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Booz Allen Hamilton - 2016 Cleveland Research Company Stock Pitch Competition

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Booz Allen Hamilton - 2016 Cleveland Research Company Stock Pitch Competition

  1. 1. Booz Allen Hamilton (NYSE: BAH) Brian Etienne | Cianan Moore | Manav Sarkaria | Matt Thomas Cleveland Research Company Stock Pitch | 2016
  2. 2. Investment Thesis & Overview 3 Industry Dynamics 7 Growth Opportunities & Drivers 10 Valuation 14 Final Thoughts 17 Appendix 18 2
  3. 3. Investment Thesis 3 Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix Booz Allen Hamilton is positioned to take advantage of growing threats facing both the United States government and private sector  Booz Allen Hamilton is a non-cyclical company as a result of its primary focus on government contracts  Growing demand for cyber security expertise due to increasing global cyber attack activity  Anticipated future margin growth led by a shift to fixed-price contracts and growth in commercial markets We recommend Booz Allen Hamilton as a Buy with a 12 month price target of $35.10, which is an upside of 25.99% from the current share price of $27.86
  4. 4. Company Overview Company Description  Headquartered in Tysons Corner, Virginia  NYSE: BAH  Management consulting firm serving as a security and defense contractor  Operations in 12 countries 4 Key Statistics Sources of Revenue  Revenue derived from contracts and task orders with the U.S. government  Revenue generated under 3 contract types:  Cost-reimbursable  Time-and-materials  Fixed-price Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix 55% 25% 20% Cost-reimbursable Time-and-materials Fixed-price MarketData Current Price $27.86 Market Cap. 4.15B P/E Ratio 15.56x Price/Book 11.09x Operations TTM Revenue 5.27B Profit Margin 5.11% Diluted EPS $1.79 CapitalStructure Net Debt 1.59B Cash – Cash Equiv. 207.2M Current Ratio 1.43x Quick Ratio 1.43x Value EV/Revenue 1.06x EV/EBITDA 12.15x EV/FCF 21.41x Source: Company 10-K, Bloomberg
  5. 5. Company Overview 52-Week Stock Performance 5 Client Relationship Length (Years) U.S. Navy 70+ U.S. Army 65+ U.S. Air Force 35+ Dept. of Energy 35+ National Security Agency 30+ Dept. of Homeland Security 30+ Federal Bureau of Investigation 20+ National Reconnaissance Office 15+ Long-Term Client Relationships  Long standing and extensive relationship with U.S. government  Deep understanding of clients’ problems and strategies Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix Company Structure  Parent company split in 2008  Booz Allen Hamilton half focusing on U.S. government contracts  Non-compete provision expired in 2011, allowing Booz Allen Hamilton to build out commercial consulting practice $20 $25 $30 $35 0mm 2mm 4mm 6mm 4/6/2015 7/6/2015 10/6/2015 1/6/2016 Source: Company 10-K, Bloomberg
  6. 6. Company Overview 3.2% 24.9% 23.5% 48.4% Commercial/ International Intelligence Civil Defense 6 Contract Win Rate Revenue By Market FY15 Breakdown  Historically successful in receiving and retaining contracts  Resistant to market cycles due to high percentage of revenue from the government Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix Source: Investor Relations 88% 55% 0% 50% 100% Re-competes New Business Historical Contract Mix 28% 28% 25% 57% 55% 55% 15% 17% 20% 0% 50% 100% FY2013 FY2014 FY2015 Time & Materials Cost Reimbursable Fixed Price
  7. 7. Industry Outlook Government Defense Spending Cyber Security Global Growth IT Market Growth Industry Success Factors  Competitive pricing and services  Well developed internal processes  Access to niche markets  Long lasting customer relationships  Adaptability to market preference changes 7 Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 2014 2015 2016 2017 $0B $100B $200B $300B 2015 2017 2019 2021 2023 2025 Source: TechTarget, Defense.gov $mm $1000mm $2000mm $3000mm $4000mm $5000mm $B $200B $400B $600B $800B 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Government Defense Spending Net Income
