CACI Reports Results for Its Fiscal 2020 Second Quarter and Raises Annual Guidance

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CACI International Inc (NYSE: CACI), a leading provider of expertise and technology to government enterprise and mission customers, announced results today for its second fiscal quarter ended December 31, 2019.

CEO Commentary and Outlook

John Mengucci, CACI’s President and CEO, said, “CACI again delivered strong financial performance across the board. We grew revenue, including accelerating organic growth, and generated significant profitability and cash flow. Our success in winning business and executing on our growing backlog is driving increasing organic growth. As a result, we are raising our guidance for Fiscal Year 2020 and remain confident in our ability to deliver value to our customers and shareholders.”

Second Quarter Results

(in millions except earnings per share and DSO)	Q2, FY20	Q2, FY19	% Change
Revenue	$1,395.5	$1,181.6	18.1%
Operating income	$110.2	$102.3	7.7%
Net income	$79.2	$68.6	15.5%
Diluted earnings per share	$3.11	$2.71	15.0%
Net cash provided by operating activities¹	$133.8	$56.4	137.1%
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), a non-GAAP measure²	$140.9	$123.0	14.6%
Days sales outstanding (DSO)³	51	73

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_{Second quarter FY20 net cash provided by operating activities includes CACI’s Master Accounts Receivable Purchase Agreement (MARPA). For more details, see the Reconciliation of Net Cash Provided by Operating Activities to Net Cash Provided by Operating Activities Excluding MARPA on page 9 of this release.}

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_{See the Reconciliation of Net Income to Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) on page 9 of this release.}

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_{The DSO calculation for Q2 FY20 includes the impact of the Company’s MARPA, which was 9 days. The DSO calculation for Q2 FY19 excludes amounts related to the Navy Systems Engineering business acquired during Q1 FY19.}

The year-over-year increase in Q2 FY20 net income was due to higher revenue and operating income and a lower tax rate, partially offset by higher interest expense. The increase in cash from operations was driven by enhanced billing and collections processes as well as the Company’s MARPA.

Second Quarter Contract Awards

Contract awards in Q2 FY20 totaled $2.7 billion, a year-over-year increase of 108%. Approximately 60% of contract award value is for new business to CACI. These awards exclude ceiling values of multi-award, indefinite delivery, indefinite quantity (IDIQ) contracts. Some notable awards during the quarter were:

A five-year task order, with a ceiling value of $1.1 billion, for new work to provide enterprise and mission technology with advanced and full lifecycle information technology support. This contract is one of the largest Agile software development programs in the federal government.
A five-year task order, with a ceiling value of nearly $93 million, to provide enterprise technology for advanced architecture engineering.
More than $530 million in previously unannounced awards on classified contracts with federal government customers safeguarding our nation’s security.

Total backlog as of December 31, 2019 was $20.3 billion compared with $12.6 billion a year ago, an increase of 61%. Funded backlog as of December 31, 2019 was $2.8 billion compared with $2.5 billion a year ago, an increase of 14%.

Additional Highlights

CACI named Lt. Gen. Michael Nagata, U.S. Army (Ret.), a Corporate Strategic Advisor and Senior Vice President to enhance the positioning of CACI’s national security related expertise and technology offerings. In this role, Mr. Nagata will support the development of CACI corporate strategy and the expansion of key client relationships.
CACI named Maj. Gen. Darryl W. Burke, USAF (Ret.) Senior Vice President to provide strategic advice in support of CACI’s offerings to the U.S. Air Force. Mr. Burke will use expertise from his more than three-decades with the Air Force to grow CACI’s long-term business pipeline with the military service.
CACI Board of Directors member Debora Plunkett has been named a 2019 Most Influential Corporate Board Director by Women Inc. Magazine. The list features a directory of top women leaders on the boards of S&P 500/Big-Cap publicly held companies.
The Washington Business Hall of Fame inducted CACI Board of Directors member Michael Daniels as a laureate. The Hall of Fame honors outstanding business leadership and entrepreneurs who, through their work, have made a significant contribution to the quality of life in Greater Washington.

Raising FY20 Guidance

We are raising our FY20 guidance to account for the Company’s strong operating performance. The table below summarizes our FY20 guidance and represents our views as of January 29, 2020.

(in millions except earnings per share)	Current Fiscal Year 2020 Guidance	Previous Fiscal Year 2020 Guidance
Revenue	$5,600 – $5,800	$5,550 – $5,750
Net income	$305 – $325	$298 – $318
Diluted earnings per share	$11.91 – $12.70	$11.64 – $12.42
Diluted weighted average shares	25.6	25.6
Net cash provided by operating activities	at least $430	at least $420

Conference Call Information

We have scheduled a conference call for 8:30 AM Eastern Time Thursday, January 30, 2020 during which members of our senior management 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 webcast and view the accompanying exhibits on CACI’s investor relations website at http://investor.caci.com/news/#upcomingevent at the scheduled time. A replay of the call will also be available on CACI’s investor relations website at http://investor.caci.com/.

