CACI International has a three-prong strategy that banks on delighting customers, winning recompetes and new work and growing its fixed-price contracting.
CACI International had a banner year in 2017, hitting record revenue, earnings per share and contract award numbers – success President and Chief Executive Officer Ken Asbury attributes in large part to the company’s three-part strategy.
CACI holds the No. 10 spot on this year’s Top 100 rankings with $2.3 billion in prime contracts.
Asbury said that the three-part strategy is built around making sure “we win more than our fair share of new business, it’s to deliver operational excellence – and what we mean by that is don’t take on things we’re not supremely capable of doing and we’re not capable of delighting our customers with – and the third is we’re going to use our free cash flow to buy access to new customers or access to new capabilities through our acquisition process.”
Several major contract wins, successful recompetes and a thriving marketplace also contributed to the company’s achievements. Its overall revenue was $4.35 billion, up 16.3 percent over 2016; diluted earnings per share hit $6.53, up from $5.76 the year before; and contract awards totaled $6 billion in 2017, up 11.6 percent from 2016.
CACI kicked off 2017 by winning a prime position on a multiple-award, task order contract with a $6 billion ceiling to provide information technology, technical and management support to the Defense Logistics Agency’s Information Operations Office.
In October 2017, the company won a place on a $480 million multiple-award contract to support the Army Research Development and Engineering Command’s work on night-vision technology and other adaptive solutions.
And 2018 is on a positive path. In March, CACI won a prime position on a multiple-award, IDIQ contract with a ceiling of $17.5 billion to support the Defense Information Systems Agency’s ENCORE III information technology solutions program – the agency’s primary vehicle for buying IT. It’s a follow-on to Encore II, a $12 billion program of which CACI has been a part of.
Additionally, CACI will continue to support the Counter Insurgency Targeting Program, “an Army job we have been doing for years,” Asbury said, under a $145 million task order the company won in April.
“Our first priority for everything is organic growth – being able to grow and take market share away from others,” Asbury said. “The market that we play in, although it is expanding right now, it is still a market that I would characterize as about 90 percent existing government requirements…. Most of the things that we pursue in terms of winning are existing capabilities or capacities that the government needs to buy from industry.”
In looking for new business, Asbury emphasizes projects that have staying power. “We’re looking for pieces of the market that customers are going to need for a long time,” he said. “We want to do something that is more like the mission-processing capabilities for a variety of different customers, which we know are going to be enduring and changing over time.”
Asbury is bullish about the government IT market, especially in areas such as counter-unmanned aerial systems and drones, electronic warfare, and space. Growing agency coffers are another positive sign, he said.
“We saw additional funds flow into the procurement accounts and [operations and maintenance] accounts that obviously were set up in [fiscal] ’18 and ’19 for additional funding, so I think the entire industry gets an opportunity to put sequestration in the rearview mirror for a while, at least for a couple years, and build capabilities and solutions that have been put to the side while we were focused on fiscal constraints,” he said.
Besides investing in research and development and acquisitions, CACI is putting a lot of money into its 18,700 employees. Two months ago, the company began moving its back-office transaction processing from Virginia to a Shared Services Center in Oklahoma City, Olka. When the move is complete in about 18 months, Asbury said the company expects to save on a net basis $20 million per year.
“It frees up indirect dollars that I’m going to reinvest back into CACI and employees,” he added. Specifically, he plans to increase the company’s 401(k) contribution and rebalance the approach to paid time off to give newer employees more leave. Additionally, the company lowered the cost of health care by about 10 percent for all employees earning less than $100,000 a year.
The search for talent is one of CACI’s main challenges, he added. To recruit new-hires, the company is “trying to be creative,” Asbury said: “How do we use deep learning to learn about the people that we’ve hired in certain skill categories to be able to decide who are the best candidates? We do get, on an annual basis, close to a million resumes flowing through our system. We need to use data analytics to allow us to pick some of those.”
More simply, employees attending the company’s annual Battle of the Bands in Virginia in May had to bring a recruit or a recruit’s resume, he added.
CACI will continue its quest for acquisitions, putting its failed bid for CSRA in the past. The company made and then withdrew its $7.2 billion cash-and-stock offer for the defense contractor in March when it became evident that CSRA was going to stick with General Dynamics' all-cash bid.
“What I really liked the best about CSRA was where the strategy would have taken us,” Asbury said. “We have had a strategy that says we want to have a higher solutions than services content of our business, and CSRA would helped us a great deal in achieving that.”
What’s more, he added, CSRA is good at enterprise-level IT delivery, while CACI does better at the mission level. General Dynamics acquired the company in April in a $9.7 billion deal including debt.
“Our whole story line is we’re moving from being completely reliant on services to balancing our portfolio with solutions,” Asbury said. “That means programs such as the attributes of CSRA where we can work on a fixed-price basis. I’d love to improve the fixed-price content of our business. A little over a third of our business now is fixed-unit or fixed business price. I’d love to see that become 50 [percent], 60 percent of our business in time.”