CACI Reports Results for Its Fiscal 2015 Third Quarter

April 29, 2015

CACI Reports Results for Its Fiscal 2015 Third Quarter

  • Operating cash flow of $97 million
  • Contract funding orders of $965 million, 22 percent higher year over year
  • Contract awards of $687 million, nearly $5 billion year-to-date
  • Funded backlog of $2.1 billion, 29 percent higher year over year

ARLINGTON, Va.–(BUSINESS WIRE)– CACI International Inc (NYSE MKT: CACI), a leading information solutions and services provider to the federal government, announced results today for its third fiscal quarter ended March 31, 2015.

CEO Commentary and Outlook

Ken Asbury, CACI’s President and CEO, said, “During the third quarter of Fiscal Year 2015, we continued to win new business, deliver operational excellence, and deploy capital for growth opportunities. We had strong contract awards and funding orders despite continued delays in award decisions and protests which impacted the start of new work and our financial performance. Our work for the Office of Personnel Management (OPM) continues to grow and is on track with our expectations. We also acquired LTC Engineering Associates which deepens our bench of highly skilled professionals, expanding our offerings in the C4ISR and Cyber market areas. We are confident in our competitive posture and in our solutions that support our customers enduring critical missions to counter threats at home and around the world. We are confident in our strategy and believe we are well positioned for a solid fourth quarter and the start of FY16.”

Third Quarter Results

(in millions except per-share data) Q3, FY15 Q3, FY14 % Change
Revenue $817.8 $900.4 -9.2%
Operating income $53.7 $60.5 -11.3%
Net income attributable to CACI $29.0 $30.8 -5.8%
Diluted earnings per share $1.18 $1.19 -0.2%

Revenue for the third quarter of Fiscal Year 2015 (FY15) decreased 9.2 percent compared to the third quarter of Fiscal Year 2014 (FY14). We maintained our direct labor base during the quarter, and direct costs declined due to a reduction of subcontract labor and other direct costs resulting from general federal government budget-related activities. The decrease in operating income was a result of the aforementioned budget-related activities offset by lower indirect costs and selling expenses occurring from ongoing cost control actions. The lesser decrease in diluted earnings per share as compared to the decrease in net income was due to fewer diluted shares as a result of paying off our convertible notes in May 2014. Cash provided by operations in the quarter was $97.1 million.

Additional Financial Metrics

Q3, FY15 Q3, FY14 % Change
Earnings before interest, taxes, depreciation and amortization (EBITDA), a non-GAAP measure (in millions) $70.0 $78.7 -11.1%
Diluted adjusted earnings per share, a non-GAAP measure $1.69 $1.78 -5.1%
Days sales outstanding 61 62

Third Quarter Awards and Contract Funding Orders

Our contract awards were $687 million in the third quarter of FY15, compared with $700 million of contract awards in the third quarter of FY14. Approximately 40 percent of our awards in the quarter were new business. Contract awards through the first nine months of FY15 were nearly $5.0 billion. Some of the awards in the quarter included:

  • An $86 million, three-year task order to provide engineering and technical support to the U.S. Army’s Software Engineering Center. This is new work for us and expands our presence in the C4ISR and Logistics and Material Readiness market areas.
  • A $43 million, one-year task order to continue to provide engineering support, including modeling and simulation and sensor development, for the U.S. Army’s Night Vision and Electronic Sensors Directorate. This work sustains our business in the C4ISR market area.
  • A $38.5 million, five-year contract to provide rapid prototyping and technology insertion support to the U.S. Army’s Communications-Electronics Research Development and Engineering Center. This is a continuation of work, reinforcing our business in the C4ISR market area.
  • A $38 million, five-year contract to provide weapons systems support, including test, evaluation, and information assurance services, to the Naval Surface Warfare Center Dahlgren Division. This is new work for us, further growing our presence in the C4ISR market area.
  • A $32 million, five-year contract to support the Electronic Claims Case Adjudication and Processing Environment for the Office of Medicare Hearing and Appeals within the Department of Health and Human Services. This is new work in our Healthcare market area.

Contract funding orders in the third quarter were $965 million compared with $794 million in the year earlier quarter. Our total backlog at March 31, 2015 was $9.7 billion. Funded backlog at March 31, 2015 was $2.1 billion.