About CACI

CACI’s 23,000 talented employees are vigilant in providing the unique expertise and distinctive technology that address our customers’ greatest enterprise and mission challenges. Our culture of good character, innovation, and excellence drives our success and earns us recognition as a Fortune World’s Most Admired Company. As a member of the Fortune 1000 Largest Companies, the Russell 1000 Index, and the S&P MidCap 400 Index, we consistently deliver strong shareholder value. Visit us at 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 from successive presidential administrations 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-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
		12/31/2019		12/31/2018		% Change	12/31/2019		12/31/2018		% Change
Revenue		$	1,395,469	$	1,181,641	18.1%	$	2,758,861	$	2,347,505	17.5%
Costs of revenue
	Direct costs		904,867		790,849	14.4%		1,783,748		1,573,609	13.4%
	Indirect costs and selling expenses		352,448		269,677	30.7%		710,040		534,434	32.9%
	Depreciation and amortization		27,967		18,852	48.4%		54,729		37,599	45.6%
Total costs of revenue			1,285,282		1,079,378	19.1%		2,548,517		2,145,642	18.8%
Operating income			110,187		102,263	7.7%		210,344		201,863	4.2%
Interest expense and other, net			14,714		9,421	56.2%		31,525		18,307	72.2%
Income before income taxes			95,473		92,842	2.8%		178,819		183,556	-2.6%
Income taxes			16,278		24,246	-32.9%		31,647		36,127	-12.4%
Net income		$	79,195	$	68,596	15.5%	$	147,172	$	147,429	-0.2%

Basic earnings per share		$	3.16	$	2.76	14.5%	$	5.89	$	5.95	-0.9%
Diluted earnings per share		$	3.11	$	2.71	15.0%	$	5.78	$	5.81	-0.6%

Weighted average shares used in per share computations:
	Basic		25,065		24,856			24,979		24,796
	Diluted		25,435		25,338			25,483		25,381

Statement of Operations Data (Unaudited)
		Quarter Ended					Six Months Ended
		12/31/2019		12/31/2018			12/31/2019		12/31/2018
						% Change					% Change
Operating income margin			7.9%		8.7%			7.6%		8.6%
Tax rate			17.1%		26.1%			17.7%		19.7%
Net income margin			5.7%		5.8%			5.3%		6.3%

Adjusted EBITDA*		$	140,902	$	122,951	14.6%	$	269,213	$	240,017	12.2%
Adjusted EBITDA Margin			10.1%		10.4%			9.8%		10.2%

	*See Reconciliation of Net Income to Adjusted Earnings before Interest, Taxes, Depreciation and Amortization on page 9

Selected Financial Data (Continued)

CACI International Inc
Condensed Consolidated Balance Sheets (Unaudited)
(Amounts in thousands)

		12/31/2019		6/30/2019
ASSETS:
Current assets
	Cash and cash equivalents	$	68,645	$	72,028
	Accounts receivable, net		828,795		869,840
	Prepaid expenses and other current assets		126,629		89,652
Total current assets			1,024,069		1,031,520

Goodwill and intangible assets, net			3,848,376		3,772,194
Property and equipment, net			168,786		149,676
Operating lease right-of-use assets			347,515		–
Other long-term assets			137,950		133,453
Total assets		$	5,526,696	$	5,086,843

LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities
	Current portion of long-term debt	$	46,920	$	46,920
	Accounts payable		135,125		118,917
	Accrued compensation and benefits		294,444		290,274
	Other accrued expenses and current liabilities		292,902		235,611
Total current liabilities			769,391		691,722

Long-term debt, net of current portion			1,550,809		1,618,093
Other long-term liabilities			697,916		405,562
Total liabilities			3,018,116		2,715,377

Shareholders’ equity			2,508,580		2,371,466
Total liabilities and shareholders’ equity		$	5,526,696	$	5,086,843

Selected Financial Data (Continued)

CACI International Inc
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands)

		Six Months Ended
		12/31/2019		12/31/2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	147,172	$	147,429
Reconciliation of net income to net cash provided by
operating activities:
	Depreciation and amortization		54,729		37,599
	Non-cash lease expense		35,850	–
	Amortization of deferred financing costs		1,176		1,156
	Stock-based compensation expense		14,499		12,047
	Deferred income taxes		14,104		9,123
Changes in operating assets and liabilities, net of
effect of business acquisitions:
	Accounts receivable, net		51,458		(136,177)
	Prepaid expenses and other assets		(28,921)		(2,739)
	Accounts payable and other accrued expenses		8,121		110,007
	Accrued compensation and benefits		1,529		(27,116)
	Income taxes payable and receivable		(21,384)		(10,781)
	Operating lease liabilities		(37,989)		–
	Long-term liabilities		(3,319)		(1,008)
Net cash provided by operating activities			237,025		139,540

