Good morning. Thank you for being with us today as we discuss Booz Allen Hamilton's earnings for the second quarter of fiscal year 2022. I will now hand the call over to Mr. Lloyd Howell, Executive Vice President, CFO and Treasurer of Booz Allen Hamilton.

Thank you. Good morning, and thank you for joining us for Booz Allen's Second Quarter Fiscal Year 2022 Earnings Announcement. As some of you know, our Head of Investor Relations, Rubun Day, recently left the company to pursue other opportunities. We thank him for his contributions and wish him well. Our Vice President and Chief Accounting Officer, Laura Adams, has stepped in as Interim Head of Investor Relations, which she will oversee while also maintaining her ongoing role. Laura has been a finance executive with the firm for over a decade, overseeing many areas of corporate finance, including governance, financial and treasury oversight, and risk mitigation. She has played a vital role for me and our leadership team in our strategic decision-making around our capital allocation and M&A plans and our investment thesis more recently. With that, I turn the call over to Laura.

Thank you, Lloyd, for that introduction. I'm excited to support the team and get to know our valued investors and analysts even more. And good morning, everyone. We hope you've had an opportunity to read the press release that we issued earlier this morning. And we have also provided presentation slides on our website and are now on Slide 2. As shown on the disclaimer on Slide 3, please keep in mind that some of the items we will discuss this morning will include statements that may be considered forward-looking and therefore, are subject to known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecasted results. Those risks and uncertainties include, among other things, general economic conditions, the availability of government funding for our company's services and other factors discussed in today's earnings release and set forth under the forward-looking statements disclaimer included in our second quarter fiscal year 2022 earnings release and in our SEC filings. We caution you not to place undue reliance on any forward-looking statements that we may make today and remind you that we assume no obligation to update or revise the information discussed on this call. During today's call, we will also discuss some non-GAAP financial measures and other metrics which we believe provide useful information for investors. We include an explanation of adjustments and other reconciliations of our non-GAAP measures to the most comparable GAAP measures in our second quarter fiscal year 2022 slides. It is now my pleasure to turn the call over to our CEO, Horacio Rozanski. We are now on Slide 4.