Third Quarter Highlights and Recognition

  • Fortune magazine ranked CACI among the most admired companies in the world in the IT services industry and in the Commonwealth of Virginia for the second consecutive year. The list, described as the “definitive report card on corporate reputations,” affirms CACI’s position as a top IT innovator supporting our customers’ most challenging missions with character and integrity.
  • We announced a cooperative partnership with Appcelerator®, provider of a leading mobile engagement platform, to offer a unique solution set to the federal market, particularly the Department of Defense and Intelligence Community. The partnership will enable customers to quickly deploy mobile apps at a decreased cost and for a higher return on investment.

Nine Months Results

Nine Months, Nine Months,
(in millions except per-share data) FY15 FY14 % Change
Revenue $2,447.9 $2,658.8 -7.9%
Operating income $161.3 $188.2 -14.3%
Net income attributable to CACI $84.8 $98.8 -14.1%
Diluted earnings per share $3.49 $3.89 -10.4%

Revenue decreased 7.9 percent compared to revenue for the nine months of FY14. We increased our direct labor base during the first nine months of FY15, and direct costs declined due to reductions in subcontract labor and other direct costs resulting from in-theater reductions and federal government budget-related activities. The decrease in operating income in the first nine months of FY15 was primarily a result of the aforementioned reductions, budget-related activities, and ramp-up costs associated with the significant growth of background investigation work for the OPM. The lesser decrease in diluted earnings per share as compared to the decrease in net income was due to fewer diluted shares as a result of paying off our convertible notes in May 2014. Cash provided by operations in the first nine months of FY15 was $190.4 million.

Additional Financial Metrics

Nine Months, Nine Months, %
FY15 FY14 Change
Earnings before interest, taxes, depreciation and amortization (EBITDA), a non-GAAP measure (in millions) $211.9 $236.1 -10.3%
Diluted adjusted earnings per share, a non-GAAP measure $5.04 $5.53 -8.9%

Subsequent Event

On April 1, 2015, we announced that we had acquired LTC Engineering Associates, Inc., a highly specialized provider of technical engineering solutions and services to the Intelligence and Department of Defense communities in the areas of software engineering, cybersecurity, signals intelligence (SIGINT), communications intelligence (COMINT), and digital signal processing. The acquisition expands our capabilities in the C4ISR, Intelligence, and Cyber market areas.

CACI Narrows FY15 Guidance Ranges

We are narrowing the FY15 guidance ranges for revenue, net income, and diluted earnings per share. The table below summarizes the changes and represents our views as of April 29, 2015:

Current FY 2015 Previous FY 2015
(In millions except for tax rate and earnings per share) Guidance Guidance
Revenue $3,300 – $3,350 $3,300 – $3,600
Net income attributable to CACI $125 – $130 $125 – $135
Effective corporate tax rate 37.6% 38.1%
Diluted earnings per share $5.12 – $5.33 $5.14 – $5.56
Diluted weighted average shares 24.4 24.3