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(41,035)		(17,813)
Purchases of businesses, net of cash acquired			(102,056)		(91,151)
Other			–		1,876
Net cash used in investing activities			(143,091)		(107,088)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under credit facilities			(68,460)		(8,460)
Payment of contingent consideration			–		(616)
Proceeds from employee stock purchase plans			3,665		2,827
Repurchases of common stock			(3,596)		(2,756)
Payment of taxes for equity transactions			(29,083)		(18,039)
Net cash provided by (used in) financing activities			(97,474)		(27,044)
Effect of exchange rate changes on cash and cash equivalents			157		(874)
Net increase (decrease) in cash and cash equivalents			(3,383)		4,534
Cash and cash equivalents, beginning of period			72,028		66,194
Cash and cash equivalents, end of period		$	68,645	$	70,728

Selected Financial Data (Continued)

Revenue by Customer Type (Unaudited)
	Quarter Ended
(dollars in thousands)	12/31/2019			12/31/2018			$ Change		% Change
Department of Defense	$	990,381	71.0%	$	834,797	70.6%	$	155,584	18.6%
Federal Civilian Agencies		342,029	24.5%		287,915	24.4%		54,114	18.8%
Commercial and other		63,059	4.5%		58,929	5.0%		4,130	7.0%
Total	$	1,395,469	100.0%	$	1,181,641	100.0%	$	213,828	18.1%

Revenue by Contract Type (Unaudited)
	Quarter Ended
(dollars in thousands)	12/31/2019			12/31/2018			$ Change		% Change
Cost reimbursable	$	818,477	58.7%	$	657,050	55.6%	$	161,427	24.6%
Fixed price		388,867	27.9%		337,374	28.6%		51,493	15.3%
Time and materials		188,125	13.5%		187,217	15.8%		908	0.5%
Total	$	1,395,469	100.0%	$	1,181,641	100.0%	$	213,828	18.1%

Revenue Generated as a Prime versus Subcontractor (Unaudited)
	Quarter Ended
(dollars in thousands)	12/31/2019			12/31/2018			$ Change		% Change
Prime	$	1,268,993	90.9%	$	1,091,956	92.4%	$	177,037	16.2%
Subcontractor		126,476	9.1%		89,685	7.6%		36,791	41.0%
Total	$	1,395,469	100.0%	$	1,181,641	100.0%	$	213,828	18.1%

Contract Awards Received (Unaudited)
	Quarter Ended
(dollars in thousands)	12/31/2019		12/31/2018		$ Change		% Change
Contract Awards	$	2,711,484	$	1,303,553	$	1,407,931	108.0%

Reconciliation of Net Cash Provided by Operating Activities to

Net Cash Provided by Operating Activities Excluding MARPA

(Unaudited)

The Company defines net cash provided by operating activities excluding CACI’s Master Accounts Receivable Purchase Agreement (MARPA) as net cash provided by operating activities calculated in accordance with GAAP, adjusted to exclude net cash received from CACI’s MARPA for the sale of certain designated eligible U.S. government receivables. Under the MARPA, the Company can sell eligible receivables, including certain billed and unbilled receivables up to a maximum amount of $200.0 million. The Company provides net cash provided by operating activities excluding MARPA to allow investors to more easily compare current period results to prior period results and to results of our peers. This non-GAAP measure should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.


(dollars in thousands)		Quarter Ended 12/31/2019
Net cash provided by operating activities		$	133,821
	Cash used (provided) by MARPA		(16,334)
Net cash provided by operating activities excluding MARPA		$	117,487

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 expense, including depreciation within direct costs, 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
(dollars in thousands)		12/31/2019		12/31/2018		% Change
Net income		$	79,195	$	68,596	15.5%
Plus:
	Income taxes		16,278		24,246	-32.9%
	Interest income and expense, net		14,714		9,421	56.2%
	Depreciation and amortization expense, including depreciation within direct costs		28,615		19,488	46.8%
	Earnout adjustments		2,100		1,200	75.0%
Adjusted EBITDA		$	140,902	$	122,951	14.6%

		Quarter Ended
(dollars in thousands)		12/31/2019		12/31/2018		% Change
Revenue, as reported		$	1,395,469	$	1,181,641	18.1%
Adjusted EBITDA			140,902		122,951	14.6%
Adjusted EBITDA margin			10.1%		10.4%

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