as Chief Operating Officer (Principal Operating Officer) of the Company.
In connection with the foregoing, on May 18, 2022, Richard Crowe, Executive Vice President of the Company, was
promoted to Executive Vice President and President of the Civil Sector of the Company, effective June 1, 2022.
Also, on May 18, 2022, Ian Fujiyama, a member of the Board of Directors of the Company, informed the Board of his
intention to not stand for re-election as a director at the Company’s 2022 Annual Meeting of Stockholders.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
PART III
Item 10.
Directors, Executive Officers and Corporate Governance.
Information related to our directors is set forth under the caption “Election of Directors” of our Proxy Statement for our
Annual Meeting of Stockholders scheduled for July 27, 2022 (the "2022 Proxy Statement"). Such information is incorporated
herein by reference.
Information relating to our Executive Officers is included in Part I of this Annual Report under the caption “Information
about our Executive Officers.”
Information relating to compliance with Section 16(a) of the Exchange Act, to the extent required, is set forth in our 2022
Proxy Statement. Such information is incorporated herein by reference.
Information related to our code of ethics is set forth under the caption “Corporate Governance and General Information
Concerning the Board of Directors and its Committees” of our 2022 Proxy Statement. Such information is incorporated herein
by reference.
Information relating to the Audit Committee and Board of Directors determinations concerning whether a member of the
Audit Committee is a “financial expert” as that term is defined under Item 407(d)(5) of Regulation S-K is set forth under the
caption “Corporate Governance and General Information Concerning the Board of Directors and its Committees” of our 2022
Proxy Statement. Such information is incorporated herein by reference.
69
Item 11.
Executive Compensation.
Information relating to this item is set forth under the captions “Compensation Discussion and Analysis,” “Director
Compensation,” “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” of our
2022 Proxy Statement. Such information is incorporated herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Equity Compensation Plans
The following table presents information concerning the securities authorized for issuance pursuant to our equity
compensation plans as of March 31, 2022:
Number of
Securities to Be
Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights
(a)
2,316,456
(1)
—
2,316,456
(1)
Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities
Reflected in
Column (a))
(c)
Weighted
Average
Exercise
Price of
Outstanding
Options,
Warrants and
Rights (b)
$
$
49.34
8,586,837
N/A
—
49.34
8,586,837
Plan Category
Equity compensation plans approved by
securityholders
Equity compensation plans not approved by
securityholders
Total
(1) Column (a) includes: 1,049,212 shares that have been granted as restricted stock units (RSUs) and 1,267,244 shares
granted as options under our equity compensation plans. The weighted average price in column (b) does not take into
account shares issued pursuant to RSUs.
Information relating to the security ownership of certain beneficial owners and management is included in our 2022
Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management” and is incorporated
herein by reference.
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
Information relating to this item is set forth under the captions “Certain Relationships and Related Party Transactions”
and “Corporate Governance and General Information Concerning the Board of Directors and its Committees” of our 2022
Proxy Statement. Such information is incorporated herein by reference.
Item 14.
Principal Accounting Fees and Services.
Information relating to this item is set forth under the caption “Independent Registered Public Accounting Firm Fees” of
our 2022 Proxy Statement. Such information is incorporated herein by reference.
Item 15.
Exhibits, Financial Statement Schedules.
(a) The following documents are filed as part of this Annual Report:
(1)
Financial Statements
Our consolidated financial statements filed herewith are set forth in Item 8 of this Annual Report.
(2)
Financial Statement Schedules
Consolidated financial statement schedules have been omitted because either they are not applicable or the
required information is included in the consolidated financial statements or the notes thereto.
