Cai von Rumohr: Got it. And can you comment about near-term bookings prospects? You know…
Matt Calderone: It’s always hard…
Cai von Rumohr: …[indiscernible] big contracts still out there, or are we looking at more task orders?
Matt Calderone: It’s a combination, Cai. It’s always hard to predict quarter-by-quarter, because as you know, these things can slip in terms of awards and then the protest environment creates some uncertainty. Looking ahead, I don’t think we’re going to have a historically stellar quarter next quarter. There are a couple of large awards that may or may not happen. We don’t have a significant amount of recompete risk in the portfolio in the next 12 months. So, as you know, this is why we talk about LTM more than each individual quarter. And the LTM of almost 1.3 times, and more importantly, our qualified pipeline, which is up 35% year-over-year. Says we’re really in good shape from a demand perspective.
Horacio Rozanski: Yeah. Cai, just to give a little color on that. I’ve had the chance to both talk to clients about needs and talk to our team about the work that we’re going after, and I would say the demand picture for technology into core mission is actually accelerating, not slowing down. And so, as Matt said, while it’s almost impossible to predict bookings on any given quarter, the demand picture absent significant budget disruption is very strong.
Cai von Rumohr: Well, last year you had a 0.1 book-to-bill, so it was particularly weak. Is that going to be the norm that we get this very strong second quarter which we got this year? And then we should look for a very, very weak, near zero Q3, or is there any opportunity that Q3 could be a little bit better, clearly below 1, but better?
Horacio Rozanski: I think that — I’ll start. I’m sure Matt will want to do color on this one. But I think on the — first of all, I think that this quarter, the last quarter of the government fiscal year, the second quarter for Booz Allen is always the strongest because of just the way in which outlays happened and the way money is obligated through the budgeting cycle. So, that will — that has always been the case, that continues to be. As you’ve seen over the last few years, the rest of the quarters are actually less predictable, because they are predicated on when will these big jobs get awarded. And that process, it really changes every year. It is really — I would not take last year and translate it into this year directly.
But as Matt said, there’s a lot in the pipeline. It is over $26 billion in the pipeline. So, could some of those things hit this year, we would — this quarter, we would like them to. But either way, we certainly have the backlog necessary to continue to grow. We have the people here to continue to grow and we have the momentum to get that done.
Matt Calderone: Yeah, Cai, if you look…
Cai von Rumohr: Terrific.
Matt Calderone: …at our leading indicators and by historical measures, we’re in as good a shape as we’ve almost ever been, right? On the demand side, we talked about not just the backlog in the book-to-bill, which is looking backwards, but the proposal pipeline looking forwards. On the supply side, at the end of the quarter, our consulting — our clients staff headcount was up over 11%, more than 4% — sequentially for the first half of the year, which puts us ahead of the pace that we’ve typically wanted to be in of 3% to 5% headcount growth. And we’re managing the business really well. But there’s a lot of volatility out there, right? And I think that’s what we’re preparing for. And that’s why we built-in two to four week assumption of a partial government shutdown.
Just to quantify that, before you — we said the last shutdown of this scale which was in 2018 to 2019 cost us about $0.02 to $0.03 at the bottom-line. But that shutdown, I remember, occurred over the holidays, it was limited in scope and was at a time when we were both smaller in size in aggregate and we had a meaningful amount of time to make-up lost billing hours, which we did. So, we’re assuming the impact this time will be 3 to 4 times of that. So again, put that in the context of our overall guidance, we raised top-line 4%, adjusted EBITDA 4% and EPS 3%, plus the government shutdown assumption, we’re just in a great spot.
Cai von Rumohr: Terrific. Thank you very much.
Operator: Thank you. [Operator Instructions] Our next question comes from the line of Matt Akers from Wells Fargo.
Eric Yan: Yes, good morning. This is Eric Yan on for Matt. Just wondering if you see the headcount kind of shifted with FocusedFox running off. Maybe that’s around end of September. I think it’s about like 400 people on the program. Do you know like how many you were able to retain and shift to other work and how many are lost?
Matt Calderone: Yeah, we’ve almost completely absorbed, as I said in my prepared remarks, the impact of that contract loss. There’s just small team left doing mission-critical work on that contract from Booz Allen. We had about — we said we had about 400 people on that contract. We kept more than half, and redeployed, many of them to mission-critical activities. But pulling up, we said we wanted to grow headcount 3% to 5% this year, we’re at 4%, and I’m really encouraged by the numbers I’m seeing even for this quarter. So, that’s why I said in the script, we’re likely going to exceed the 3% to 5% range. And historically, that’s been what we need to maintain our organic growth objectives.
Eric Yan: Okay, thanks. Just one more on the Section 174, with the updated guidance from IRS. Do you see an impact from that going forward?
Matt Calderone: No.
Eric Yan: Okay, thanks.
Operator: Thank you. At this time, I would now like to turn the conference back over to Horacio Rozanski for closing remarks.
Horacio Rozanski: Thank you, Gigi. And thank you all for your questions and for being here this morning. I hope, Matt and I successfully conveyed how excited we are about both the momentum and the resilience we see in our business. And also of the opportunities that are ahead for our people, for our clients and for all of our investors. If you’ll indulge me for a moment, I’d like to close the call by calling out our annual innovation publication called Velocity, which is now available on our website. And this year, it’s fully centered on artificial intelligence. In this year’s Velocity, you get to hear from Booz Allen experts and from our industry partners on the ubiquity of AI, its transformative capabilities, how harnesses it for good, and a lot more. So, I hope you’ll enjoy reading it. And we would love to hear your feedback. And on that note, thank you again for joining, and have a great day.
Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
