CACI Reports Results for Its Fiscal 2018 Third Quarter

Record third quarter revenue, operating income, and net income Revenue of $1.12 billion, up 3.5 percent Operating income of $104.8 million, up 55.8 percent Net income of $64.5 million, up 59.8 percent Diluted EPS of $2.56 Contract awards of $1.4 billion Operating cash flow of $98.7 million ARLINGTON, Va.--(BUSINESS WIRE)-- CACI International Inc...

Record third quarter revenue, operating income, and net income

Revenue of $1.12 billion, up 3.5 percent

Operating income of $104.8 million, up 55.8 percent

Net income of $64.5 million, up 59.8 percent

Diluted EPS of $2.56

Contract awards of $1.4 billion

Operating cash flow of $98.7 million

ARLINGTON, Va.--(BUSINESS WIRE)-- CACI International Inc (NYSE: CACI), a leading information solutions and service provider to the federal government, announced results today for its third fiscal quarter ended March 31, 2018.

CEO Commentary and Outlook

Ken Asbury, CACI’s President and CEO, said, “Our fiscal third quarter results continue to affirm our long-term strategy. We delivered another strong quarter of organic revenue growth, profitability, awards and cash flow. There is momentum across the business which is delivering exceptional outcomes for our customers and gives us continued confidence in our ability to deliver on our long-term commitment to grow revenue organically and expand margins. In addition, the improving budget backdrop should enhance our ability to grow and generate shareholder value.”

                   

Third Quarter Results as Reported

                         
(in millions except per-share data)       Q3, FY18       Q3, FY17       % Change
Revenue       $1,124.1       $1,086.4       3.5%
Operating income       $104.8       $67.3       55.8%
Net income       $64.5       $40.4       59.8%
Diluted earnings per share       $2.56       $1.61       59.0%
 
                   

Third Quarter Results Excluding the Impact of Tax Reform(1)

                         
(in millions except per-share data)       Q3, FY18       Q3, FY17       % Change
Revenue       $1,124.1       $1,086.4       3.5%
Operating income       $104.8       $67.3       55.8%
Net income, excluding the impact of tax reform(1)       $58.8       $40.4       45.6%
Diluted earnings per share excluding the impact of tax reform(1)       $2.33       $1.61       44.9%
 

 (1) See Reconciliation of Net Income to Non-GAAP Net Income excluding the impact of tax reform page 11.

 

Revenue for the third quarter of Fiscal Year 2018 (FY18) increased compared to the third quarter of Fiscal Year 2017 (FY17), driven primarily by on-contract growth of existing work and new business wins. The higher operating income was due primarily to improved program execution, particularly on fixed price programs, one-time incentive fees and other one-time items. The increase in net income was due to the factors noted above and the impact of the passage of tax reform legislation. Cash provided by operations in the quarter was $98.7 million.

                   

Additional Financial Metrics

                         
        Q3, FY18       Q3, FY17       % Change
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), a non-GAAP measure (in millions)(1)       $122.9       $85.5       43.7%
Days sales outstanding       62       58        
 

(1) See Reconciliation of Net Income to Earnings before Interest, Taxes, Depreciation and Amortization on page 10.

 

Third Quarter Awards and Contract Funding Orders

Our contract awards in the quarter were $1.4 billion, which excludes ceiling values of multi-award, indefinite delivery, indefinite quantity (IDIQ) contracts. Approximately 40 percent of our awards were for new business.

  • A $145 million task order to support the U.S. Army Intelligence and Security Command (INSCOM) Counter Insurgency Targeting Program. The three-and-a-half-year, single-award contract was awarded under INSCOM’s Global Intelligence Support Services contract vehicle.
  • A $94 million award to provide enterprise IT solutions and services for a classified customer and a $92 million award to support deployed intelligence efforts.
  • A three-year, $85 million task order to provide multi-capable systems integration support and quick reaction capabilities to address urgent requirements from the battlefield and support ground forces.
  • A single-award, three-year contract, with a ceiling value of $60 million, to provide advertising and marketing support to the Army National Guard State Media Services Program.
  • A one-year task order, with a potential value of approximately $41.5 million, to provide engineering support services for the U.S. Army Intelligence and Information Warfare Directorate’s Commercial Based Technology Analysis program.
  • $522 million in previously unannounced classified awards on contracts with customers in the Intelligence Community.
  • A prime position on a 10-year, multiple-award IDIQ contract, with a ceiling value of $17.5 billion, to support the Defense Information Systems Agency’s ENCORE III information technology solutions program.