Thank you, Laura, and good morning, everyone. Laura, it's great to have you play a more public role on these calls because you have been a leader on our finance team and integral to the quarterly earnings process for many years. I have personally relied on your expertise for as long as I've been CEO. So welcome to the call, Laura, and thank you for taking on this extra responsibility on an interim basis. And everyone, thanks for joining the call. Lloyd and I, along with several of our Booz Allen colleagues, were excited to be in New York City earlier this month to share our new investment thesis and our strategy for growth. It was great to see so many of you in person, and we hope you took away from that event a deeper understanding of our strategy, business, and multiyear financial goals. Today, we will continue the conversation in the context of our second quarter results for the fiscal year. And we will show how Booz Allen is already setting up to accelerate into the financial goals described in our investment thesis. I'm also pleased to share an update on our future work rollout. Before diving into the second quarter results, I want to briefly recap a few points from our Investor Day, starting with VoLT: Velocity, Leadership, and Technology. VoLT is the strategic framework that will accelerate our growth and create exceptional shareholder value. Through VoLT, we will capitalize on future market opportunities and leverage our positioning to deploy talent and capital against the nation's highest priorities. As part of our new strategy, we also told you about the opportunities we see for hyper growth in the areas of digital battle space and national cyber, among others. And then those of you who attended AUSA a week later saw some of our differentiated technology solutions that are transforming national missions. Specifically, demos of Rainmaker and a few of our edge solutions are excellent examples of how we are leading in our market. Fueled by the investments we have made during Vision 2020, Booz Allen holds first-mover advantage at key intersections of technology and mission. The overall strategy is important because it's what creates our strong financial performance year-to-year. And on Investor Day, we were pleased to present our new investment thesis. It's the multiyear outlook that will frame our quarter-to-quarter performance going forward. At the core of these theses is accelerating growth in adjusted EBITDA dollars through fiscal year 2025. We expect adjusted EBITDA to increase by about 50% from $840 million in fiscal year 2021 to $1.2 billion to $1.3 billion in fiscal year 2025. Broadly, we expect this increase to be driven by above-market organic revenue growth, continued strong margins, and capital deployment that prioritizes strategic acquisitions. To be more specific, our path to 50% adjusted EBITDA growth includes financial expectations of 5% to 8% annual organic revenue growth, adjusted EBITDA margins in the mid-10s, and $3.5 billion to $4.5 billion in total capital deployment during the period. The leadership team and I are confident that we can accelerate growth and achieve the goals in our investment thesis. We have the right strategy. And more importantly, the right team is in place to drive our business. This quarter's results demonstrate that Booz Allen is already positioned for acceleration. So let me shift now to an overview of the second quarter. As we have said since fiscal year 2022 began, this year's growth pattern looks different from recent fiscal years, with slower revenue growth in the first half and significant acceleration expected in the second half. This pattern is primarily due to three factors: first and most importantly, a ramp-up in hiring; second, productivity and time-off dynamics tied to the pandemic that create challenging comparisons in the first half; and third, full inclusion of revenue from acquisitions. These factors contribute to choppiness at the top line. And with our second quarter results now final, you can see that the first half of the fiscal year played out just as we expected. For the full six months, revenue growth was in the low single digits. We are pleased to report that across bottom line metrics, we outperformed in the first half, with strong profit margins driving EBITDA and ADEPS growth. Book-to-bill for the second quarter was strong, reflecting a significant year-over-year increase in bookings. And cash generation was exceptional. Our latest results demonstrate several key things about our business at the midpoint of the fiscal year. We are not demand-constrained, as shown in our backlog and book-to-bill performance. Hiring, which is our top operational priority, rapidly accelerated over the first two quarters. We continue to attract and retain the talent we need in a very competitive market, and we aim to keep our momentum going. Our team is managing the business extraordinarily well, which can be seen especially in the bottom line metrics. We are well underway with making strategic acquisitions and successfully integrating them, with our acquisition of Tracepoint last month being the most recent example. I am excited to welcome the Tracepoint team to Booz Allen. We're already seeing a lift from combining Tracepoint's channel access and incident response expertise with Booz Allen's cyber consulting and managed services offerings. And while we did face headwinds from comparisons and a slow ramp-up on some contracts, we continue to manage through them. Taken together, our first half results and the strong operational performance behind them point to acceleration through the rest of the fiscal year. To achieve our second half objectives, we are focused on a set of priorities that are critical to our success. Let me walk through them. Our top priority remains recruiting. We must continue strong hiring to execute our growing backlog. Second, we will maintain operational excellence in managing the business. Third, we will continue to capture key market opportunities. Fourth, we will capitalize on the upside presented by our acquisitions of Liberty and Tracepoint. And fifth, we will continue to invest in our people and differentiated solutions to drive growth beyond this fiscal year. Lloyd and I are confident Booz Allen will continue to make progress on these objectives. And today, we are pleased to reaffirm guidance for the full fiscal year. We believe that our growing momentum will both deliver another successful year and accelerate our business into the years covered by our new investment thesis. Lloyd will share more details on our results and fiscal year 2022 guidance in a few minutes. Before giving him the floor, I want to provide an update on the implementation of our future of work program. As you may recall, we believe we can offer our people increased flexibility in the way we work, with the expectation that many of our people will work in a hybrid model, a mix of telework and purposeful in-person collaboration. We have plans to launch future of work and reopen all our offices on September 7. But those plans have to be delayed. It was just not safe at the time, given the summer wave of COVID driven by the Delta variant. Since then, case metrics have improved and we are implementing a vaccination policy consistent with the federal governance mandate, requirements, and timeline. We're making excellent progress in our vaccination rates. And earlier this month, we began a phased reopening of offices that have remained closed, and we expect to have all offices open by November 22. We are excited to now be in the position to safely engage more broadly with clients and colleagues in person. Our people did an extraordinary job staying connected over the past 19 months. But just like Investor Day, there are times when being face-to-face is best. Our future of work program provides the flexibility to come together with purpose, when and where it makes the most sense. With the opportunity to see more of our teams, clients, investors, and other Booz Allen stakeholders in person, I am feeling energized and confident about the future. And my optimism is enhanced by the strong performance we delivered in the first half and how it sets us up for acceleration for the rest of the fiscal year and well beyond. And with that, Lloyd, over to you to take us through the financials in depth.