(3)
Exhibits
70
Exhibit
Number Description
Exhibit Index
2.1
2.2
2.3
2.4
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Agreement and Plan of Merger, dated as of May 15, 2008, by and among Booz Allen Hamilton Inc., Booz Allen
Hamilton Holding Corporation (formerly known as Explorer Holding Corporation), Booz Allen Hamilton Investor
Corporation (formerly known as Explorer Investor Corporation), Explorer Merger Sub Corporation and Booz &
Company Inc. (Incorporated by reference to Exhibit 2.1 to the Company’s Registration Statement on Form S-1 (File
No. 333-167645))
Spin Off Agreement, dated as of May 15, 2008, by and among Booz Allen Hamilton Inc., Booz & Company
Holdings, LLC, Booz & Company Inc., Booz & Company Intermediate I Inc. and Booz & Company Intermediate II
Inc. (Incorporated by reference to Exhibit 2.2 to the Company’s Registration Statement on Form S-1 (File No.
333-167645))
Amendment to the Agreement and Plan of Merger and the Spin Off Agreement, dated as of July 30, 2008, by and
among Booz Allen Hamilton Inc., Booz Allen Hamilton Holding Corporation (formerly known as Explorer Holding
Corporation), Booz Allen Hamilton Investor Corporation (formerly known as Explorer Investor Corporation),
Explorer Merger Sub Corporation, Booz & Company Holdings, LLC, Booz & Company Inc., Booz & Company
Intermediate I Inc. and Booz & Company Intermediate II Inc. (Incorporated by reference to Exhibit 2.3 to the
Company’s Registration Statement on Form S-1 (File No. 333-167645))
Membership Interest Purchase Agreement, dated May 3, 2021, among (i) Booz Allen Hamilton Inc., (ii) Liberty IT
Solutions, LLC, (iii) William Greene, Christopher Bickell, and Jeff Denniston, and (iv) Southpaw Representative,
LLC, in its capacity as Members' Representative (Incorporated by reference to Exhibit 2.1 to the Company's Form 8-
K filed on May 4, 2021 (File No. 001-34972))
Fifth Amended and Restated Certificate of Incorporation of Booz Allen Hamilton Holding Corporation
(Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on August 5, 2020
(File No. 001-34972))
Fifth Amended and Restated Bylaws of Booz Allen Hamilton Holding Corporation (Incorporated by reference to
Exhibit 3.2 to the Company’s Quarterly Report for the period ended December 31, 2020 on Form 10-Q (File No.
001-34972))
Form of Stock Certificate (Incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on
Form S-1 (File No. 333-167645))
Indenture, dated August 24, 2020, among Booz Allen Hamilton Inc., the Subsidiary Guarantors party thereto and
Wilmington Trust, National Association (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report
on Form 8-K filed on August 24, 2020 (File No. 001-34972))
First Supplemental Indenture, dated August 24, 2020, among Booz Allen Hamilton Inc., the Subsidiary Guarantors
party thereto and Wilmington Trust, National Association (Incorporated by reference to Exhibit 4.2 to the
Company’s Current Report on Form 8-K filed on August 24, 2020 (File No. 001-34972))
Second Supplemental Indenture, dated as of November 5, 2021, among Booz Allen Hamilton Inc., the New
Subsidiary Guarantors party thereto and Wilmington Trust, National Association (Incorporated by reference to
Exhibit 4.1 to the Company’s Quarterly Report for the period ended December 31, 2021 on Form 10-Q (File No.
001-34972))
Indenture, dated June 17, 2021, among Booz Allen Hamilton Inc., the Subsidiary Guarantors party thereto and
Wilmington Trust, National Association (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report
on Form 8-K filed on June 17, 2021 (File No. 001-34972))
First Supplemental Indenture, dated June 17, 2021, among Booz Allen Hamilton Inc., the Subsidiary Guarantors
party thereto and Wilmington Trust, National Association (Incorporated by reference to Exhibit 4.2 to the
Company’s Current Report on Form 8-K filed on June 17, 2021 (File No. 001-34972))
Second Supplemental Indenture, dated as of November 5, 2021, among Booz Allen Hamilton Inc., the New
Subsidiary Guarantors party thereto and Wilmington Trust, National Association (Incorporated by reference to
Exhibit 4.2 to the Company’s Quarterly Report for the period ended December 31, 2021 on Form 10-Q (File No.
