CACI sees organic growth return in another $1B quarter

CACI International holds largely the same expectations that many of its government services peers have indicated recently in that September will see significant contract award activity against a backdrop of budget uncertainty from Capitol Hill.

Arlington, Va.-based CACI saw a return to organic growth in the second half of its most recent fiscal year after the integration of its two largest-ever acquisitions, CEO Ken Asbury told me. A pair of large contract wins with yet-unnamed agencies in its recently ended fourth quarter helped CACI record its sixth straight three-month period of at least $1 billion in awards. CACI’s fiscal year ended June 30.

With that, CACI is holding to guidance of organic sales growth of 2-4 percent to a range of $4.35 billion-$4.5 billion for its fiscal 2018 that started July 1. This is in keeping with the forecast Asbury gave in a June interview surrounding CACI’s No. 9 spot on the 2017 Washington Technology Top 100 list.

The company is also planning for a continuing resolution to come out of Congress ahead of a Sept. 30 deadline to continue government funding but sees signs of budget growth, Asbury said.

“We have a new administration trying to figure out the intricacies of getting a budget in place,” Asbury said. “The aspirations are terrific for everyone in the defense and intelligence industry but we haven’t gotten to a tradecraft for getting certain elements of the budget through. It’ll take both sides to get that done.”

CACI has also worked to take down its debt leverage ratio since its 2016 acquisition of the former L-3 National Security Solutions business. As of June 30, the company has a ratio of 3.2 in debt to adjusted earnings before interest, tax, depreciation and amortization expenses. The NSS acquisition brought that ratio to 4.2 from 3.2.

That lower debt load gives CACI more “dry powder” to make additional deals in keeping with a “fundamental part of who we are as a strategic integrator,” Asbury told me. He said CACI is particularly interested in adding new machine learning and data analytics offerings to its portfolio.

“The government will always have a need for enterprise IT and we want to find companies (with) products that help with automated network defense,” Asbury said.

Revenue of $4.35 billion for CACI’s 2017 fiscal year climbed 16 percent year-over-year – acquired growth included -- and exceeded Wall Street’s $4.31 billion consensus. CACI also reported fourth quarter sales of $1.14 billion to show 2.1-percent growth -- all excluding acquisitions -- and topped the $1.09 billion expected by analysts.

Also of note, CACI recorded a book-to-bill ratio of 1.4x for fiscal 2017 and said it only has 10 percent of its contracts up for recompete in this current 12-month period. Government IT and professional services companies typically have between 15-20 percent of their contracts up for recompete each year.