Thanks, Horacio, and hello again. Before I speak through our latest results, I want to add my thanks again to those who were able to join us just a few weeks ago in New York City for Investor Day. A recording of the webcast is available at investors.boozallen.com. Our overall objective with Investor Day was to once again demonstrate Booz Allen's commitment to long-term profitable growth. Leveraging our VoLT strategy, we will make the internal investments and strategic acquisitions required to drive and execute that growth. In our view, the first half of fiscal year 2022 was an inflection point. As we move into the second half of the fiscal year and move past the direct and indirect influences of COVID over the last 19 months, we are entering the next leg of the firm's multiyear journey. As Horacio noted, we closed out the first half of the fiscal year with top line performance in line with our expectations and prior guidance and with bottom line performance well ahead. This gives us great confidence in our plan for the full fiscal year. Our large backlog, strong bookings, and proposal activity signals continued client interest and strong demand for our work. Our hiring engine is now firing on all cylinders, positioning us to drive growth in the second half of the fiscal year. We closed on the acquisitions of Liberty and Tracepoint. As we have noted, we anticipated early year choppiness in our top line results as we move into a post-COVID operating rhythm, which played out as we expected. Our strong balance sheet position and favorable market conditions have allowed us to take advantage of a number of opportunities, including attractive levels of debt financing, M&A, and share repurchases. As a reminder, we had forecast constrained low single-digit top line growth in the first half, with an acceleration through the fiscal year, driven by three dynamics: a ramp-up in contracts and hiring; normalizing staff utilization and time-off usage; growing contributions from acquisitions. I will speak to these in more detail when I address our guidance. With that, let me walk you through the second quarter results. Please turn to Slide 5. At the top line, in the second quarter, revenue increased 4.3% year-over-year to $2.1 billion. Revenue excluding billable expenses grew 3.6% to $1.5 billion. Revenue growth was driven by inorganic contributions and solid operational performance, offset from higher-than-normal staff utilization in the comparable prior year period. Now let me step through performance at the market level. In defense, revenue declined by 0.6%, primarily due to a significant material purchase in billable expenses and unusually high staff utilization in the prior year period, a headwind felt throughout most of our markets. Defense also saw some slowness in ramp-ups on both new and existing work while ongoing protests continue to create uncertainty on the timing of program starts. In the first 6 months, revenue increased 1.8%. In civil, revenue grew by 16.4%, led by strong performance in our health business and the addition of Liberty. Liberty's contribution so far is slightly outpacing our previously forecasted range of $300 million to $340 million of annualized revenue. We remain exceptionally pleased with Liberty's performance and contribution to Booz Allen and are well underway with plans to fully integrate it with our broader health and digital business. We are feeling momentum across this entire market as we continue to capture key opportunities aligned to the government's priorities. In the first 6 months, revenue increased 11.2%. In intelligence, we recorded 0.8% revenue growth this quarter. Our portfolio-reshaping efforts have started to yield critical wins, and we are excited to see this business return to growth. For the full first 6 months, revenue declined 2.9%, but we believe this will continue to turn around in the second half of the fiscal year. Lastly, revenue in global commercial declined 5.7% compared to the prior year quarter. We continue to strategically shift focus to our U.S. commercial cyber business and anticipate growth in the back half of the fiscal year as we accelerate hiring to capitalize on the strong demand and additive growth in the business from Tracepoint. In the first 6 months, revenue declined 17.2%. Please turn to Slide 6. Our book-to-bill for the quarter was 2.03x, while our last 12 months' book-to-bill was 1.28x. Total backlog grew 18% year-over-year, resulting in backlog of $29 billion, a new record. Funded backlog grew 9.7% to $4.9 billion. Unfunded backlog grew 54.7% to $9.5 billion. And priced options grew 4.4% to $14.6 billion. We are proud of our bookings performance in the second quarter, which continues to demonstrate we are not demand-constrained and our ability to win and convert on work aligned with our core capabilities and clients' most critical missions. Pivoting to headcount. As of September 30, we had approximately 29,200 employees, up by about 1,600 year-over-year, or 5.8%. In the first half of the fiscal year, we added approximately 1,500 employees. As we have previously noted, the competition for talent, particularly technical talent, remains fierce. Still, we have successfully executed our hiring and retention strategies. As Betty Thompson highlighted at Investor Day, those strategies focused on fostering a strong people-centered culture and effective talent systems that support individual pursuits as well as business needs. Accelerating headcount growth remains a top operational priority for this fiscal year and will be key as we move into the next multiyear period of our investment thesis. We expect to continue building on our progress through the second half of the fiscal year. Moving to the bottom line. Adjusted EBITDA for the quarter was $270 million, up 18.1% from the prior year period. Adjusted EBITDA margin on revenue was 12.8% compared to 11.3% in the prior year period. The increase in adjusted EBITDA margin was driven by three factors: first, profitable contract level performance and mix which includes the inorganic contributions into our results; second, prudent