CACI CACI International Inc

Record second quarter revenue of $1.06 billion, up 27.3 percent

Net income of $42.4 million, up 39.3 percent

Cash from operations of $77.6 million

Contract awards of $1.6 billion

Raises FY17 annual guidance

CACI International Inc (NYSE: CACI), a leading information solutions and services provider to the federal government, announced results today for its second fiscal quarter ended December 31, 2016.

CEO Commentary and Outlook

Ken Asbury, CACI’s President and CEO, said, “We had excellent operational, financial and business development execution in the second quarter. Our NSS acquisition continues to perform well and is fully integrated into CACI. Our performance in the first half of this year gives us confidence to raise our top and bottom line guidance for FY17.”

Second Quarter Results

                    (in millions except per-share data)     Q2, FY17     Q2, FY16     % Change Revenue     $1,057.5     $830.4     27.3% Operating income     $80.3     $55.5     44.6% Net income     $42.4     $30.5     39.3% Diluted earnings per share     $1.69     $1.23     37.7%            

Revenue for the second quarter of Fiscal Year 2017 (FY17) increased compared to the second quarter of Fiscal Year 2016 (FY16), driven primarily by revenue of $260 million from the NSS acquisition. The higher operating income was due to the NSS contribution, program performance, and the absence of one-time acquisition-related expenses which occurred in the second quarter of FY16. The increase in net income was due to the factors noted above. Cash provided by operations in the quarter was $77.6 million.

Additional Financial Metrics

                          Q2, FY17     Q2, FY16     % Change Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), a non-GAAP measure (in millions)     $98.8     $70.4     40.3% Diluted adjusted earnings per share, a non-GAAP measure     $2.30     $1.72     33.7% Days sales outstanding     60     60                  

Second Quarter Awards, Contract Funding Orders, and Other Highlights

Our contract awards in the quarter were $1.6 billion, which excludes ceiling values of multi-award indefinite delivery, indefinite quantity (IDIQ) contracts. Approximately 85 percent of our awards were for new business (which includes modifications and extensions).

Key awards during the quarter included:

• A task order with a ceiling value of $1.77 billion to provide deployable analytical operations, integrated intelligence, and training services to the Joint Improvised-Threat Defeat Organization (JIDO). The five-year award, won under the OASIS contract vehicle, represents new work for CACI in its Intelligence Services market area. The anticipated spend is estimated at $875.6 million which the company recorded as an increase to its total backlog.
• A $140 million prime contract to provide global logistics support services for the U.S. Fleet Forces Command’s Naval Forces Logistics Support/Training Services program. The five-year contract represents continuing business in CACI’s Logistics and Material Readiness market area.
• A $79 million task order to support the U.S. Army Intelligence and Information Warfare Directorate’s Innovative Intelligence Solutions and Systems Engineering Support program. The three-year award, won under the TIES contract vehicle, represents continuing work in CACI’s Intelligence Systems and Support market area.
• A $31 million task order to support modeling and simulation technology for the U.S. Army’s Night Vision and Electronic Sensors Directorate. The three-year award, won under the R2-3G contract vehicle, represents new business in CACI’s Surveillance and Reconnaissance market area.
• A $26 million task order with the Space and Naval Warfare Systems Center Atlantic to provide DoD travel call center support services. The three-year, seven-month contract, won under the ITES-2S contract vehicle, represents continuing work in CACI’s Business Systems market area.
• A prime position on a multiple-award IDIQ contract with a $6 billion ceiling value to provide IT, technical, and management expertise for the Defense Logistics Agency’s Information Operations Office (J6), program offices, and other DoD agencies. The eight-year J6 Enterprise Technology Services contract positions CACI for new work in its Business Systems, Enterprise IT, and Cyber Security market areas.
• A prime position on a multiple-award IDIQ contract with a ceiling value of $192 million to provide training and curriculum development to the Naval Education and Training Command. The six-year contract represents new work for CACI in its Logistics and Material Readiness market area.
• A prime position on a $92 million multiple-award IDIQ contract to provide a range of operations support solutions for the Space and Naval Warfare Systems Center Pacific. The two-year contract represents new work for CACI in its Surveillance and Reconnaissance market area.