001-34972))
Form of 4.000% Senior Note due 2029 (included as Exhibit A to Exhibit 4.5 hereof)
Form of 3.875% Senior Note due 2028 (included as Exhibit A to Exhibit 4.2 hereof)
71
4.10*
10.1†
10.2†
10.3†
10.4†
10.5†
10.6†
10.7†
10.8†
10.9†
Description of Capital Stock (Incorporated by reference to Exhibit 4.5 to the Company's Annual Report for the year
ended March 31, 2021 on Form 10-K (File No. 001-34972))
Third Amended and Restated Equity Incentive Plan of Booz Allen Hamilton Holding Corporation (Incorporated by
reference to Exhibit 10.2 to the Company’s Quarterly Report for the period ended December 31, 2019 on Form 10-Q
(File No. 001-34972))
Form of Stock Option Agreement under the Equity Incentive Plan of Booz Allen Hamilton Holding Corporation
(Incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-1 (File No.
333-167645))
Form of Stock Option Agreement under the Equity Incentive Plan of Booz Allen Hamilton Holding Corporation
(Incorporated by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S-1 (File No.
333-167645))
Form of Subscription Agreement (Incorporated by reference to Exhibit 10.12 to the Company’s Registration
Statement on Form S-1 (File No. 333-167645))
Second Amended and Restated Booz Allen Hamilton Holding Corporation Annual Incentive Plan (Incorporated by
reference to Exhibit 10.3 to the Company’s Quarterly Report for the period ended December 31, 2019 on Form 10-Q
(File No. 001-34972))
Booz Allen Hamilton Holding Corporation Officers’ Retirement Plan (Incorporated by reference to Exhibit 10.6 to
the Company’s Annual Report for the year ended March 31, 2018 on Form 10-K (File No. 001-34972))
Officer’s Comprehensive Medical and Dental Choice Plans (Incorporated by reference to Exhibit 10.7 to the
Company’s Annual Report for the year ended March 31, 2018 on Form 10-K (File No. 001-34972))
Retired Officer’s Comprehensive Medical and Dental Choice Plans (Incorporated by reference to Exhibit 10.8 to the
Company’s Annual Report for the year ended March 31, 2018 on Form 10-K (File No. 001-34972))
Group Variable Universal Life Insurance (Incorporated by reference to Exhibit 10.14 to the Company’s Annual
Report for the year ended March 31, 2015 on Form 10-K (File No. 001-34972))
10.10† Group Personal Excess Liability Insurance*
10.11† Officer Annual Performance Bonus Policy (Incorporated by reference to Exhibit 10.11 to the Company’s Annual
Report for the year ended March 31, 2018 on Form 10-K (File No. 001-34972))
10.12†
Form of Booz Allen Hamilton Holding Corporation Director and Officer Indemnification Agreement (Incorporated
by reference to Exhibit 10.23 to the Company’s Registration Statement on Form S-1 (File No. 333-167645))
10.13†
Form of Stock Option Agreement under the Amended and Restated Equity Incentive Plan of Booz Allen Hamilton
Holding Corporation (Incorporated by reference to Exhibit 10.23 to the Company’s Annual Report for the year
ended March 31, 2011 on Form 10-K (File No. 001-34972))
10.14† Officer Transition Policy (Incorporated by reference to Exhibit 10.14 to the Company’s Annual Report for the year
ended March 31, 2018 on Form 10-K (File No. 001-34972))
10.15†
10.16
Form of Stock Option Agreement under the Amended and Restated Equity Incentive Plan of Booz Allen Hamilton
Holding Corporation (Incorporated by reference to Exhibit 10.25 to the Company’s Quarterly Report for the period
ended December 31, 2011 on Form 10-Q (File No. 001-34972))
Credit Agreement among Booz Allen Hamilton Inc., as the Borrower, the several lenders from time to time parties
thereto, Bank of America, N.A., as Administrative Agent, Collateral Agent and Issuing Lender, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Credit Suisse Securities (USA) LLC, as Joint Lead Arrangers, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC, Barclays Bank PLC, Citigroup