cost management; and third, a return to billing for fee within Intel, which had a $7 million negative impact on the prior year period under the CARES Act. As we move through the fiscal year, we expect billable expenses and unallowable spends to ramp up, with billable expenses, which are currently near the low-end of our historical 29% to 31% range, expected to move towards the midpoint of that range by the fiscal year end. Second quarter net income increased 14% year-over-year to $155 million. Adjusted net income was $170 million, up 19% from the prior year period, primarily driven by the same factors driving higher adjusted EBITDA. Diluted earnings per share increased 16% to $1.14 from $0.98 the prior year period. And adjusted diluted earnings per share increased 22% to $1.26 from $1.03. These increases to our non-GAAP metrics were primarily driven by better operating performance, the inclusion of Liberty, a lower effective tax rate, and a lower share count due to our share repurchase program. Turning to cash. Cash from operations was $470 million in the second quarter compared to $426 million in the prior year period. This increase was driven primarily by continued strong cash management, fueled by consistent operational performance. Capital expenditures for the quarter were $21 million, up approximately $3 million from the prior year period, driven by investments for future growth. We still expect capital expenditures to land within our forecast range for the fiscal year. Please turn to Slide 7. During the quarter, we paid out $50 million for our quarterly dividend and repurchased $106 million worth of shares at an average price of $83.31 per share. We also acquired the remaining stake in Tracepoint, a promising digital forensics and incident response business. As you may recall, we took a minority stake in Tracepoint last December, and the partnership has proven so fruitful that we completed the purchase in September. In total, including the close of the Tracepoint acquisition, we deployed $285 million during the quarter. Today, we are announcing that our Board has approved a regular dividend of $0.37 per share payable on December 2 to stockholders of record on November 15. As our actions and performance demonstrate, we remain committed to preserving and maximizing shareholder value through a disciplined balance capital allocation posture. Turning now to guidance, please move to Slide 8. Before I address the numbers, I want to highlight our continued expectations for a distinct first half, second half dynamics this fiscal year. Let me walk through the puts and takes of this second half ramp, starting with the top line perspective. First, we expect year-over-year comparables and staff utilization to normalize in the second half of the fiscal year. As a reminder, in fiscal year 2021, staff utilization trended roughly 300 basis points above typical levels in the first half of the year before starting to normalize in the third quarter. Second, we expect that our ramp on both contracts and hiring will translate into growth as we move through the fiscal year. Strong customer interest and proactive demand signals give us confidence that any near-term slowness in the acquisition process is likely temporary, notwithstanding any unforeseen disruptions in government funding. On the other hand, from a supply perspective, our efforts to improve hiring, in some cases ahead of demand, have paid off. Third, our growing Liberty business will fully contribute in the second half of the fiscal year relative to a partial first half. Lastly, minor timing differences in our costing of labor, resulting from the implementation of our new financial management systems. Putting it all together, we still forecast significant acceleration from our first half performance ramping through the fourth quarter, barring any major disruptions such as a prolonged government shutdown or other dynamics outside of our control. Regarding adjusted EBITDA margins, we exercised considerable control over our cost structure and margin levers. We traditionally take a conservative approach to cost management early in the fiscal year and prioritize investments in our people, infrastructure, and long-term growth objectives as we move throughout the fiscal year. Given the slowness we noted in the government's contracting process, we have maintained a tighter grip on our cost levers into this fiscal year. However, we still expect to make those same investments in the second half of the fiscal year, which will pressure back half adjusted EBITDA margins. Taking these factors into consideration, we are reaffirming our fiscal year 2022 guidance. We expect revenue growth to be between 7% and 10%, inclusive of Liberty and Tracepoint. We expect adjusted EBITDA margin in the mid-10% range. Let me reiterate that we expect to make investments in our people and our technology in the second half of the fiscal year to support our multiyear growth aspirations. That said, given our strong first half results, we expect to finish near the top end of our current guidance. We expect adjusted diluted earnings per share to be between $4.10 and $4.30 based on an effective tax rate of 22% to 24%, 134 million to 137 million weighted average shares outstanding, and interest expense of $92 million to $95 million. We expect operating cash flow near the low end of our prior $800 million to $850 million range, which is inclusive of approximately $56 million of cash payments related to the Liberty transaction. And finally, we expect CapEx in the $80 million to $100 million range. Finally, I would like to round out the conversation by looking to the future and our new investment thesis, which Horacio recapped in his remarks. As we continue to position ourselves for a post-COVID operating environment, we believe that our actions and performance throughout the remainder of fiscal year 2022 will put us on the right trajectory to accelerate our growth and execute on our investment thesis. We are truly excited for the future of this firm and all we can accomplish for both our clients and our investors.