Contract funding orders in the second quarter were $752 million. Our total backlog at December 31, 2016 was $11.6 billion compared with $11.0 billion at the end of the fourth quarter of FY16. Funded backlog at December 31, 2016 was $2.0 billion compared with $2.3 billion at June 30, 2016.

Other highlights in the quarter included:

• CACI earned enterprise-wide certification for the International Organization for Standardization (ISO) 27001 credential for information security policies and practices, providing independent verification that CACI’s internal corporate IT infrastructure and information security policies and practices adhere to industry best practices. This is the second enterprise-wide ISO credential the company has received, having been certified for the ISO 9001:2015 quality management credential in May 2016.
• CACI received the SmartCEO GovStar Industry Star award in the large company category, recognizing the significant contributions CACI has made to the government contracting industry through mentoring, business partnerships, philanthropy, advocacy, and dedication providing solutions and services that help safeguard the nation and support its customers’ critical missions.
• CACI was selected for the Amazon Web Services (AWS) Public Sector Partner Program, recognizing CACI’s strong overall AWS practice experience and readiness to support government, education, and/or non-profit customer missions. The selection builds upon CACI’s work providing customers with comprehensive, rapid, and agile cloud services and solutions and enhances the company’s presence across all its market areas.
• CACI was named a Top Workplace in Austin by The Austin American-Statesman and in Memphis by The Memphis Commercial Appeal. These rankings are based on employee feedback surveys.

Six Months Results

                    (in millions except per-share data)    

Six Months,FY17

   

Six Months,FY16

    % Change Revenue     $2,130.8     $1,652.9     28.9% Operating income     $149.9     $120.0     24.9% Net income     $79.1     $65.1     21.5% Diluted earnings per share     $3.16     $2.63     20.3%            

Revenue in the first half of FY17 increased compared to the year earlier period due to the NSS acquisition. Operating and net income increased due to the NSS acquisition, program performance, and the absence of one-time acquisition-related expenses which occurred in the second quarter of FY16. Net cash provided by operations in the first half of FY17 was $135 million.

Additional Financial Metrics

                         

Six Months,FY17

   

Six Months,FY16

    % Change Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), a non-GAAP measure (in millions)     $187.0     $149.7     24.9% Diluted adjusted earnings per share, a non-GAAP measure     $4.37     $3.59     21.8%            

CACI Raises Its FY17 Guidance

We are raising our FY17 guidance we issued on October 26, 2016. The table below summarizes our FY17 guidance and represents our views as of February 1, 2017:

             

 

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

   

Current Fiscal Year2017 Guidance

   

Previous Fiscal Year2017 Guidance

Revenue     $4,150 - $4,300     $4,050 - $4,250 Net income     $155 - $162     $150 - $160 Effective corporate tax rate     37.5%     37.5% Diluted earnings per share     $6.18 - $6.45     $5.98 - $6.37 Diluted weighted average shares     25.1     25.1        

Conference Call Information

We have scheduled a conference call for 8:30 AM Eastern Time Thursday, February 2, 2017 during which members of our senior management team will be making a brief presentation focusing on second 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 our homepage, www.caci.com, at the scheduled time, or you may dial 1-888-317-6016, confirmation code CACI International. 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 Info button.

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 20,000 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 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-Earnings Release