Contract funding orders in the third quarter were $1.1 billion. Our total backlog at March 31, 2018 was $11.0 billion. Funded backlog at March 31, 2018 was $1.9 billion.

Other Highlights

  • CACI will establish a Shared Services Center (SSC) in Oklahoma City, Oklahoma in July 2018. We will optimize the delivery of company-wide support services, primarily in the areas of contracts, procurement, human resources, finance, information systems, and security. With the location’s cost advantages and high-quality talent, the SSC will further enhance CACI’s competitiveness and benefit our company, customers, and shareholders.

  • Chief Operating Officer John Mengucci has been named to the FCW 2018 Federal 100, an elite list of government and industry leaders who have positively transformed federal IT. Mr. Mengucci was selected for his strategic leadership and insight which were integral to CACI’s record-setting FY17 financial performance and our positioning for continued growth.
  • CACI Board of Directors member William Scott Wallace, USA (Ret.) was honored with the Distinguished Graduate Award from the U.S. Military Academy at West Point. The award is conferred upon graduates who embody West Point’s motto: “Duty, Honor, Country.”
  • Dr. J.P. (Jack) London, CACI Executive Chairman and Chairman of the Board, was named a National Association of Corporate Directors (NACD) Governance Fellow. The NACD is the premier organization and authority for boardroom practices and advancing exemplary board leadership. NACD’s Fellowship program is the association’s highest credential for corporate directors and governance professionals.
                   

Nine Months Results as Reported

                         
(in millions except per-share data)      

Nine Months,

FY18

     

Nine Months,

FY17

      % Change
Revenue       $3,297.8       $3,217.2       2.5%
Operating income       $260.4       $217.2       19.9%
Net income       $249.3       $119.4       108.8%
Diluted earnings per share       $9.88       $4.77       107.1%
 
                   

Nine Months Results Excluding the Impact of Tax Reform(1)

                         
(in millions except per-share data)       Nine Months,

FY18

      Nine Months,

FY17

      % Change
Revenue       $3,297.8       $3,217.2       2.5%
Operating income       $260.4       $217.2       19.9%
Net income excluding the impact of tax reform(1)       $151.4       $119.4       26.7%
Diluted earnings per share excluding the impact of tax reform(1)       $6.00       $4.77       25.7%
 

(1) See Reconciliation of Net Income to non-GAAP Net Income excluding the impact of tax reform on page 11

 

Revenue in the nine months of FY18 increased compared to the year earlier period due primarily due to on-contract growth of existing work and new business wins. Operating income increased primarily due to higher profitability in existing work and new business, higher award fees, one-time incentive fees and the other items we already noted. Net income increased primarily due to the factors noted above and the impact of the passage of tax reform legislation. Net cash provided by operations in the nine months of FY18 was $254.5 million, 17.6 percent higher than net cash provided by operations in the nine months of FY17. Adjusted EBITDA, a non-GAAP measure, for the nine months of FY18 was $312.3 million, 14.6 percent higher than adjusted EBITDA of $272.5 million for the nine months of FY17.

CACI Reiterates its FY18 Annual Guidance

We are reiterating the FY18 guidance we revised on March 18, 2018. Investors are reminded that the recent tax reform legislation is expected to add approximately $100 million to net income, which was incorporated in our previous guidance and is also reflected in the current guidance. The table below summarizes our FY18 expectations and represents our views as of May 2, 2018.