Thank you, Lloyd. Operator, please open the line.

Our first question comes from Sheila Kahyaoglu with Jefferies.

Good morning, Horacio and Lloyd, and welcome Laura. I wanted to first ask about revenue growth. It's increasing by 3% in the first half and 1% organically, suggesting a 14% increase in the second half and 10% organically. Horacio, you mentioned three key factors driving this growth, one being an increase in hiring and the other two relating to contributions from acquisitions. Could you elaborate on these two points? Regarding the increase in hiring, it's approximately up 4% organically this quarter. What should we expect in terms of headcount growth? How quickly do employees start generating revenue? Additionally, could you provide insights on the acquisition contributions, specifically about Tracepoint and its financial impact? Our calculations suggest it contributes around $80 million using the same multiple as Liberty.

So Sheila, let me start to unpack those questions. On the revenue front, we're pleased that the growth is in line with our expectations and positions us for acceleration in the second half. I think what's important is there are about three reasons that we're confident. One is that the ramp-up and improvement in our recruiting and hiring, as Horacio and I said in previous calls, this is the operational priority. And with a first half adding 1,500 folks this year, up just under 6% year-over-year, particularly in a very tight job market, we're very pleased with that part of our operations kicking in. We're not done. With an eye toward the balance of the year, we've got to maintain that pace. But as Betty shared with everyone at Investor Day, we're feeling really confident about that. The second point is that we're kind of in an apples and oranges kind of comparison this year. The productivity and the time-off dynamics last year, people weren't taking any time off. Our productivity was through the roof. And by our estimation, that's about a 400, 450 basis point headwind. So if you take the growth that we had this quarter and you were to add to that, we're in the mid-single digits which keeps us on pace for why we're confident in the second half of the year. And then the third point, I would add is that we're going to get the full inclusion of revenue from the acquisitions that we've made. Liberty is off to a great start. The integration is going very well. We've won some significant procurements together. And we just see that continuing. And then I'll finish sort of my part of the response, because you probably have to remind me of the other parts of your question, but when you look at our backlog, book-to-bill, 2.03x for this quarter trailing 12 months to 1.28x. As we've always said, we don't feel demand-constrained especially when the backlog is up 18% to an all-time record of $29 billion. So we've got the supply side underway. The demand signals are strong. We're working through, as you heard in our prepared comments, some timing issues in some parts of the portfolio. But overall, we believe we're on pace for an acceleration in the second half.

I want to add a few thoughts on the acceleration of momentum that Lloyd mentioned. There are several reasons why our numbers appear to improve as we enter the second half. What gives us confidence and optimism is the real momentum we're seeing in the business. This is evident in our book-to-bill ratio, and our pipeline is particularly strong. It's not just the numbers that stand out; it's also the nature of the work, which represents the next wave of growth for Booz Allen. This work aligns with key technology intersections where we anticipate significant growth. We believe that the projects we can present this quarter, along with upcoming work, position us well not only for the remainder of this year but also for achieving 5 to 8 percent organic revenue growth and our investment strategy through 2025 and beyond.

Sheila, you had a second part...

That's okay. I was on Tracepoint, how do we think about the total revenue contribution for Tracepoint, given it was a minority interest? And I think you guys spent $114 million in the quarter on that?

Yes. At this point, it's really not that material. We're excited about the transaction with the simple fact that this is a high-demand area, particularly for our global commercial clients, but in this part of the journey, it's really not material.

Our next question comes from Gavin Parsons with Goldman Sachs.