Conference Call Information

We have scheduled a conference call for 8:30 AM Eastern Time Thursday, April 30, 2015 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 our homepage, www.caci.com, at the scheduled time, or you may dial 877-303-9143 FREE and enter the confirmation code 94732795. 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 SmallCap 600 Index. CACI provides dynamic careers for over 16,700 employees in 120 offices worldwide. Visit 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: 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 and the Bipartisan Budget Act of 2013; 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-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
3/31/2015 3/31/2014 % Change 3/31/2015 3/31/2014 % Change
Revenue $ 817,797 $ 900,393 -9.2 % $ 2,447,946 $ 2,658,844 -7.9 %
Costs of revenue
Direct costs 542,841 605,780 -10.4 % 1,626,139 1,813,874 -10.3 %
Indirect costs and selling expenses 205,174 216,164 -5.1 % 610,407 609,704 0.1 %
Depreciation and amortization 16,067 17,917 -10.3 % 50,098 47,098 6.4 %
Total costs of revenue 764,082 839,861 -9.0 % 2,286,644 2,470,676 -7.4 %
Operating income 53,715 60,532 -11.3 % 161,302 188,168 -14.3 %
Interest expense and other, net 8,473 11,480 -26.2 % 26,153 28,324 -7.7 %
Income before income taxes 45,242 49,052 -7.8 % 135,149 159,844 -15.4 %
Income taxes 16,185 18,043 -10.3 % 50,199 60,533 -17.1 %
Net income 29,057 31,009 -6.3 % 84,950 99,311 -14.5 %
Noncontrolling interest (18 ) (181 ) (139 ) (529 )
Net income attributable to CACI $ 29,039 $ 30,828 -5.8 % $ 84,811 $ 98,782 -14.1 %
Basic earnings per share $ 1.20 $ 1.31 -8.5 % $ 3.55 $ 4.22 -15.8 %
Diluted earnings per share $ 1.18 $ 1.19 -0.2 % $ 3.49 $ 3.89 -10.4 %
Weighted average shares used in per share computations:
Basic 24,165 23,473 23,871 23,406
Diluted 24,527 25,973 24,313 25,368
Statement of Operations Data (Unaudited)
Quarter Ended Nine Months Ended
3/31/2015 3/31/2014 % Change 3/31/2015 3/31/2014 % Change
Operating income margin 6.6 % 6.7 % 6.6 % 7.1 %
Tax rate 35.8 % 36.9 % 37.2 % 38.0 %
Net income margin 3.6 % 3.4 % 3.5 % 3.7 %
EBITDA** $ 69,967 $ 78,739 -11.1 % $ 211,871 $ 236,140 -10.3 %
EBITDA Margin 8.6 % 8.7 % 8.7 % 8.9 %
Adjusted net income** $ 41,537 $ 46,343 -10.4 % $ 122,539 $ 140,328 -12.7 %
Diluted adjusted earnings per share $ 1.69 $ 1.78 -5.1 % $ 5.04 $ 5.53 -8.9 %
**See Reconciliation of Net Income to Earnings before Interest, Taxes, Depreciation and Amortization and to Adjusted Net Income on page 10.
Selected Financial Data (Continued)
CACI International Inc
Condensed Consolidated Balance Sheets (Unaudited)
(Amounts in thousands)
3/31/2015 6/30/2014
ASSETS:
Current assets
Cash and cash equivalents $ 33,552 $ 64,461
Accounts receivable, net 594,148 615,580
Prepaid expenses and other current assets 69,032 55,808
Total current assets 696,732 735,849
Goodwill and intangible assets, net 2,376,200 2,418,979
Property and equipment, net 63,477 68,485
Other long-term assets 131,916 135,825
Total assets $ 3,268,325 $ 3,359,138
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities
Current portion of long-term debt $ 41,563 $ 41,563
Accounts payable 114,780 55,811
Accrued compensation and benefits 175,019 183,361
Other accrued expenses and current liabilities 122,045 141,852
Total current liabilities 453,407 422,587
Long-term debt, net of current portion 1,036,152 1,238,728
Other long-term liabilities 350,693 338,657
Total liabilities 1,840,252 1,999,972
Shareholders’ equity 1,428,073 1,359,166
Total liabilities and shareholders’ equity $ 3,268,325 $ 3,359,138
Selected Financial Data (Continued)
CACI International Inc
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands)
Nine Months Ended
3/31/2015 3/31/2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 84,950 $ 99,311
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization 50,098 47,098