Global Markets Inc., HSBC Securities (USA) Inc., J.P. Morgan Securities LLC, Morgan Stanley Senior Funding,
Inc. and Sumimoto Mitsui Banking Corporation, as Joint Bookrunners, Credit Suisse Securities (USA) LLC, as
Syndication Agent, Barclays Bank PLC, Citigroup Global Markets Inc., HSBC Securities (USA) Inc., J.P. Morgan
Securities LLC, Morgan Stanley Senior Funding, Inc., Sumimoto Mitsui Banking Corporation and The Bank of
Tokyo-Mitsubishi UFJ, Ltd., as Co-Documentation Agents, dated as of July 31, 2012 (Incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 1, 2012 (File No. 001-34972))
10.17
Guarantee and Collateral Agreement, among Booz Allen Hamilton Investor Corporation, Booz Allen Hamilton Inc.,
ASE, Inc. and Booz Allen Hamilton International, Inc., in favor of Bank of America, N.A., as Collateral Agent,
dated as of July 31, 2012 (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
filed on August 1, 2012 (File No. 001-34972))
72
10.18
10.19†
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
First Amendment to Credit Agreement, dated as of August 16, 2013, among Booz Allen Hamilton Inc., as Borrower,
Booz Allen Hamilton Investor Corporation, Booz Allen Hamilton Engineering Holding Co., LLC, Booz Allen
Hamilton Engineering Services, LLC, SDI Technology Corporation, and Booz Allen Hamilton International, Inc., as
Guarantors,, Bank of America, N.A., as Administrative Agent, Collateral Agent and New Refinancing Tranche B
Term Lender, and the other Lenders and financial institutions from time to time party thereto. (Incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 20, 2013 (File No.
001-34972))
Form of Employment Agreement (Incorporated by reference to Exhibit 10.27 to the Company’s Annual Report for
the year ended March 31, 2014 on Form 10-K (File No. 001-34972))
Second Amendment to Credit Agreement, dated as of May 7, 2014, among Booz Allen Hamilton Inc., as Borrower,
Booz Allen Hamilton Investor Corporation, Booz Allen Hamilton Engineering Holding Co., LLC, Booz Allen
Hamilton Engineering Services, LLC, SDI Technology Corporation, ASE, Inc. and Booz Allen Hamilton
International, Inc., as Guarantors, Bank of America, N.A., as Administrative Agent, Collateral Agent and Issuing
Lender, and the other Lenders and financial institutions from time to time party thereto (Incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 13, 2014 (File No. 001-34972))
Third Amendment to Credit Agreement, dated as of July 13, 2016, among Booz Allen Hamilton Inc., as Borrower,
Booz Allen Hamilton Investor Corporation, Booz Allen Hamilton Engineering Holding Co., LLC, Booz Allen
Hamilton Engineering Services, LLC, SDI Technology Corporation, ASE, Inc. and Booz Allen Hamilton
International, Inc., as Guarantors, Bank of America, N.A., as Administrative Agent, Collateral Agent and New
Refinancing Tranche B Term Lender, and the other Lenders and financial institutions from time to time party thereto
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 18, 2016
(File No. 001-34972))
Fourth Amendment to Credit Agreement, dated as of February 6, 2017, among Booz Allen Hamilton Inc., as
Borrower, Booz Allen Hamilton Investor Corporation, Booz Allen Hamilton Engineering Holding Co., LLC, Booz
Allen Hamilton Engineering Services, LLC and SDI Technology Corporation, as Guarantors, Bank of America,
N.A., as Administrative Agent, Collateral Agent and New Refinancing Tranche B Term Lender, and the other
Lenders and financial institutions from time to time party thereto (Incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on February 7, 2017 (File No. 001-34972))