         

(In millions except for tax rate and earnings per share)

     

Fiscal Year 2018

Guidance

Revenue       $4,400 - $4,500
Net income       $285 - $291
Effective corporate tax rate       -3.4%
Diluted earnings per share       $11.26 - $11.50
Diluted weighted average shares       25.3
     

Conference Call Information

We have scheduled a conference call for 8:30 AM Eastern Time Thursday, May 3, 2018 during which members of our senior management team will be making a brief presentation focusing on third quarter results and operating trends followed by a question-and-answer session. You can listen to the conference call and view the accompanying exhibits over the Internet by logging on to http://investor.caci.com/news/#upcomingevent, at the scheduled time. A replay of the call will also be available over the Internet and can be accessed through our homepage (www.caci.com) by clicking on the CACI Investor Relations tab.

CACI provides information solutions and services in support of national security missions and government transformation for Intelligence, Defense, and Federal Civilian customers. A Fortune Magazine World’s Most Admired Company in the IT Services industry, CACI is a member of the Fortune 1000 Largest Companies, the Russell 2000 Index, and the S&P SmallCap600 Index. CACI’s sustained commitment to ethics and integrity defines its corporate culture and drives its success. With approximately 18,600 employees worldwide, CACI provides dynamic career opportunities for military veterans and industry professionals to support the nation’s most critical missions. Join us! www.caci.com.

There are statements made herein which do not address historical facts and, therefore, could be interpreted to be forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. The factors that could cause actual results to differ materially from those anticipated include, but are not limited to, the following: legal, regulatory, and political change as a result of transitioning to a new presidential administration that could result in economic uncertainty; changes in U.S. federal agencies, current agreements with other nations, foreign events, or any other events which may affect the global economy; regional and national economic conditions in the United States and globally; terrorist activities or war; changes in interest rates; currency fluctuations; significant fluctuations in the equity markets; changes in our effective tax rate; failure to achieve contract awards in connection with re-competes for present business and/or competition for new business; the risks and uncertainties associated with client interest in and purchases of new products and/or services; continued funding of U.S. government or other public sector projects, based on a change in spending patterns, implementation of spending cuts (sequestration) under the Budget Control Act of 2011, or any legislation that amends or changes discretionary spending levels under that act; changes in budgetary priorities or in the event of a priority need for funds, such as homeland security; government contract procurement (such as bid protest, small business set asides, loss of work due to organizational conflicts of interest, etc.) and termination risks; the results of government audits and reviews conducted by the Defense Contract Audit Agency, the Defense Contract Management Agency, or other governmental entities with cognizant oversight; individual business decisions of our clients; paradigm shifts in technology; competitive factors such as pricing pressures and/or competition to hire and retain employees (particularly those with security clearances); market speculation regarding our continued independence; material changes in laws or regulations applicable to our businesses, particularly in connection with (i) government contracts for services, (ii) outsourcing of activities that have been performed by the government, and (iii) competition for task orders under Government Wide Acquisition Contracts (GWACs) and/or schedule contracts with the General Services Administration; the potential impact of the announcement or consummation of a proposed transaction and our ability to successfully integrate the operations of our recent and any future acquisitions; our own ability to achieve the objectives of near term or long range business plans; and other risks described in our Securities and Exchange Commission filings.

CACI-Financial

                       
Selected Financial Data
 
CACI International Inc
Condensed Consolidated Statements of Operations (Unaudited)
(Amounts in thousands, except per share amounts)
 
 
Quarter Ended Nine Months Ended
3/31/2018 3/31/2017 % Change 3/31/2018 3/31/2017 % Change
Revenue $ 1,124,100   $ 1,086,418   3.5 % $ 3,297,774   $ 3,217,228   2.5 %
Costs of revenue
Direct costs 728,444 732,224 -0.5 % 2,195,282 2,165,766 1.4 %
Indirect costs and selling expenses 273,145 269,237 1.5 % 788,569 780,397 1.0 %
Depreciation and amortization   17,717     17,703   0.1 %   53,563     53,898   -0.6 %
Total costs of revenue   1,019,306     1,019,164   0.0 %   3,037,414     3,000,061   1.2 %
Operating income 104,794 67,254 55.8 % 260,360 217,167 19.9 %
Interest expense and other, net   10,566     12,107   -12.7 %   32,769     36,921   -11.2 %
Income before income taxes 94,228 55,147 70.9 % 227,591 180,246 26.3 %
Income taxes   29,729     14,790   101.0 %   (21,749 )   60,806   -135.8 %
Net income $ 64,499   $ 40,357   59.8 % $ 249,340   $ 119,440   108.8 %
 