  Selected Financial Data   CACI International Inc Condensed Consolidated Statements of Operations (Unaudited) (Amounts in thousands, except per share amounts)     Quarter Ended     Six Months Ended   12/31/2016   12/31/2015 % Change 12/31/2016   12/31/2015 % Change Revenue $ 1,057,530   $ 830,437   27.3 % $ 2,130,810   $ 1,652,879   28.9 % Costs of revenue Direct costs 705,321 547,140 28.9 % 1,433,542 1,084,564 32.2 % Indirect costs and selling expenses 253,822 213,144 19.1 % 511,160 418,844 22.0 % Depreciation and amortization   18,132     14,670   23.6 %   36,195     29,481   22.8 % Total costs of revenue   977,275     774,954   26.1 %   1,980,897     1,532,889   29.2 % Operating income 80,255 55,483 44.6 % 149,913 119,990 24.9 % Interest expense and other, net   12,325     8,180   50.7 %   24,814     17,362   42.9 % Income before income taxes 67,930 47,303 43.6 % 125,099 102,628 21.9 % Income taxes   25,510     16,851   51.4 %   46,016     37,544   22.6 % Net income $ 42,420   $ 30,452   39.3 % $ 79,083   $ 65,084   21.5 %   Basic earnings per share $ 1.74 $ 1.26 38.5 % $ 3.25 $ 2.69 20.8 % Diluted earnings per share $ 1.69 $ 1.23 37.7 % $ 3.16 $ 2.63 20.3 %   Weighted average shares used in per share computations: Basic 24,387 24,246 24,363 24,227 Diluted 25,069 24,786 24,998 24,754   Statement of Operations Data (Unaudited) Quarter Ended Six Months Ended 12/31/2016 12/31/2015 % Change 12/31/2016 12/31/2015 % Change Operating income margin 7.6 % 6.7 % 7.0 % 7.3 % Tax rate 37.6 % 35.6 % 36.8 % 36.6 % Net income margin 4.0 % 3.7 % 3.7 % 3.9 %   Adjusted EBITDA* $ 98,793 $ 70,439 40.3 % $ 187,032 $ 149,708 24.9 % Adjusted EBITDA Margin 9.3 % 8.5 % 8.8 % 9.1 %   Adjusted net income* $ 57,777 $ 42,714 35.3 % $ 109,299 $ 88,884 23.0 % Diluted adjusted earnings per share $ 2.30 $ 1.72 33.7 % $ 4.37 $ 3.59 21.8 %       *   See Reconciliation of Net Income to Earnings before Interest, Taxes, Depreciation and Amortization and to Adjusted Net Income on page 11.   Selected Financial Data (Continued)   CACI International Inc Condensed Consolidated Balance Sheets (Unaudited) (Amounts in thousands)   12/31/2016   6/30/2016 ASSETS: Current assets Cash and cash equivalents $ 72,650 $ 49,082 Accounts receivable, net 717,721 803,817 Prepaid expenses and other current assets   69,679   68,939 Total current assets 860,050 921,838   Goodwill and intangible assets, net 2,825,778 2,860,715 Property and equipment, net 86,406 81,362 Other long-term assets   124,931   123,426 Total assets $ 3,897,165 $ 3,987,341   LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities Current portion of long-term debt $ 67,456 $ 53,965 Accounts payable 39,293 95,270 Accrued compensation and benefits 212,480 228,362 Other accrued expenses and current liabilities   179,705   187,579 Total current liabilities 498,934 565,176   Long-term debt, net of current portion 1,292,348 1,402,079 Other long-term liabilities   409,924   412,773 Total liabilities   2,201,206   2,380,028   Shareholders' equity   1,695,959   1,607,313 Total liabilities and shareholders' equity $ 3,897,165 $ 3,987,341   Selected Financial Data (Continued)   CACI International Inc Condensed Consolidated Statements of Cash Flows (Unaudited) (Amounts in thousands)     Six Months Ended 12/31/2016   12/31/2015 CASH FLOWS FROM OPERATING ACTIVITIES:   Net Income $ 79,083 $ 65,084

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

Depreciation and amortization 36,195 29,481 Amortization of deferred financing costs 2,252 1,152 Loss on disposal of fixed assets 975 - Stock-based compensation expense 10,557 8,473 Provision for deferred income taxes 5,081 12,045 Equity in earnings from unconsolidated ventures (103 ) (98 )

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

Accounts receivable, net 71,080 35,216 Prepaid expenses and other assets 1,649 (7,170 ) Accounts payable and accrued expenses (58,873 ) 11,870 Accrued compensation and benefits (15,339 ) (16,998 ) Income taxes receivable and payable (391 ) (2,768 ) Other liabilities   3,184     (647 ) Net cash provided by operating activities   135,350     135,640     CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (21,826 ) (7,642 ) Purchases of businesses, net of cash acquired (5,605 ) (15,578 ) Proceeds from net working capital refund of acquired business 13,619 - Proceeds from equity method investments 4,681 - Other   1,051     (684 ) Net cash used in investing activities   (8,080 )   (23,904 )   CASH FLOWS FROM FINANCING ACTIVITIES: Net payments under credit facilities (98,491 ) (74,494 ) Proceeds from employee stock purchase plans 2,262 1,577 Repurchases of common stock (2,243 ) (1,689 ) Payment of taxes for equity transactions (3,632 ) (2,560 ) Other   -     451   Net cash used in financing activities   (102,104 )   (76,715 ) Effect of exchange rate changes on cash and cash equivalents   (1,598 )   (1,388 ) Net increase in cash and cash equivalents 23,568 33,633 Cash and cash equivalents, beginning of period   49,082     35,364   Cash and cash equivalents, end of period $ 72,650   $ 68,997     Selected Financial Data (Continued)   Revenue by Customer Type (Unaudited)   Quarter Ended         (dollars in thousands) 12/31/2016   12/31/2015  