Fifth Amendment to Credit Agreement, dated as of March 7, 2018, among Booz Allen Hamilton Inc., as Borrower,
Booz Allen Hamilton Investor Corporation, Booz Allen Hamilton Engineering Holding Co., LLC, Booz Allen
Hamilton Engineering Services, LLC, SDI Technology Corporation, eGov Holdings, Inc. and Aquilent, Inc., as
Guarantors, Bank of America, N.A., as Administrative Agent, Collateral Agent, Exchanging Lender and New
Refinancing Tranche B Term Lender, and the other Lenders and financial institutions from time to time party thereto
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 7, 2018
(File No. 001-34972))
Sixth Amendment to Credit Agreement, dated as of July 23, 2018, among Booz Allen Hamilton Inc., as Borrower,
Booz Allen Hamilton Investor Corporation, Booz Allen Hamilton Engineering Holding Co., LLC, Booz Allen
Hamilton Engineering Services, LLC, SDI Technology Corporation, eGov Holdings, Inc. and Aquilent, Inc. as
Guarantors, Bank of America, N.A., as Administrative Agent and Collateral Agent and the other Lenders and
financial institutions from time to time party thereto (Incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed on July 24, 2018 (File No. 001-34972))
Seventh Amendment to the Credit Agreement, dated as of November 26, 2019, among Booz Allen Hamilton Inc., as
Borrower, Booz Allen Hamilton Investor Corporation, Booz Allen Hamilton Engineering Holding Co., LLC, Booz
Allen Hamilton Engineering Services, LLC, SDI Technology Corporation, eGov Holdings, Inc. and Aquilent, Inc.,
as Guarantors, Bank of America, N.A., as Administrative Agent, Collateral Agent, Exchanging Lender and New
Refinancing Tranche B Term Lender and the other Lenders and financial institutions from time to time party thereto
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 26,
2019 (File No. 001-34972))
Eighth Amendment to Credit Agreement, dated as of June 24, 2021, among Booz Allen Hamilton Inc., as Borrower,
Booz Allen Hamilton Investor Corporation, eGov Holdings, Inc. and Aquilent, Inc., as Guarantors, Bank of
America, N.A., as Administrative Agent and Collateral Agent and the other Lenders and financial institutions from
time to time party thereto (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on June 25, 2021 (File No. 001-34972))
ISDA Master Agreement, by and between Booz Allen Hamilton Inc. and The Bank of Tokyo-Mitsubishi UFJ, Ltd.
dated as of January 13, 2015 (the “Bank of Tokyo-Mitsubishi Master Agreement”), and the Amendment to the Bank
of Tokyo-Mitsubishi Master Agreement, dated as of April 18, 2017 (including the Schedule thereto) (Incorporated
by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 31, 2017 (File No.
001-34972))
73
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
ISDA Master Agreement, by and between Booz Allen Hamilton Inc. and Barclays Bank Plc, dated as of December
11, 2014 (the “Barclays Master Agreement”), and the Amendment to the Barclays Master Agreement, dated as of
May 18, 2017 (including the Amended and Restated Schedule thereto) (Incorporated by reference to Exhibit 10.2 to
the Company's Current Report on Form 8-K filed on May 31, 2017 (File No. 001-34972))
ISDA Master Agreement, by and between Booz Allen Hamilton Inc. and Wells Fargo Bank, N.A., dated as of
February 13, 2017 (the “Wells Fargo Master Agreement”), including the Schedule thereto (Incorporated by
reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on May 31, 2017 (File No.
001-34972))
ISDA Master Agreement, by and between Booz Allen Hamilton Inc. and SMBC Capital Markets, Inc., dated as of
December 11, 2014, and the Amended and Restated Schedule thereto, dated as of February 6, 2017 (Incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on November 1, 2018 (File No.