  8. 8. Cyber Security Industry Attack Surface Expansion  Expected device expansion (2015-2020)  Global public cloud computing market: 63.9%  Wearable technology: 290.0%  Tablets: 8.5%  Growing trend in connected vehicles  Increased use of cryptocurrencies 8 Rising Cost of Data Breaches History of Chinese Intrusions $5mm $6mm $7mm $4mm $5mm $6mm $7mm 2013 2014 2015 Average Organizational Breach Cost Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix Source: IBISWorld, McAfee 2002 2004 2006 2008 2010 2012 2014 Titan Rain State Dept US BIS US NWC US Sec Def Enfal US Rep Frank Wolf POTUS Campaign Ghost Net F-35 JSF Aurora Shadows in the Cloud Byzantine Haydes Night Dragon RSA Shady RAT Lurid Nitro Taidoor Luckycat Ixeshe VOHO Elderwood Cyber-Sitter HeartBeat US News Media ATP1/CommentCrew Beebus, Mutter Bit9 Telvent QinetiQ Safe ASIO SCADA Honeypot ATP12: G-20 Hidden Lynx Icefog  Government  Mixed  Commercial
  9. 9. 9 Government Consulting Market  Highly concentrated segment of consulting management  Advancements in technology have led to a more competitive market  Smaller firms now able to succeed in niche markets Commercial Markets  Focused on cyber security and analytics market  Becoming increasingly fragmented due to number of products and services in the industry  Industry's sheer size prevents any one company from dominating the industry Industry Landscape Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix $9B $5B $2B $2B $1B $0B $4B $8B Towers Watson & Co. Booz Allen Hamilton CEB Inc. WageWorks Inc. Fit Consulting Inc. Key Players by Revenue 19% 81% Industry Market Share Top 4 Firms Other Source: IBISWorld, ControlRisks
  10. 10. Areas of Focus for Growth Engineering  First began building engineering portfolio in 2012  Purchased Defense Systems Engineering and Support division of Annapolis-based Arinc Inc.  3,000 engineers and applied scientists  Access to engineering-focused firms  U.S. Air Force Space Command 10 Innovation  Broken up into four areas:  Digital  Next-generation analytics and data science  Predictive intelligence  Innovation services Cyber Security  Devise cyber strategies for clients  Rising cost of data breaches  Increased cyber attack activity Commercial and International  Looking to re-establish commercial markets  Grown commercial revenue to 3% since 2011  Emerging markets for IT Consulting  Brazil, Russia, India, China, Middle-East Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix Source: Company 10-K
  11. 11. Margin Analysis 11 Competitor MarginsMargin Growth Margin Outlook  Increased focus towards software vs. hardware will lead to higher margins  Targeting the commercial consulting market, leading to higher margins relative to government contracts Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix 5.0% 7.0% 9.0% 11.0% $0mm $200mm $400mm $600mm FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Adj. EBITDA Margin Variable Contracts  Increasing fixed price contract mix resulting in higher margin  Hedge high risk of fixed price contracts with time-and-material and cost-reimbursable contract mixes 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% Booz Allen Hamilton Leidos Holdings Maximus Inc Science Applications Intl. Mantech International Corp Caci International Avg.
  12. 12. $0 $50 $100 $150 $200 $250 $300 $350 11/17/10 3/31/11 3/31/12 3/31/13 3/31/14 3/31/15 Comparison of Cumulative Total Returns Since IPO Booz Allen Hamilton Holding Corp Russell 1000 Index DJ US Computer Services Return on Investment 12  Assumes a $100 investment Source: Company 10-K, Google Finance Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix
  13. 13. 13 SWOT Analysis Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix  Long lasting customer relationships  72% of employees have classified clearances  Large backlog provides realizable revenues S  Changes in U.S. government’s budget process  Upcoming U.S. Presidential election  Contract modifications T  Relatively new to commercial market  Beginning to build international presence  Lack of consulting headcount to fulfill demand W  Higher margins in commercial markets  International expansion  Increasing cyber attack activity O Source: Company 10-K
  14. 14. Valuation Summary 14 Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix Source: Company 10-K, Bloomberg $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 Public Comparables - EV/EBITDA DCF - Bear Case DCF - Base Case Public Comparables - P/E DCF - Bull Case Implied Price Target of $35.10
  15. 15. Valuation Historical Earnings Performance Comparables WACC Calculation Comparable Analysis  Low P/E ratio compared to its peers indicates that the stock is currently undervalued  Capital structure causes its EV/EBITDA multiple to be slightly higher than average 15 Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix Source: Company 10-K, Bloomberg WACC Analysis Market Value of Debt $1,590 Market Value of Equity 4,330 Total Capital $5,920 Beta 1.24 Market Risk Premium 5.75% Risk Free Rate 1.73% Cost of Equity 8.86% Cost of Debt 4.52% WACC 7.29% Implied Valuation EV/EBITDA Low Average High Implied Share Price $20.94 $26.50 $34.63 Upside (25.8%) (6.1%) 22.7% P/E Implied Share Price $30.85 $36.47 $43.17 Upside 9.3% 29.2% 52.9% 0 0.1 0.2 0.3 0.4 0.5 0.6 Q4 - 2014 Q1 - 2015 Q2 - 2015 Q3 - 2015 Q4 - 2015 Q1 - 2016 Q2 - 2016 Q3 - 2016 Consesus EPS Actual EPS
  16. 16. Discounted Cash Flow Analysis Perpetuity Growth Method @ 2.25% PV of Projection Period $ 1,698,178 2020 FCF 355,667 Perpetuity Growth Rate 2.25% Terminal Value $ 7,217,842 Years 5.0 PV of Terminal Value $ 5,077,406 Total Enterprise Value $ 6,775,584 Equity Value 5,188,384 Shares Outstanding 147,196 Price Per Share $35.25 Valuation 16 Sensitivity Analysis Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix Source: Company 10-K, Bloomberg Variance of Perpetuity Growth Rate - Bull Case WACC 1.75% 2.00% 2.25% 2.50% 2.75% 6.50% $47.56 $50.20 $53.15 $56.47 $60.24 6.75% $44.20 $46.52 $49.11 $52.00 $55.25 7.00% $41.17 $43.23 $45.51 $48.04 $50.87 7.29% $38.04 $39.84 $41.82 $44.01 $46.44 7.50% $35.95 $37.59 $39.39 $41.36 $43.55 7.75% $33.68 $35.16 $36.77 $38.53 $40.46 8.00% $31.61 $32.94 $34.38 $35.96 $37.68 Variance of Perpetuity Growth Rate - Bear Case WACC 1.75% 2.00% 2.25% 2.50% 2.75% 6.50% $32.74 $34.70 $36.88 $39.34 $42.12 6.75% $30.25 $31.97 $33.89 $36.03 $38.43 7.00% $28.01 $29.54 $31.22 $33.10 $35.19 7.29% $25.69 $27.02 $28.49 $30.11 $31.91 7.50% $24.14 $25.36 $26.69 $28.15 $29.77 7.75% $22.47 $23.56 $24.75 $26.05 $27.48 8.00% $20.93 $21.91 $22.98 $24.15 $25.42 Variance of Perpetuity Growth Rate - Base Case WACC 1.75% 2.00% 2.25% 2.50% 2.75% 6.50% $40.21 $42.49 $45.04 $47.90 $51.15 6.75% $37.30 $39.31 $41.54 $44.04 $46.84 7.00% $34.69 $36.47 $38.44 $40.62 $43.06 7.29% $31.98 $33.54 $35.25 $37.14 $39.24 7.50% $30.18 $31.59 $33.15 $34.85 $36.74 7.75% $28.22 $29.49 $30.88 $32.40 $34.07 8.00% $26.43 $27.58 $28.82 $30.18 $31.67
  17. 17. Final Thoughts 17 Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix Booz Allen Hamilton is positioned to take advantage of growing threats facing both the United States government and private sector  Booz Allen Hamilton is a non-cyclical company as a result of its primary focus on government contracts  Growing demand for cyber security expertise due to increasing global cyber attack activity  Anticipated future margin growth led by a shift to fixed-price contracts and growth in commercial markets We recommend Booz Allen Hamilton as a Buy with a 12 month price target of $35.10, which is an upside of 25.99% from the current share price of $27.86