Basic earnings per share $ 2.62 $ 1.65 58.3 % $ 10.14 $ 4.90 107.0 %
Diluted earnings per share $ 2.56 $ 1.61 59.0 % $ 9.88 $ 4.77 107.1 %
 
Weighted average shares used in per share computations:
Basic 24,656 24,419 24,588 24,382
Diluted 25,234 25,106 25,229 25,034
 
 
Statement of Operations Data (Unaudited)
 
Quarter Ended Nine Months Ended
3/31/2018 3/31/2017 % Change 3/31/2018 3/31/2017 % Change
Operating income margin 9.3 % 6.2 % 7.9 % 6.8 %
Tax rate 31.6 % 26.8 % -9.6 % 33.7 %
Net income margin 5.7 % 3.7 % 7.6 % 3.7 %
 
Adjusted EBITDA* $ 122,927 $ 85,515 43.7 % $ 312,326 $ 272,547 14.6 %
Adjusted EBITDA Margin 10.9 % 7.9 % 9.5 % 8.5 %
 
*See Reconciliation of Net Income to Earnings before Interest, Taxes, Depreciation and Amortization on page 10.
 

       
Selected Financial Data (Continued)
 
CACI International Inc
Condensed Consolidated Balance Sheets (Unaudited)
(Amounts in thousands)
 
 
3/31/2018 6/30/2017
ASSETS:
Current assets
Cash and cash equivalents $ 55,970 $ 65,539
Accounts receivable, net 820,042 757,341
Prepaid expenses and other current assets   77,335   57,022
Total current assets 953,347 879,902
 
Goodwill and intangible assets, net 2,853,234 2,812,806
Property and equipment, net 100,756 91,749
Other long-term assets   140,063   126,625
Total assets $ 4,047,400 $ 3,911,082
 
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities
Current portion of long-term debt $ 94,438 $ 53,965
Accounts payable 138,597 62,874
Accrued compensation and benefits 234,532 239,741
Other accrued expenses and current liabilities   160,104   170,164
Total current liabilities 627,671 526,744
 
Long-term debt, net of current portion 989,462 1,177,598
Other long-term liabilities   372,192   413,019
Total liabilities   1,989,325   2,117,361
 
Shareholders' equity   2,058,075   1,793,721
Total liabilities and shareholders' equity $ 4,047,400 $ 3,911,082
 

       
Selected Financial Data (Continued)
 
CACI International Inc
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands)
 
 
Nine Months Ended
3/31/2018 3/31/2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 249,340 $ 119,440

Reconciliation of net income to net cash provided by operating activities:

Depreciation and amortization 53,563 53,898
Amortization of deferred financing costs 3,311 3,371
Loss on disposal of fixed assets - 975
Stock-based compensation expense 18,183 16,114
(Benefit) provision for deferred income taxes (69,405 ) 6,773
Equity in earnings from unconsolidated ventures - (167 )
Other - (1,545 )

Changes in operating assets and liabilities net of effect of business acquisitions

Accounts receivable, net (53,410 ) 62,360
Prepaid expenses and other assets (11,916 ) (3,895 )
Accounts payable and accrued expenses 68,505 (31,706 )
Accrued compensation and benefits (12,047 ) (7,013 )
Income taxes receivable and payable (572 ) (4,082 )
Other liabilities   8,945     1,955  
Net cash provided by operating activities   254,497     216,478  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (31,810 ) (34,941 )
Purchases of businesses, net of cash acquired (50,368 ) (5,786 )
Proceeds from net working capital refund of acquired business - 13,619
Proceeds from equity method investments - 4,681
Other   (38 )   1,597  
Net cash used in investing activities   (82,216 )   (20,830 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under credit facilities (150,974 ) (178,474 )
Payment of contingent consideration (11,553 ) -
Proceeds from employee stock purchase plans 3,673 3,334
Repurchases of common stock (3,802 ) (3,367 )
Payment of taxes for equity transactions   (20,692 )   (10,580 )
Net cash used in financing activities   (183,348 )   (189,087 )
Effect of exchange rate changes on cash and cash equivalents   1,498     (1,272 )
Net (decrease) increase in cash and cash equivalents (9,569 ) 5,289
Cash and cash equivalents, beginning of period   65,539     49,082  
Cash and cash equivalents, end of period $ 55,970   $ 54,371  
 