001-34972))
ISDA Master Agreement, by and between Booz Allen Hamilton Inc. and SunTrust Bank, dated as of April 10, 2017,
including the Schedule thereto (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form
8-K filed on November 1, 2018 (File No. 001-34972))
ISDA Master Agreement, by and between Booz Allen Hamilton Inc. and U.S. Bank National Association, dated as
of September 26, 2018, including the Schedule thereto (Incorporated by reference to Exhibit 10.3 to the Company's
Current Report on Form 8-K filed on November 1, 2018 (File No. 001-34972))
ISDA Master Agreement, by and between Booz Allen Hamilton Inc. and Capital One, National Association, dated
as of March 27, 2019, including the Schedule thereto (Incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed on April 8, 2019 (File No. 001-34972))
ISDA Master Agreement, by and between Booz Allen Hamilton Inc. and PNC Bank, National Association, dated as
of December 11, 2018, including the Schedule thereto (Incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K filed on April 8, 2019 (File No. 001-34972))
Confirmation of transaction, by and between Booz Allen Hamilton Inc. and The Bank of Tokyo-Mitsubishi UFJ,
Ltd., dated as of May 26, 2017 (Incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form
8-K filed on May 31, 2017 (File No. 001-34972))
Confirmation of transaction, by and between Booz Allen Hamilton Inc. and Barclays Bank Plc, dated as of May 30,
2017 (Incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on May 31,
2017 (File No. 001-34972))
Confirmation of transaction, by and between Booz Allen Hamilton Inc. and Wells Fargo Bank, N.A., dated as of
May 25, 2017 (Incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed on
May 31, 2017 (File No. 001-34972))
Confirmation of transaction, by and between Booz Allen Hamilton Inc. and SunTrust Bank, dated as of October 29,
2018 (Incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on November
1, 2018 (File No. 001-34972))
Confirmation of transaction, by and between Booz Allen Hamilton Inc. and U.S. Bank National Association, dated
as of October 29, 2018 (Incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K
filed on November 1, 2018 (File No. 001-34972))
Confirmation of transaction, by and between Booz Allen Hamilton Inc. and Capital One, National Association,
dated as of April 4, 2019 (Incorporated by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K
filed on April 8, 2019 (File No. 001-34972))
Confirmation of transaction, by and between Booz Allen Hamilton Inc. and Fifth Third Bank, dated as of April 2,
2019 (Incorporated by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K filed on April 8,
2019 (File No. 001-34972))
Confirmation of transaction, by and between Booz Allen Hamilton Inc. and Capital One, National Association,
dated as of April 4, 2019 (Incorporated by reference to Exhibit 10.9 to the Company's Current Report on Form 8-K
filed on April 8, 2019 (File No. 001-34972))
Confirmation of transaction, by and between Booz Allen Hamilton Inc. and PNC Bank, National Association, dated
as of April 2, 2019 (Incorporated by reference to Exhibit 10.10 to the Company's Current Report on Form 8-K filed
on April 8, 2019 (File No. 001-34972))
Confirmation of transaction, by and between Booz Allen Hamilton Inc. and SMBC Capital Markets, Inc., dated as of
April 2, 2019 (Incorporated by reference to Exhibit 10.11 to the Company's Current Report on Form 8-K filed on
April 8, 2019 (File No. 001-34972))
74
10.45
10.46
10.47
10.48
10.49
Confirmation of transaction, by and between Booz Allen Hamilton Inc. and Bank of America, N.A., dated as of
April 3, 2019 (Incorporated by reference to Exhibit 10.12 to the Company's Current Report on Form 8-K filed on
April 8, 2019 (File No. 001-34972))
Confirmation of transaction, by and between Booz Allen Hamilton Inc. and U.S. Bank National Association, dated
as of April 2, 2019 (Incorporated by reference to Exhibit 10.13 to the Company's Current Report on Form 8-K filed
on April 8, 2019 (File No. 001-34972))
Confirmation of transaction, by and between Booz Allen Hamilton Inc. and Fifth Third Bank, dated as of April 2,