  18. 18. Appendix 18 Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix
  19. 19. 19  Pro Forma Income Statement  Pro Forma Balance Sheet  Pro Forma Statement of Cash Flows  Discounted Cash flow  Comparables  United States Office Locations  International Office Locations  Notable Contract Awards Appendix Table of Contents Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix
  20. 20. 20 Fiscal Year Ended March 31, 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E Revenue $5,591,296 $5,859,218 $5,758,059 $5,478,693 $5,274,770 $5,353,892 $5,471,677 $5,608,469 $5,759,898 $5,915,415 % Growth 1.50% 2.20% 2.50% 2.70% 2.70% Cost of revenue 2,836,955 2,934,378 2,871,240 2,716,113 2,593,849 2,611,341 2,646,904 2,690,643 2,740,250 2,790,576 % of Revenue 48.77% 48.37% 47.97% 47.57% 47.17% Billable expenses 1,473,266 1,542,822 1,532,590 1,487,115 1,406,527 3,076,230 3,123,126 3,179,904 3,243,887 3,309,006 General and administrative expenses 881,028 903,721 833,986 742,527 752,912 1,646,702 1,671,805 1,702,198 1,736,448 1,771,306 Depreciation and amortization 80,603 75,205 74,009 72,327 62,660 137,044 139,134 141,663 144,513 147,414 Restructuring Charge 0 15,660 0 0 0 0 0 0 0 0 Total operating costs and expenses 5,271,852 5,471,786 5,311,825 5,018,082 4,815,948 4,859,976 4,934,065 5,023,766 5,124,848 5,227,727 % of Revenue 42.00% 41.80% 41.60% 41.40% 41.20% Operating income 319,444 387,432 446,234 460,611 458,822 493,916 537,612 584,703 635,050 687,688 Interest expense (131,892) (48,078) (70,284) (78,030) (71,832) (77,326) (84,167) (91,540) (99,422) (107,663) Other, net (59,488) 4,520 (7,639) (1,794) (1,072) (1,154) (1,256) (1,366) (1,484) (1,607) Income before income taxes 128,064 343,874 368,311 380,787 385,918 415,436 452,189 491,798 534,144 578,419 Income tax expense 43,370 103,919 149,253 148,599 153,349 138,848 151,132 164,370 178,523 193,321 Net income $84,694 $239,955 $219,058 $232,188 $232,569 $276,587 $301,057 $327,427 $355,621 $385,098 Earnings per common share (Note 3): Basic 0.74 1.83 1.56 1.62 1.58 $1.88 $2.05 $2.22 $2.42 $2.62 Pro Forma Income Statement Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix Source: Bloomberg
  21. 21. 21 Fiscal Year Ended March 31, 2011 2012 2013 2014 2015 x Assets Cash and cash equivalents $192,631 $484,368 $350,384 $259,994 $207,217 Accounts receivable, net of allowance 1,111,004 1,077,315 1,029,586 916,737 857,310 Deferred income taxes 0 0 0 29,687 14,539 Prepaid expenses and other current assets 56,808 45,180 44,382 49,559 84,142 Income taxes receivable 0 46,794 0 0 0 Total current assets 1,360,443 1,653,657 1,424,352 1,255,977 1,163,208 Property and equipment, net of accumulated depreciation 173,430 191,079 166,570 129,427 111,367 Deferred income taxes 41,409 7,790 10,032 0 14,758 Intangible assets, net of accumulated amortization 240,238 223,834 236,220 220,887 219,382 Goodwill 1,163,549 1,188,004 1,277,369 1,273,789 1,304,231 Other long-term assets 44,954 50,427 62,985 60,738 64,547 Totalassets $3,024,023 $3,314,791 $3,177,528 $2,940,818 $2,877,493 x Liabilities & Shareholder's Equity Current portion of long-term debt $30,000 $42,500 $55,562 $73,688 $57,063 Accounts payable and other accrued expenses 406,310 443,951 451,065 488,807 481,815 Accrued compensation and benefits 396,996 357,872 385,433 331,440 279,239 Deferred income taxes 21,231 59,493 10,286 0 0 Other current liabilities 11,598 10,630 62,300 23,169 30,877 Totalcurrent liabilities 866,135 914,446 964,646 917,104 848,994 Long-term debt, net of current portion 964,328 922,925 1,659,611 1,585,231 1,569,272 Income tax reserve 90,474 55,282 57,018 57,406 58,444 Deferred income taxes 0 0 0 8,231 0 Other long-term liabilities 195,836 236,953 269,460 201,210 214,285 Totalliabilities $2,116,773 $2,129,606 $2,950,735 $2,769,182 $2,690,995 Common stock, Class A — $0.01 par value — authorized, 600,000,000 shares; issued, 150,237,675 shares at March 31, 2015 and 143,962,073 shares at March 31, 2014; outstanding, 147,238,282 shares at March 31, 2015 and 143,352,448 shares at March 31, 2014 1,227 1,287 1,364 1,440 1,502 Non-voting common stock, Class B — $0.01 par value — authorized, 16,000,000 shares; issued and outstanding, 0 shares at March 31, 2015 and 582,080 shares at March 31, 2014 31 25 15 6 0 Restricted common stock, Class C — $0.01 par value — authorized, 5,000,000 shares; issued and outstanding, 0 shares at March 31, 2015 and 935,871 shares at March 31, 2014 20 15 12 9 0 Special voting common stock, Class E — $0.003 par value — authorized, 25,000,000 shares; issued and outstanding, 1,851,589 shares at March 31, 2015 and 4,424,814 shares at March 31, 2014 37 30 22 13 6 Treasury stock, at cost — 2,999,393 shares at March 31, 2015 and 609,625 shares at March 31, 2014 0 (5,377) (6,444) (10,153) (72,293) Additional paid-in capital 840,058 898,541 120,836 144,269 174,985 Retained earnings 71,330 299,379 124,775 42,688 104,457 Accumulated other comprehensive loss (5,453) (8,715) (13,787) (6,636) (22,159) Total stockholders’ equity 907,250 1,185,185 226,793 171,636 186,498 Totalliabilities andstockholders’ equity $3,024,023 $3,314,791 $3,177,528 $2,940,818 $2,877,493 Pro Forma Balance Sheet Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix Source: Bloomberg
  22. 22. 22 Pro Forma Statement of Cash Flows Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix Fiscal Year Ended March 31, 2011 2012 2013 2014 2015 Assets Cash and cash equivalents $192,631 $484,368 $350,384 $259,994 $207,217 Accounts receivable, net of allowance 1,111,004 1,077,315 1,029,586 916,737 857,310 Deferred income taxes 0 0 0 29,687 14,539 Prepaid expenses and other current assets 56,808 45,180 44,382 49,559 84,142 Income taxes receivable 0 46,794 0 0 0 Total current assets 1,360,443 1,653,657 1,424,352 1,255,977 1,163,208 Property and equipment, net of accumulated depreciation 173,430 191,079 166,570 129,427 111,367 Deferred income taxes 41,409 7,790 10,032 0 14,758 Intangible assets, net of accumulated amortization 240,238 223,834 236,220 220,887 219,382 Goodwill 1,163,549 1,188,004 1,277,369 1,273,789 1,304,231 Other long-term assets 44,954 50,427 62,985 60,738 64,547 Totalassets $3,024,023 $3,314,791 $3,177,528 $2,940,818 $2,877,493 Liabilities & Shareholder's Equity Current portion of long-term debt $30,000 $42,500 $55,562 $73,688 $57,063 Accounts payable and other accrued expenses 406,310 443,951 451,065 488,807 481,815 Accrued compensation and benefits 396,996 357,872 385,433 331,440 279,239 Deferred income taxes 21,231 59,493 10,286 0 0 Other current liabilities 11,598 10,630 62,300 23,169 30,877 Totalcurrent liabilities 866,135 914,446 964,646 917,104 848,994 Long-term debt, net of current portion 964,328 922,925 1,659,611 1,585,231 1,569,272 Income tax reserve 90,474 55,282 57,018 57,406 58,444 Deferred income taxes 0 0 0 8,231 0 Other long-term liabilities 195,836 236,953 269,460 201,210 214,285 Totalliabilities $2,116,773 $2,129,606 $2,950,735 $2,769,182 $2,690,995 Common stock, Class A — $0.01 par value — authorized, 600,000,000 shares; issued, 150,237,675 shares at March 31, 2015 and 143,962,073 shares at March 31, 2014; outstanding, 147,238,282 shares at March 31, 2015 and 143,352,448 shares at March 31, 2014 1,227 1,287 1,364 1,440 1,502 Non-voting common stock, Class B — $0.01 par value — authorized, 16,000,000 shares; issued and outstanding, 0 shares at March 31, 2015 and 582,080 shares at March 31, 2014 31 25 15 6 0 Restricted common stock, Class C — $0.01 par value — authorized, 5,000,000 shares; issued and outstanding, 0 shares at March 31, 2015 and 935,871 shares at March 31, 2014 20 15 12 9 0 Special voting