Non-cash interest expense 10,245
Amortization of deferred financing costs 2,062 2,178
Loss on extinguishment of debt 4,116
Stock-based compensation expense 10,051 8,890
Provision for deferred income taxes 25,682 17,420
Undistributed earnings of unconsolidated joint ventures (610 ) (1,420 )
Changes in operating assets and liabilities
Accounts receivable, net 15,774 61,700
Prepaid expenses and other assets (5,605 ) (10,641 )
Accounts payable and accrued expenses 40,486 (71,638 )
Accrued compensation and benefits (6,644 ) (23,261 )
Income taxes receivable and payable (25,538 ) (489 )
Other liabilities (298 ) 2,793
Net cash provided by operating activities 190,408 146,302
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (13,128 ) (11,636 )
Purchases of businesses, net of cash acquired (838,427 )
Investment in unconsolidated joint venture 542
Other 793 (1,020 )
Net cash used in investing activities (11,793 ) (851,083 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings under credit facilities (203,507 ) 696,632
Payment of contingent consideration (3,294 )
Proceeds from employee stock purchase plans 2,499 2,681
Proceeds from exercise of stock options 691
Repurchases of common stock (2,587 ) (2,804 )
Payment of taxes for equity transactions (7,168 ) (9,493 )
Other 2,899 3,752
Net cash( used in) provided by financing activities (207,173 ) 687,474
Effect of exchange rate changes on cash and cash equivalents (2,351 ) 1,339
Net decrease in cash and cash equivalents (30,909 ) (15,968 )
Cash and cash equivalents, beginning of period 64,461 64,337
Cash and cash equivalents, end of period $ 33,552 $ 48,369
Selected Financial Data (Continued)
Revenue by Customer Type (Unaudited)
Quarter Ended
(dollars in thousands) 3/31/2015 3/31/2014 $ Change % Change
Department of Defense $ 538,289 65.8 % $ 656,407 72.9 % $ (118,118 ) -18.0 %
Federal Civilian Agencies 229,589 28.1 % 188,857 21.0 % 40,732 21.6 %
Commercial and other 49,919 6.1 % 55,129 6.1 % (5,210 ) -9.5 %
Total $ 817,797 100.0 % $ 900,393 100.0 % $ (82,596 ) -9.2 %
Nine Months Ended
(dollars in thousands) 3/31/2015 3/31/2014 $ Change % Change
Department of Defense $ 1,640,747 67.0 % $ 1,924,359 72.4 % $ (283,612 ) -14.7 %
Federal Civilian Agencies 651,212 26.6 % 571,885 21.5 % 79,327 13.9 %
Commercial and other 155,987 6.4 % 162,600 6.1 % (6,613 ) -4.1 %
Total $ 2,447,946 100.0 % $ 2,658,844 100.0 % $ (210,898 ) -7.9 %
Revenue by Contract Type (Unaudited)
Quarter Ended
(dollars in thousands) 3/31/2015 3/31/2014 $ Change % Change
Cost reimbursable $ 377,119 46.1 % $ 439,957 48.9 % $ (62,838 ) -14.3 %
Fixed price 295,855 36.2 % 283,151 31.4 % 12,704 4.5 %
Time and materials 144,823 17.7 % 177,285 19.7 % (32,462 ) -18.3 %
Total $ 817,797 100.0 % $ 900,393 100.0 % $ (82,596 ) -9.2 %
Nine Months Ended
(dollars in thousands) 3/31/2015 3/31/2014 $ Change % Change
Cost reimbursable $ 1,127,458 46.1 % $ 1,304,092 49.1 % $ (176,634 ) -13.5 %
Fixed price 882,204 36.0 % 819,879 30.8 % 62,325 7.6 %
Time and materials 438,284 17.9 % 534,873 20.1 % (96,589 ) -18.1 %
Total $ 2,447,946 100.0 % $ 2,658,844 100.0 % $ (210,898 ) -7.9 %
Revenue Received as a Prime versus Subcontractor (Unaudited)
Quarter Ended
(dollars in thousands) 3/31/2015 3/31/2014 $ Change % Change
Prime $ 733,207 89.7 % $ 804,570 89.4 % $ (71,363 ) -8.9 %
Subcontractor 84,590 10.3 % 95,823 10.6 % (11,233 ) -11.7 %
Total $ 817,797 100.0 % $ 900,393 100.0 % $ (82,596 ) -9.2 %
Nine Months Ended
(dollars in thousands) 3/31/2015 3/31/2014 $ Change % Change
Prime $ 2,185,496 89.3 % $ 2,382,563 89.6 % $ (197,067 ) -8.3 %
Subcontractor 262,450 10.7 % 276,281 10.4 % (13,831 ) -5.0 %
Total $ 2,447,946 100.0 % $ 2,658,844 100.0 % $ (210,898 ) -7.9 %
Selected Financial Data (Continued)
Contract Funding Orders Received (Unaudited)
Quarter Ended
(dollars in thousands) 3/31/2015 3/31/2014 $ Change % Change