Lloyd, you provided a lot of details on margins and the potential for a decline in the second half of the year, but you're still focused on increasing margins. I appreciate the in-depth multiyear outlook discussed at the Investor Day, but when do you expect that trend to start moving downward? Is there a specific point where that happens, or will it remain steady in line with the Investor Day targets? It seems like you aren't under-investing, but are there any areas where you might be over-earning? Any additional insights on this would be helpful.

Yes. I mean, right out of the gate, we've had solid operational performance, and I think our margin performance is indicative of that. There are a couple of things I'd point to in terms of what's happening structurally. One is that as we're emerging from the pandemic, things that have gone into it been very strong was profitable contract level performance, and that has maintained over the past 18 months. And I think that's been a tailwind to our margin. Number two is we're now seeing the contributions from our inorganic transactions, more fixed-price work, particularly when you're looking at what Liberty has brought to the game. And over the past several years, we've had a real prudent cost management set of initiatives underway. And I think across the portfolio, all of that has kicked in and is really institutionalized. For this period, we've also had some unique, what I call, contributions. One is now we have the ability to bill for fee in the Intel market. The timing of unallowable spend, which gets, I think, to your trend question, we expect to start to pick up in the back half of this year. And we've probably repeatedly talked about billable expenses and the fact that they've been low versus historical norms. And you heard in our prepared remarks that we're expecting that to kind of pick up move into the middle of the range. So on a trending perspective, we see it beginning, in terms of spending, to pick up in the back half of the year. We'll probably see that it will come back a bit due to some of our investment activity. But as you know, in the back half of Booz Allen, we usually are investing in our people, our infrastructure, getting ready for the next fiscal year.

Gavin, if I can just expand a little bit and connect this conversation to our Investor Day discussion, I think what you're seeing, if you look at the trends over the last couple of years, is that the margin potential in this business continues to improve as a result of the work that we're doing, our differentiation in the market. And frankly, this is a time to brag about the team, just the operational performance keeps getting better and better even in light of some really challenging conditions all around us. And what I think is impressive about the last 18 months is we've managed to drive margins while at the same time, we invested in our people. If you remember, we set high $100 million for pandemic response. We did a lot of employee welfare work, especially around mental health over the last year. And a number of other things that position us well to continue to be an employer of choice and be able to drive the talent into the business that we need to achieve our goals. So as Lloyd pointed out at Investor Day, what we have in front of us is real margin potential and the ability to invest in our business intelligently, as the opportunities present themselves, to continue to drive both top and bottom line growth.

Got it. I appreciate all that detail. And maybe just if you could give a little bit more color on the delays of the DoD starts that you referenced in the prepared remarks.

Yes. I mean, it's as frustrating to us as, I think, to anyone. I think in our defense market, a couple of dynamics. One is we continue to be well positioned for long-term growth. And the demand for our services continues to accelerate a lot of our client urgency around modernization, as Karen spoke to during our Investor Day and the Joint Warfighter. We've got, again, a tough comp to Q2 of last year, where productivity is at all-time high. That being said, we've won really good work, but the ramp-up has been slower than expected. We're expecting in the second half of this year for that to pick up. There's no indications from our clients that they intend for that dynamic to persist. So we're working our way through it. And we've also got some larger opportunities that we're expecting to come in, in the back half of this year as well.

I mean everything we're hearing from clients, and I spent a lot of time with clients at AUSA, I spent time with clients really over the past six months, with a lot of plans across the board, not just in defense. But in particular, defense clients see the work that we're doing in digital battle space as absolutely a priority for great power competition and for what's to come. And so while it is true that things now are a little slower than they would like and we would like, we're doing great in terms of driving those businesses, and we expect momentum to accelerate.

Our next question comes from Matt Akers with Wells Fargo.

It's actually Eric Gain on for Matt. Just wondering what drove the big uptick in fixed price contract mix during the quarter. Is that a single from here? And could that drive margins higher?

Yes, Matt. It's really a function of Liberty coming into the portfolio. They've been doing great. Clients have been very pleased. We've also seen some upside potential there, which would sort of provide some tailwind to the margin. We've got strong contractual performance across the portfolio. So a combination of that plus Liberty is the dynamic.

Got it. If I could do one more. Just quickly on M&A. What are you seeing for valuations in the current market and how competitive you think the deals are?