2019 (Incorporated by reference to Exhibit 10.14 to the Company's Current Report on Form 8-K filed on April 8,
2019 (File No. 001-34972))
Assumption Agreement, dated as of April 14, 2017, by eGov Holdings, Inc. and Aquilent, Inc. in favor of Bank of
America, N.A., as collateral agent for the banks and other financial institutions or entities party to the Credit
Agreement, as amended (Incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report for the
period ended June 30, 2017 on Form 10-Q (File No. 001-34972))
Assumption Agreement, dated as of November 5, 2021, by Liberty IT Solutions, LLC, in favor of Bank of America,
N.A., as collateral agent for the banks and other financial institutions or entities party to the Credit Agreement, as
amended (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report for the period ended
December 31, 2021 on Form 10-Q (File No. 001-34972))
10.50† Booz Allen Hamilton Inc. Nonqualified Deferred Compensation Plan (Incorporated by reference to Exhibit 10.7 to
the Company’s Quarterly Report for the period ended December 31, 2018 on Form 10-Q (File No. 001-34972))
10.51†
10.52†
10.53†
10.54†
10.55†
10.56†
10.57†
10.58†
10.59†
10.60†
First Amendment to the Nonqualified Deferred Compensation Plan (Incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report for the period ended September 30, 2019 on Form 10-Q (File No. 001-34972))
Form of Restricted Stock Unit Agreement under the Second Amended and Restated Equity Incentive Plan of Booz
Allen Hamilton Holding Corporation (Incorporated by reference to Exhibit 10.39 to the Company’s Annual Report
for the year ended March 31, 2017 on Form 10-K (File No. 001-34972))
Form of Restricted Stock Unit Agreement under the Second Amended and Restated Equity Incentive Plan of Booz
Allen Hamilton Holding Corporation (Incorporated by reference to Exhibit 10.58 to the Company’s Annual Report
for the year ended March 31, 2019 on Form 10-K (File No. 001-34972))
Form of Restricted Stock Unit Agreement under the Third Amended and Restated Equity Incentive Plan of Booz
Allen Hamilton Holding Corporation (Incorporated by reference to Exhibit 10.58 to the Company’s Annual Report
for the year ended March 31, 2020 on Form 10-K (File No. 001-34972))
Form of Stock Option Agreement under the Second Amended and Restated Equity Incentive Plan of Booz Allen
Hamilton Holding Corporation (Incorporated by reference to Exhibit 10.36 to the Company’s Annual Report for the
year ended March 31, 2017 on Form 10-K (File No. 001-34972))
Form of Stock Option Agreement under the Second Amended and Restated Equity Incentive Plan of Booz Allen
Hamilton Holding Corporation (Incorporated by reference to Exhibit 10.59 to the Company’s Annual Report for the
year ended March 31, 2019 on Form 10-K (File No. 001-34972))
Form of Stock Option Agreement under the Third Amended and Restated Equity Incentive Plan of Booz Allen
Hamilton Holding Corporation (Incorporated by reference to Exhibit 10.61 to the Company's Annual Report for the
year ended March 31, 2020 on Form 10-K (file No. 001-34972)
Form of Performance Restricted Stock Unit Agreement under the Second Amended and Restated Equity Incentive
Plan of Booz Allen Hamilton Holding Corporation (Incorporated by reference to Exhibit 10.37 to the Company’s
Annual Report for the year ended March 31, 2017 on Form 10-K (File No. 001-34972))
Form of Performance Restricted Stock Unit Agreement under the Second Amended and Restated Equity Incentive
Plan of Booz Allen Hamilton Holding Corporation (Incorporated by reference to Exhibit 10.60 to the Company’s
Annual Report for the year ended March 31, 2019 on Form 10-K (File No. 001-34972))
Form of Restricted Stock Agreement for Directors under the Second Amended and Restated Equity Incentive Plan
of Booz Allen Hamilton Holding Corporation (Incorporated by reference to Exhibit 10.44 to the Company’s Annual
Report for the year ended March 31, 2018 on Form 10-K (File No. 001-34972))
10.61† Officer Perquisites Policy (Incorporated by reference to Exhibit 10.45 to the Company’s Annual Report for the year