common stock, Class E — $0.003 par value — authorized, 25,000,000 shares; issued and outstanding, 1,851,589 shares at March 31, 2015 and 4,424,814 shares at March 31, 2014 37 30 22 13 6 Treasury stock, at cost — 2,999,393 shares at March 31, 2015 and 609,625 shares at March 31, 2014 0 (5,377) (6,444) (10,153) (72,293) Additional paid-in capital 840,058 898,541 120,836 144,269 174,985 Retained earnings 71,330 299,379 124,775 42,688 104,457 Accumulated other comprehensive loss (5,453) (8,715) (13,787) (6,636) (22,159) Total stockholders’ equity 907,250 1,185,185 226,793 171,636 186,498 Totalliabilities andstockholders’ equity $3,024,023 $3,314,791 $3,177,528 $2,940,818 $2,877,493 Source: Bloomberg
  23. 23. 23 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E Year 1.0 2.0 3.0 4.0 5.0 Revenue $5,591,296 $5,859,218 $5,758,059 $5,478,693 $5,274,770 $5,353,892 $5,471,677 $5,608,469 $5,759,898 $5,915,415 % Growth 4.8% (1.7%) (4.9%) (3.7%) 1.5% 2.2% 2.5% 2.7% 2.7% Less: Cost of Goods Sold 2,836,955 2,934,378 2,871,240 2,716,113 2,593,849 $2,611,341 $2,646,904 $2,690,643 $2,740,250 $2,790,576 Gross Profit 2,754,341 2,924,840 2,886,819 2,762,580 2,680,921 2,742,550 2,824,773 2,917,826 3,019,647 3,124,839 Less: Operating Expenses 2,434,897 2,537,408 2,440,585 2,301,969 2,222,099 $2,248,634 $2,287,161 $2,333,123 $2,384,598 $2,437,151 Operating Income 319,444 387,432 446,234 460,611 458,822 493,916 537,612 584,703 635,050 687,688 Less: Taxes 43,370 103,919 149,253 148,599 153,349 165,078 179,683 195,421 212,248 229,842 Tax Rate 13.6% 26.8% 33.4% 32.3% 33.4% 33% 33% 33% 33% 33% NOPAT 276,074 283,513 296,981 312,012 305,473 328,838 357,930 389,282 422,801 457,847 Add: D&A 80,603 75,205 74,009 72,327 62,660 69,601 71,132 72,910 74,879 76,900 Less: Capex 87,400 53,593 190,452 13,556 60,575 53,539 76,603 128,995 57,599 59,154 Less: Change in W/C ($34,334) ($132,459) ($12,317) $11,493 (57,141) (22,559) (25,175) (26,053) (30,009) Unlevered FCF $269,277 $339,459 $312,997 $383,100 $296,065 $402,040 $375,017 $358,373 $466,134 $505,603 PV of FCF @ Discount Rate 7.29% 374,728 325,795 290,185 351,802 355,667 PV of Projection Period 1,698,178 Discounted Cash Flow Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix Source: Bloomberg
  24. 24. 24 Name Ticker Mkt. Cap EV/EBITDA T12M Net Sales T12M P/E Booz Allen BAH $4,395.20 12.15x $5,324.37 16.52x Leidos Holdings LDOS $3,658.66 9.25x $5,086.00 16.86x Maximus Inc MMS $3,107.13 12.77x $2,189.50 21.70x Science Applications SAIC $2,345.34 8.92x $4,315.00 18.69x Mantech International Corp MANT $1,173.55 9.71x $1,550.12 23.59x Caci International CACI $2,537.07 10.10x $3,336.18 18.81x Average $2,869.49 10.48x $3,633.53 19.93x Comparables Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix Source: Bloomberg
  25. 25. 25 United States Office Locations Source: Company 10-K Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix Corporate Headquarters Major U.S. Military Installment Office Location
  26. 26. 26 International Office Locations Corporate Headquarters Major U.S. Military Installment Office Location Source: Company 10-K Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix
  27. 27. 27  March 2016: $5B IDIQ Cybersecurity and Information Systems Contract by Department of Defense  October 2015: $937M Threat Intelligence Contract with Department of Defense  August 2015: $500M Support Contract with Department of Health and Human Services  June 2015: $3.5B Research and Development Task Order with U.S. Army  June 2015: $7.9B Information Technology Contract with U.S. Air Force  May 2015: $39M Cyber Security Task with Department of Homeland Security Notable Contract Awards Source: Company 10-K, Google Finance Investment Thesis & Overview Industry Dynamics Growth Opportunities & Drivers Valuation & Final Thoughts Appendix

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