                       
Selected Financial Data (Continued)
 
Revenue by Customer Type (Unaudited)
Quarter Ended            
(dollars in thousands) 3/31/2018 3/31/2017

$ Change

    % Change
Department of Defense $ 747,203 66.5 % $ 700,212 64.4 % $ 46,991 6.7 %
Federal Civilian Agencies 299,309 26.6 % 320,269 29.5 % (20,960 ) -6.5 %
Commercial and other   77,588     6.9 %   65,937     6.1 %   11,651       17.7 %
Total $ 1,124,100     100.0 % $ 1,086,418     100.0 % $ 37,682       3.5 %
 
Nine Months Ended            
(dollars in thousands) 3/31/2018 3/31/2017

$ Change

    % Change
Department of Defense $ 2,181,495 66.1 % $ 2,077,088 64.5 % $ 104,407 5.0 %
Federal Civilian Agencies 902,075 27.4 % 942,115 29.3 % (40,040 ) -4.3 %
Commercial and other   214,204     6.5 %   198,025     6.2 %   16,179       8.2 %
Total $ 3,297,774     100.0 % $ 3,217,228     100.0 % $ 80,546       2.5 %
 
Revenue by Contract Type (Unaudited)
Quarter Ended            
(dollars in thousands) 3/31/2018 3/31/2017

$ Change

    % Change
Cost reimbursable $ 558,937 49.7 % $ 526,350 48.4 % $ 32,587 6.2 %
Fixed price 368,491 32.8 % 349,722 32.2 % 18,769 5.4 %
Time and materials   196,672     17.5 %   210,346     19.4 %   (13,674 )     -6.5 %
Total $ 1,124,100     100.0 % $ 1,086,418     100.0 % $ 37,682       3.5 %
 
Nine Months Ended            
(dollars in thousands) 3/31/2018 3/31/2017

$ Change

    % Change
Cost reimbursable $ 1,662,066 50.4 % $ 1,556,012 48.4 % $ 106,054 6.8 %
Fixed price 1,092,871 33.1 % 1,054,176 32.7 % 38,695 3.7 %
Time and materials   542,837     16.5 %   607,040     18.9 %   (64,203 )     -10.6 %
Total $ 3,297,774     100.0 % $ 3,217,228     100.0 % $ 80,546       2.5 %
 
Revenue Received as a Prime versus Subcontractor (Unaudited)
Quarter Ended            
(dollars in thousands) 3/31/2018 3/31/2017

$ Change

    % Change
Prime $ 1,053,017 93.7 % $ 1,007,952 92.8 % $ 45,065 4.5 %
Subcontractor   71,083     6.3 %   78,466     7.2 %   (7,383 )     -9.4 %
Total $ 1,124,100     100.0 % $ 1,086,418     100.0 % $ 37,682       3.5 %
 
Nine Months Ended            
(dollars in thousands) 3/31/2018 3/31/2017

$ Change

    % Change
Prime $ 3,085,992 93.6 % $ 2,989,051 92.9 % $ 96,941 3.3 %
Subcontractor   211,782     6.4 %   228,177     7.1 %   (16,395 )     -7.2 %
Total $ 3,297,774     100.0 % $ 3,217,228     100.0 % $ 80,546       2.5 %
 

 
Selected Financial Data (Continued)
               
Contract Funding Orders Received (Unaudited)
Quarter Ended            
(dollars in thousands) 3/31/2018 3/31/2017

$ Change

% Change
Contract Funding Orders $ 1,099,394 $ 1,138,263 $ (38,869 ) -3.4 %
 
Nine Months Ended            
(dollars in thousands) 3/31/2018 3/31/2017

$ Change

% Change
Contract Funding Orders $ 3,322,097 $ 3,052,857 $ 269,240   8.8 %
 

Reconciliation of Net Income to Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
(Unaudited)