Contract Funding Orders $ 964,637 $ 794,158 $ 170,479 21.5 %
Nine Months Ended
(dollars in thousands) 3/31/2015 3/31/2014 $ Change % Change
Contract Funding Orders $ 2,885,286 $ 2,703,478 $ 181,808 6.7 %
Direct Costs by Category (Unaudited)
Quarter Ended
(dollars in thousands) 3/31/2015 3/31/2014 $ Change % Change
Direct labor $ 271,162 50.0 % $ 270,405 44.6 % $ 757 0.3 %
Other direct costs 271,679 50.0 % 335,375 55.4 % (63,696 ) -19.0 %
Total direct costs $ 542,841 100.0 % $ 605,780 100.0 % $ (62,939 ) -10.4 %
Nine Months Ended
(dollars in thousands) 3/31/2015 3/31/2014 $ Change % Change
Direct labor $ 786,556 48.4 % $ 764,086 42.1 % $ 22,470 2.9 %
Other direct costs 839,583 51.6 % 1,049,788 57.9 % (210,205 ) -20.0 %
Total direct costs $ 1,626,139 100.0 % $ 1,813,874 100.0 % $ (187,735 ) -10.3 %
Selected Financial Data (Continued)
Reconciliation of Net Income to Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA) and to Adjusted Net Income
(Unaudited)
The Company views EBITDA, EBITDA margin, Adjusted Net Income and Diluted Adjusted Earnings Per Share as important indicators of performance, consistent with the manner in which management measures and forecasts the Company’s performance.   EBITDA is a commonly used non-GAAP measure when comparing our results with those of other companies.  We believe Adjusted Net Income is a significant driver 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.  EBITDA is defined by us as GAAP net income attributable to CACI plus net interest expense, income taxes, and depreciation and amortization.  EBITDA margin is EBITDA divided by revenue.  Adjusted Net Income is defined by us as GAAP net income attributable to CACI plus stock-based compensation expense, depreciation and amortization, amortization of financing costs, and non-cash interest expense net of related tax effects.  Diluted Adjusted Earnings Per Share is Adjusted Net Income divided by diluted weighted-average shares, as reported.  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 Nine Months Ended
(dollars in thousands) 3/31/2015 3/31/2014 % Change 3/31/2015 3/31/2014 % Change
Net income attributable to CACI $ 29,039 $ 30,828 -5.8 % $ 84,811 $ 98,782 -14.1 %
Plus:
Income taxes 16,185 18,043 -10.3 % 50,199 60,533 -17.1 %
Interest income and expense, net 8,676 11,951 -27.4 % 26,763 29,727 -10.0 %
Depreciation and amortization 16,067 17,917 -10.3 % 50,098 47,098 6.4 %
EBITDA $ 69,967 $ 78,739 -11.1 % $ 211,871 $ 236,140 -10.3 %
Quarter Ended Nine Months Ended
(dollars in thousands) 3/31/2015 3/31/2014 % Change 3/31/2015 3/31/2014 % Change
Revenue, as reported $ 817,797 $ 900,393 -9.2 % $ 2,447,946 $ 2,658,844 -7.9 %
EBITDA 69,967 78,739 -11.1 % 211,871 236,140 -10.3 %
EBITDA margin 8.6 % 8.7 % 8.7 % 8.9 %
Quarter Ended Nine Months Ended
(dollars in thousands) 3/31/2015 3/31/2014 % Change 3/31/2015 3/31/2014 % Change
Net income attributable to CACI $ 29,039 $ 30,828 -5.8 % $ 84,811 $ 98,782 -14.1 %
Plus:
Stock-based compensation 3,857 3,105 24.2 % 10,051 8,890 13.1 %
Depreciation and amortization 16,067 17,917 -10.3 % 50,098 47,098 6.4 %
Amortization of financing costs 684 1,049 -34.8 % 2,062 2,178 -5.3 %
Non-cash interest expense 3,476 -100.0 % 10,245 -100.0 %
Less:
Related tax effect (8,110 ) (10,032 ) -19.2 % (24,483 ) (26,865 ) -8.9 %
Adjusted net income $ 41,537 $ 46,343 -10.4 % $ 122,539 $ 140,328 -12.7 %
Quarter Ended Nine Months Ended
(shares in thousands) 3/31/2015 3/31/2014 % Change 3/31/2015 3/31/2014 % Change
Diluted weighted average shares, as reported 24,527 25,973 24,313 25,368
Diluted earnings per share $ 1.18 $ 1.19 -0.2 % $ 3.49 $ 3.89 -10.4 %
Diluted adjusted earnings per share $ 1.69 $ 1.78 -5.1 % $ 5.04 $ 5.53 -8.9 %

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

Source: CACI International Inc

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