ended March 31, 2018 on Form 10-K (File No. 001-34972))
10.62†
Form of Performance Restricted Stock Unit Agreement under the Third Amended and Restated Equity Incentive
Plan of Booz Allen Hamilton Holding Corporation (Incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report for the period ended September 30, 2020 on Form 10-Q (File No. 001-34972))
75
10.63†
10.64†
10.65†
10.66†
10.67†
21
23
31.1
31.2
32.1
32.2
101
Form of Restricted Stock Unit Agreement for Directors under the Third Amended and Restated Equity Incentive
Plan of Booz Allen Hamilton Holding Corporation (Incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report for the period ended September 30, 2020 on Form 10-Q (File No. 001-34972))
Form of Performance Restricted Stock Unit Agreement under the Third Amended and Restated Equity Incentive
Plan of Booz Allen Hamilton Holding Corporation (Incorporated by reference to Exhibit 10.2 to the Company’s
Quarterly Report for the period ended June 30, 2021 on Form 10-Q (File No. 001-34972))
Form of Stock Option Agreement under the Third Amended and Restated Equity Incentive Plan of Booz Allen
Hamilton Holding Corporation*
Form of Restricted Stock Unit Agreement under the Third Amended and Restated Equity Incentive Plan of Booz
Allen Hamilton Holding Corporation*
Form of Performance Restricted Stock Unit Agreement under the Third Amended and Restated Equity Incentive
Plan of Booz Allen Hamilton Holding Corporation*
Subsidiaries of the registrant*
Consent of Independent Registered Public Accounting Firm*
Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer*
Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer*
Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of
Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)*
Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of
Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)*
The following materials from Booz Allen Hamilton Holding Corporation’s Annual Report on Form 10-K for the
fiscal year ended March 31, 2022, formatted in Inline XBRL (eXtensible Business Reporting Language): (i)
Consolidated Balance Sheets as of March 31, 2022 and 2021; (ii) Consolidated Statements of Operations for the
fiscal years ended March 31, 2022, 2021 and 2020; (iii) Consolidated Statements of Comprehensive Income for the
fiscal years ended March 31, 2022, 2021 and 2020; (iv) Consolidated Statements of Cash Flows for the fiscal years
ended March 31, 2022, 2021 and 2020; (v) Consolidated Statements of Stockholders' Equity for the fiscal years
ended March 31, 2022, 2021 and 2020; and (vi) Notes to Consolidated Financial Statements.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
___________________________________
*
†
Filed electronically herewith.
Management contract or compensatory arrangement.
Item 16.
Form 10-K Summary.
None.
76
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized on this 20th day of May, 2022.
SIGNATURES
BOOZ ALLEN HAMILTON HOLDING CORPORATION
(Registrant)
By:
/s/ Horacio D. Rozanski
Name: Horacio D. Rozanski
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURES
Signature
Title
Date
/s/ Horacio D. Rozanski
Horacio D. Rozanski
/s/ Lloyd W. Howell, Jr.
Lloyd W. Howell, Jr.
/s/ Scott M. Murphy
Scott M. Murphy
/s/ Ralph W. Shrader
Ralph W. Shrader
/s/ Joan Lordi C. Amble
Joan Lordi C. Amble
/s/ Melody C. Barnes
Melody C. Barnes
/s/ Michèle A. Flournoy
Michèle A. Flournoy
/s/ Ian Fujiyama
Ian Fujiyama
/s/ Mark E. Gaumond
Mark E. Gaumond
President, Chief Executive Officer and
Director (Principal Executive Officer)
May 20, 2022
Executive Vice President and Chief Financial
Officer (Principal Financial Officer)
May 20, 2022
Vice President, Chief Accounting Officer and
Controller (Principal Accounting Officer)
May 20, 2022
Chairman of the Board
May 20, 2022
May 20, 2022
May 20, 2022
May 20, 2022
May 20, 2022
May 20, 2022
Director
Director
Director
Director
Director
77
/s/ Ellen Jewett
Ellen Jewett
/s/ Arthur E. Johnson
Arthur E. Johnson
/s/ Gretchen W. McClain
Gretchen W. McClain
/s/ Charles O. Rossotti
Charles O. Rossotti
Director
Director
Director
Director
May 20, 2022
May 20, 2022
May 20, 2022
May 20, 2022
78