The Company views Adjusted EBITDA and Adjusted EBITDA margin, both of which are defined as non-GAAP measures, as important indicators of performance, consistent with the manner in which management measures and forecasts the Company’s performance. Adjusted EBITDA is a commonly used non-GAAP measure when comparing our results with those of other companies. We define Adjusted EBITDA as GAAP net income plus net interest expense, income taxes, depreciation and amortization, and earnout adjustments. We consider Adjusted EBITDA to be a useful metric for management and investors to evaluate and compare the ongoing operating performance of our business on a consistent basis across reporting periods, as it eliminates the effect of non-cash items such as depreciation of tangible assets, amortization of intangible assets primarily recognized in business combinations, as well as the effect of earnout gains and losses, which we do not believe are indicative of our core operating performance. Adjusted EBITDA margin is adjusted EBITDA divided by revenue. These non-GAAP measures should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.

                       
Quarter Ended Nine Months Ended
(dollars in thousands) 3/31/2018     3/31/2017     % Change 3/31/2018     3/31/2017     % Change
Net income $ 64,499 $ 40,357 59.8 % $ 249,340 $ 119,440 108.8 %
Plus:
Income taxes 29,729 14,790 101.0 % (21,749 ) 60,806 -135.8 %
Interest income and expense, net 10,566 12,170 -13.2 % 32,769 37,088 -11.6 %
Depreciation and amortization 17,717 17,703 0.1 % 53,563 53,898 -0.6 %
Earnout adjustments   416         495       -16.0 %   (1,597 )       1,315       -221.4 %
Adjusted EBITDA $ 122,927       $ 85,515       43.7 % $ 312,326       $ 272,547       14.6 %
 
Quarter Ended Nine Months Ended
(dollars in thousands) 3/31/2018     3/31/2017     % Change 3/31/2018     3/31/2017     % Change
Revenue, as reported $ 1,124,100 $ 1,086,418 3.5 % $ 3,297,774 $ 3,217,228 2.5 %
Adjusted EBITDA   122,927         85,515       43.7 %   312,326         272,547       14.6 %
Adjusted EBITDA margin   10.9 %       7.9 %           9.5 %       8.5 %        
 

Selected Financial Data (Continued)

Reconciliation of Net Income Excluding the Impact of Tax Reform
(Unaudited)

The Company views Net Income excluding the impact of Tax Reform, a non-GAAP measure, as an important indicator of performance, consistent with the manner in which management measures and forecasts the Company’s performance. Net Income excluding the impact of Tax Reform is defined as GAAP Net Income adjusted to exclude the impact of Tax Reform. We believe this is an important calculation to show company performance without the benefits of Tax Reform. Management is incented to perform via metrics without the impact of Tax Reform. This non-GAAP measure should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.

               
Three Months Nine Months
(Amounts in thousands, except per share amounts) 3/31/2018 3/31/2018
 
Net Diluted Net Diluted
Income     EPS Income     EPS
Net Income, as reported $ 64,499 $ 2.56 $ 249,340 $ 9.88
Tax reform benefit from lower tax rate and other items   (5,729 )       (0.23 )   (12,829 )       (0.50 )

Net Income before remeasurement and transition tax reform adjustments

$ 58,770 $ 2.33 $ 236,511 $ 9.38
Remeasurement of deferred tax liabilities - - (94,831 ) (3.76 )
Transition tax on foreign earnings   -         -     9,676         0.38  
Net income, excluding impact of tax reform $ 58,770       $ 2.33   $ 151,356       $ 6.00  
 

View source version on businesswire.com: https://www.businesswire.com/news/home/20180502006516/en/

CACI International Inc
Corporate Communications and Media:
Jody Brown
Executive Vice President, Public Relations
(703) 841-7801
jbrown@caci.com
or
Investor Relations:
David Dragics
Senior Vice President, Investor Relations
(866) 606-3471
ddragics@caci.com

Source: CACI International Inc

Source: investor.caci.com