Maybe I'll start with this one just to switch up the pattern. As we talked about at Investor Day, our posture in M&A is to look for opportunities that are strategic accelerators to our business. And that is becoming a central plank of VoLT and in some ways a bit of a difference from our prior approach. And Tracepoint is a great example of that. Liberty is a great example of that. Albeit small, our investment in Latent AI a while back is a great example of strategic acceleration. And so that's the goal. Underneath that, it's a very competitive market. It's challenging to find the right things that will give us strategic acceleration. What we're seeing is some of the uniqueness of Booz Allen that makes us attractive to clients and to talent. Actually reflects also well as being attractive in the acquisition arena, where we're able to potentially have better discussions, more relationship-based discussions, and reach a mutually agreeable win-win-type scenario, even in the light of some overheated evaluations that are operating around us.

Our next question comes from Cai von Rumohr with Cowen.

Terrific. So I have a two-part question about revenue growth, two issues. One is the impact of PTO and what that might be going forward. I bring that up because Northrop on its call mentioned a higher PTO in the quarter, but it expected it to go back to normal, so that was sort of a negative this quarter, but it should be better next quarter. And the second question is on organic growth. I mean you gave it for the full year at 4% to 7%. You didn't repeat it this time. You gave it at Investor Day. I mean if Liberty is really doing better than expected, I would have guessed that organic growth was zero and revenues, excluding billables, excluding inorganic growth, would have been minus 2%. Is that essentially correct? And what is the organic growth target for this year?

So Cai, let me pick up your first comment regarding PTO. We expect the impact, by our estimate, to be around 400 basis points to start to mitigate in the second half. So I would be supportive of what Northrop said or shared in terms of it over time starting to normalize. I think we're all watching it closely. Our workforce's PTO balances are elevated, obviously, because folks haven't been going on. We have a program in place to manage that and track it, but we would expect that that will start to normalize going forward. In terms of organic growth, no purposeful oversight or reason why we didn't repeat it, but we still remain 4% to 7%, given that we've had a nice pickup in headcount, as I've always shared with you, that with inflation on top of it puts us comfortably in that range for the year. And we've also said that we expected the first half to be low single digits. And the organic component of that, I think it's tracking. And we expect that to accelerate in the second half.

So you're saying PTO was a 400 basis point impact to revenues this quarter, and it should diminish in the second half. Is that essentially correct?

That's correct, Cai.

Our next question comes from Tobey Sommer with Truist Securities.

I was wondering if you could give us some comments on some of the HR things that you're doing to stem the tide of turnover to continue to attract talent.

I'm happy to address that and will reference Betty Thompson's excellent discussion from Investor Day. I would categorize this into three points. The data supports our statements. The rise in headcount during the first half is due to not experiencing the anticipated wave of resignations; in fact, our attrition rate is at or below our yearly forecast, coupled with strong hiring. We are not just attracting any talent; we're focusing on technical skills and highly skilled individuals crucial for executing our strategy. I see our success in three main areas. First, as Betty elaborated, our culture, commitment to diversity, and our efforts over the past year and a half to ensure a safe, productive, and engaged workforce is clearly enhancing our value proposition and brand in the talent market. Second, there's a noticeable excitement regarding our future of work program, which we are eager to launch. Although we had to postpone the rollout by a month or so due to the Delta wave, I remain optimistic and we expect to have our facilities operational under the new future of work guidelines by around Thanksgiving. Lastly, for attracting technical talent, the work we are pursuing and investing in under VoLT is very appealing to the talent we seek. Incorporating AI into a significant national mission allows us to draw in AI experts comparable to major tech firms. While we may have more financial resources, the passion these missions hold for people is unique. Overall, these three factors explain our strong hiring performance in the first half and gives us confidence for sustained momentum moving forward.

As a follow-up, I would like to know your expectations regarding the effect of the vaccine mandate on your workforce and workforce growth. Additionally, do you see any unique aspects of your business or business mix that could either reduce or amplify the impact compared to others operating in the government sector?

We've considered the impact of the vaccine mandate on our headcount and have incorporated that into our guidance. Our aim is to ensure that 100% of our workforce complies with our policy, which aligns with the mandate. This is a priority for us. With a team of over 29,000 employees, our goal is to keep everyone on board, and we have approached this in our usual manner. We've engaged in extensive internal discussions, including town halls attended by several thousand employees, where we addressed questions and had open conversations, which were sometimes challenging but necessary. Our leaders across various divisions have conducted similar discussions, and we are actively working towards achieving full compliance.