$ Change

 

% Change

Department of Defense $ 684,673   64.8 %   $ 543,716   65.5 %   $ 140,957   25.9 % Federal Civilian Agencies 308,053 29.1 % 232,773 28.0 % 75,280 32.3 % Commercial and other   64,804   6.1 %     53,948   6.5 %     10,856     20.1 % Total $ 1,057,530   100.0 %   $ 830,437   100.0 %   $ 227,093     27.3 %   Six Months Ended         (dollars in thousands) 12/31/2016   12/31/2015  

$ Change

 

% Change

Department of Defense $ 1,376,876 64.6 % $ 1,087,235 65.8 % $ 289,641 26.6 % Federal Civilian Agencies 621,846 29.2 % 458,196 27.7 % 163,650 35.7 % Commercial and other   132,088   6.2 %     107,448   6.5 %     24,640     22.9 % Total $ 2,130,810   100.0 %   $ 1,652,879   100.0 %   $ 477,931     28.9 %   Revenue by Contract Type (Unaudited) Quarter Ended         (dollars in thousands) 12/31/2016  

12/31/2015

 

$ Change

 

% Change

Cost reimbursable $ 495,080 46.8 % $ 394,425 47.5 % $ 100,655 25.5 % Fixed price 361,141 34.2 % 288,883 34.8 % 72,258 25.0 % Time and materials   201,309   19.0 %     147,129   17.7 %     54,180     36.8 % Total $ 1,057,530   100.0 %   $ 830,437   100.0 %   $ 227,093     27.3 %   Six Months Ended         (dollars in thousands) 12/31/2016   12/31/2015  

$ Change

 

% Change

Cost reimbursable $ 1,029,662 48.3 % $ 782,423 47.3 % $ 247,239 31.6 % Fixed price 704,454 33.1 % 578,184 35.0 % 126,270 21.8 % Time and materials   396,694   18.6 %     292,272   17.7 %     104,422     35.7 % Total $ 2,130,810   100.0 %   $ 1,652,879   100.0 %   $ 477,931     28.9 %   Revenue Received as a Prime versus Subcontractor (Unaudited) Quarter Ended         (dollars in thousands) 12/31/2016   12/31/2015  

$ Change

 

% Change

Prime $ 984,642 93.1 % $ 758,336 91.3 % $ 226,306 29.8 % Subcontractor   72,888   6.9 %     72,101   8.7 %     787     1.1 % Total $ 1,057,530   100.0 %   $ 830,437   100.0 %   $ 227,093     27.3 %   Six Months Ended         (dollars in thousands) 12/31/2016   12/31/2015  

$ Change

  % Change Prime $ 1,981,099 93.0 % $ 1,500,914 90.8 % $ 480,185 32.0 % Subcontractor   149,711   7.0 %     151,965   9.2 %     (2,254 )   -1.5 % Total $ 2,130,810   100.0 %   $ 1,652,879   100.0 %   $ 477,931     28.9 %   Selected Financial Data (Continued)   Contract Funding Orders Received (Unaudited)   Quarter Ended         (dollars in thousands) 12/31/2016   12/31/2015  

$ Change

  % Change Contract Funding Orders $ 751,703   $ 541,358   $ 210,345   38.9 % Six Months Ended         (dollars in thousands) 12/31/2016   12/31/2015  

$ Change

  % Change Contract Funding Orders $ 1,914,594   $ 1,669,834   $ 244,760   14.7 %         Direct Costs by Category (Unaudited)   Quarter Ended (dollars in thousands) 12/31/2016   12/31/2015  

$ Change

  % Change Direct labor $ 324,485   46.0 %   $ 259,835   47.5 %   $ 64,650   24.9 % Other direct costs   380,836   54.0 %     287,305   52.5 %     93,531   32.6 % Total direct costs $ 705,321   100.0 %   $ 547,140   100.0 %   $ 158,181   28.9 %   Six Months Ended (dollars in thousands) 12/31/2016   12/31/2015  

