COMPANIES
Booz Allen puts headcount back near the top of its agenda
For Booz Allen Hamilton, growing the employee headcount in tandem with the expanding backlog of federal business has long been a lynchpin of the company’s strategy to continue top-line success.
But hiring “probably wasn’t top three” of Booz Allen’s priorities during the height of the coronavirus pandemic though still one top of mind, CEO Horacio Rozanski said during the company’s fourth quarter earnings call with investors Friday.
“We shifted that stance, really in the mid-winter months, and we are now very focused on that,” Rozanski told analysts. “We'll get to the numbers we want to get to probably by the second half of the year. There's some choppiness as we accelerate into it, but it's a question of timing, there's no structural issue.”
Booz Allen typically targets headcount growth in the mid single-digits and exited its last fiscal year ended March 31 with a gain of 2 percent, or 554 employees to 27,727. That came in a year that saw revenue climb 5.3 percent to $7.86 billion and its total backlog rise 16 percent to a record $24 billion, of which $3.5 billion is funded.
The new fiscal year outlook sees revenue growth of between 7 and 10 percent, buoyed by the acquisition of Liberty IT Solutions that should close by the end of June and also a record purchase price for Booz Allen at $725 million.
Chief Financial Officer Lloyd Howell said that Liberty should give a “partial year contribution of $300 million to $340 million” in revenue to Booz Allen and $46 million-to-$50 million in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization).
Rozanski acknowledged that growing Booz Allen’s workforce takes time hence his use of the word “choppiness,” but indicated he and the firm’s leadership team are thinking hard about the post-pandemic labor market.
That includes internal conversations within the company and external discussions with agencies on the nature and future of work given the shift of many employees to a remote or hybrid model during the COVID-19 pandemic.
“We're having really good discussions with some of our clients about the opportunity for more flexibility and to distribute our labor force differently in support of them, and there's more receptivity to those discussions than there was pre-pandemic,” Rozanski said. “We are imagining new ways of working that leverage our footprint differently that give people more flexibility.”
Liberty will add to Booz Allen about 600 employees that include 140 professionals focused on the Salesforce product often characterized as “low code no code,” an area Rozanski highlighted as among his company’s tech priorities.
“While we're scaling cloud, we're working on low code. While we're working on cyber, we're thinking about 5G and quantum and the impact on cyber,” Rozanski said.
That focus on technology Booz Allen has long articulated as being intertwined with its consulting heritage is what Rozanski believes will carry the company through what it expects to be a flattening defense budget environment.
“I know what we've tried to do is to really be positioned as the digital innovator as a digital integrator around all of these technologies that are going to be in high demand,” Rozanski said. “Even in any agency a flattening budget doesn't mean that everything grows at the same rate.
“Some things are going to get prioritized and continue to grow. I think we're well positioned against those.”
Booz Allen ended its fiscal year with a margin of 10.7 percent adjusted EBITDA versus last year’s 10.1 percent. The firm sees the current fiscal year’s margin as mid-10 percent amid greater ability to collect fees on contracts from agencies, something Booz Allen and its peers had limitations in doing under a section of the CARES Act stimulus law to allow for certain cost reimbursements.
Contractors could get relief for costs of paid leave for employees who could not get to their designated government facilities during the pandemic if those locations had occupancy restrictions. Howell said Booz Allen sees those impacts to its business continuing to taper off.
One other update came from Rozanski during his opening script: the Justice Department has closed its criminal investigation into the firm that was first disclosed in mid-2017. Civil probes by Justice and the Securities and Exchange Commission are still pending. No other details were given on that front.
But more details will be forthcoming sometime this fall regarding the next iteration of Booz Allen’s strategy and long-term financial outlook now that the firm is turning the page on its Vision 2020 initiative.
Sounds like an investor day will be on the calendar soon, with perhaps more knowns for Booz Allen and the industry than there were around this time last year.
About the Author
Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers. Also connect with him on LinkedIn.
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Booz Allen puts headcount back near the top of its agenda - Washington Technology
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