Our next question comes from Seth Seifman with JPMorgan.

Maybe just a quick clarification first, Lloyd. I apologize if I missed it. Did you guys state the Liberty sales contribution in the quarter?

We didn't in our prepared remarks. If you look in the Q, it's about $88 million from Liberty for this quarter.

Okay. Great. And then roughly how many employees did Tracepoint add? And would you guys be willing to give a target for where you want to be at headcount at year-end?

For just Tracepoint or for...

No, no, for the whole company, yes.

Tracepoint, just under 100 added to the mix. Every year, we go into the year targeting mid-single-digit growth. We're on pace for that, as Horacio and I have said. So we hope to be over the 30,000 mark or around nearby the end of the year.

Our next question comes from Louie DiPalma with William Blair.

Horacio and Lloyd, several times over the past few quarters, you cited a large civil cyber program that was as a contributor to your revenue deceleration. Has it restarted to a full run rate for the December quarter?

Louie, the short form of the answer is not yet. We are seeing some ramp, but we are not back to the full run rate.

Sounds good. And on a separate topic, it appears that Accenture Federal paid a very premium multiple for Novetta. Is Booz Allen willing to pay like very high multiples for strategic deals that bring a lot of technology content? Or just in terms of deal valuation, should investors more or less expect similar types of multiples to what you paid for Liberty?

I'll start and then Horacio wants to get in. Before we even get to the economics, I mean, we look at every opportunity in terms of strategic alignment, cultural integration, and then, financially, does it make sense? Within that rubric, we have the capacity to stretch if it makes sense, if the first two criteria are met. But as you've heard me say in the past, we're going to be disciplined and patient. And we feel we've got a great handle on this market, what clients need. And we're looking for partners to bring into Booz Allen that makes sense. But that's about where I think financially we spend.

Yes, I think within the concept of strategic acceleration and the discussion that we've been having, we appreciate the need to pay full price for high-value, high-quality companies. And at the same time, we want to make sure that we're capturing significant value from those. So like Lloyd said, we're going to be disciplined, we're going to be thoughtful, and we're going to leverage the same approach that we have to everything. We're going to build relationships. We're going to execute a disciplined playbook to the extent that we can, and we were successful twice this year. We're going to try to do it in a way that isn't an overheated auction. And again, we are leaning forward on this, but in a disciplined way.

Our last question comes from Ron Epstein with Bank of America.

Yes. I have a couple of quick questions. First, are you noticing any indirect effects from the supply chain issues, particularly the chip shortage? Also, to gain a clearer understanding, could you explain why the major defense companies seem unaffected? It appears that this industry, especially those manufacturing hardware, has been more severely impacted by supply chain challenges, including the commercial sector.

Yes, Ronnie, we have not seen any of the dynamics that others have talked about regarding supply chain. To your point, we just don't have those issues. The other companies that whatever their portfolio looks like, it is what it is. But for us, we aren't seeing any supply chain issues.

Got it. And as we approach the second half of the year, it seems there is some pressure on your EBITDA margins. What is causing that?

Yes. It's really four areas. We're going to continue to ramp up in hiring. It's really two flavors of that, folks who have sold their funded positions as well as what we call capability hires in anticipation of work that's on the horizon. Number two is that typically in the back half is where we reward our people. Number three is we make improvements to our infrastructure and technology as we have an eye toward the next fiscal year. And we step up our investment in growth areas and capabilities that we think are going to position us for the future.

Yes. I'll just close out by just saying we're intent on delivering against the conversation at Investor Day of 50% increase in adjusted EBITDA through 2025. That requires us to grow the top line, to drive strong margins, and to invest intelligently to make it all work both for the short and for the long term.

Thank you. There are no further questions in the queue. I'd like to turn the call back to Horacio Rozanski for closing remarks.

Thank you, Katherine. I'll just close by saying how great it was to have the opportunity to see so many of you in New York City earlier this month. Certainly, it was great in and of itself, but also being able to safely hold an in-person Investor Day was an encouraging indicator that we are indeed emerging from COVID. We look forward to keeping you updated in future calls regarding the progress on our VoLT strategy and especially on the superior financial performance, we believe, it will produce. We're extremely excited about the opportunities ahead for our firm, for our clients, for our people, and certainly for our investors. So as always, thank you for your continued interest and support, and have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.