$ Change

  % Change Direct labor $ 659,413 46.0 % $ 530,299 48.9 % $ 129,114 24.3 % Other direct costs   774,129   54.0 %     554,265   51.1 %     219,864   39.7 % Total direct costs $ 1,433,542   100.0 %   $ 1,084,564   100.0 %   $ 348,978   32.2 %  

Selected Financial Data (Continued)

 

Reconciliation of Net Income to Adjusted Earnings Before Interest, Taxes, Depreciation

and Amortization (EBITDA) and to Adjusted Net Income

(Unaudited)

  The Company views Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Diluted Adjusted Earnings Per Share, all 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. We define Adjusted Net Income as GAAP net income plus stock-based compensation expense, depreciation and amortization, amortization of financing costs, and earnout adjustments, net of related tax effects. We believe Adjusted Net Income is an important measure of long-term value and is used by investors to measure our performance. This measure in particular assists readers in further understanding our results and trends from period-to-period by removing certain non-cash items that do not impact the cash flow performance of our business. Diluted Adjusted Earnings Per Share is Adjusted Net Income divided by diluted weighted-average shares, as reported. Adjusted EBITDA and Adjusted Net Income as defined by us may not be computed in the same manner as similarly titled measures used by other companies. These non-GAAP measures should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.     Quarter Ended   Six Months Ended (dollars in thousands) 12/31/2016   12/31/2015   % Change   12/31/2016   12/31/2015   % Change Net income $ 42,420   $ 30,452   39.3 %   $ 79,083   $ 65,084   21.5 % Plus: Income taxes 25,510 16,851 51.4 % 46,016 37,544 22.6 % Interest income and expense, net 12,325 8,327 48.0 % 24,918 17,460 42.7 % Depreciation and amortization 18,132 14,670 23.6 % 36,195 29,481 22.8 % Earnout adjustments   406       139     192.1 %     820       139     489.9 % Adjusted EBITDA $ 98,793     $ 70,439     40.3 %   $ 187,032     $ 149,708     24.9 %   Quarter Ended   Six Months Ended (dollars in thousands) 12/31/2016   12/31/2015   % Change   12/31/2016   12/31/2015   % Change Revenue, as reported $ 1,057,530 $ 830,437 27.3 % $ 2,130,810 $ 1,652,879 28.9 % Adjusted EBITDA $ 98,793     $ 70,439     40.3 %   $ 187,032     $ 149,708     24.9 % Adjusted EBITDA margin   9.3 %     8.5 %         8.8 %     9.1 %       Quarter Ended   Six Months Ended (dollars in thousands) 12/31/2016   12/31/2015   % Change   12/31/2016   12/31/2015   % Change Net income $ 42,420 $ 30,452 39.3 % $ 79,083 $ 65,084 21.5 % Plus: Stock-based compensation 5,660 4,835 17.1 % 10,557 8,473 24.6 % Depreciation and amortization 18,132 14,670 23.6 % 36,195 29,481 22.8 % Amortization of financing costs 1,124 575 95.5 % 2,252 1,152 95.5 % Earnout adjustments 406 139 192.1 % 820 139 489.9 % Less: Related tax effect   (9,965 )     (7,957 )   25.2 %     (19,608 )     (15,445 )   27.0 % Adjusted net income $ 57,777     $ 42,714     35.3 %   $ 109,299     $ 88,884     23.0 %   Quarter Ended   Six Months Ended (shares in thousands) 12/31/2016   12/31/2015   % Change   12/31/2016   12/31/2015   % Change

Diluted weighted average shares, as reported

25,069 24,786 24,998 24,754 Diluted earnings per share $ 1.69     $ 1.23     37.7 %   $ 3.16     $ 2.63     20.3 % Diluted adjusted earnings per share $ 2.30     $ 1.72     33.7 %   $ 4.37     $ 3.59     21.8 %  

View source version on businesswire.com: http://www.businesswire.com/news/home/20170201006149/en/

CACI International IncCorporate Communications and Media:Jody Brown, Executive Vice President, Public Relations703-841-7801jbrown@caci.comorInvestor Relations:David Dragics, Senior Vice President, Investor Relations866-606-3471ddragics@caci.com