CACI changing some tactics but not strategy

CACI International’s recent transition of the chief executive role from Ken Asbury to John Mengucci certainly was big news when the company announced the succession plan in June.

After all, it was Asbury who steered the transformation of CACI into a much different kind of government contractor than it was when he joined as CEO in 2013.

CACI has largely through acquisitions but also some organic growth moved more into the product and solution realm, where the company blends technology and specialized skills around them as part of a broader managed services offering.

A shift from one CEO to another at a publicly-traded contractor may seem like a big deal (it is). But in starting CACI’s investor day presentation Tuesday in New York City, Mengucci sought to make it anything but.

“Some of the strategy going forward: going to look exactly alike,” Mengucci told attendees. “Just because there’s a new CEO here does not mean we’re going to peel back and say ‘Now we have a new vision and a new strategy going forward.’”

Here is part of where CACI with Mengucci at the helm is going forward. In its just-ended 2019 fiscal year financial statement, the company reported $5 billion in revenue with expectations of that hitting $5.5 billion-$5.7 billion for FY 2020. CACI also won seven out of 10 new business competitions in its fiscal 2019 and doubled its contract awards to $10.3 billion for the year, with $6.9 billion of that new business.

With all that said: one piece of the strategy is going to be slightly different, partly thanks to CACI’s almost $1 billion in acquisitions of LGS Innovations and Mastodon Design that tilted the acquirer even further into the product-based direction.

Mengucci said Arlington, Virginia-based CACI is modifying parts of its internal investment strategy in order to be more centered around what the company does in the mission-facing technology areas that LGS and Mastodon were in before they were acquired.

LGS brought to CACI a large network infrastructure business, plus products and solutions in spectrum management, cybersecurity and C4ISR. Details on Mastodon were much more sparse by comparison when that deal closed in January given the nature of that business.

But CACI did say at the time that Mastodon focuses its products on rugged signals intelligence, electronic warfare and cyber operations.

“If we’re going to play in the mission tech area and the way we want to address that market… for us to do that, investment takes on a little different model,” Mengucci said. “It’s customer-reimbursable investment, which is built into our rates, and it’s self-investment: those areas that come from our profits, from our earnings.

“We’re going to do that in the mission tech area because intellectual property is critical to growing in the mission tech area the way we want to grow.”

In those deals, CACI’s characterization of the product element there does not automatically mean hardware. CACI instead wants to be at the forefront of software-defined hardware that sees continual, incremental improvements of products to both deploy them faster and keep them in the field longer versus longer-term development programs.

“It’s great to have customer investment and we’ll make use of that, but there are certain areas (that) if we’re going to be a software-defined mission tech company, then we need to own the intellectual property,” Mengucci said.

“By doing that we get to control what it is we’re out there delivering. And if people have no issue that Apple owns a lot of their own intellectual property, then customers and investors shouldn’t have a problem with us owning it as well, you’d expect us to.”

Apple and other like it are also a comparison point for talent as well given its intersection with technology. In addition to other GovCon firms, Mengucci said CACI benchmarks its talent metrics against the high-tech sector including Apple.

“We compared ourselves starting six years ago against high-tech. Why is that? Because the vision of this company was to move ourselves more towards a technology delivery company on top of the expertise we are already delivering,” Mengucci said.

“We did move funds to make certain that we could drive employee benefits higher. You want that, you need that, we need that to continue to attract the best and the brightest.”

Some of that ramp-up on the part of CACI and other GovCon companies is in response to the well-documented backlog of people awaiting approvals to get security clearances that the government is working hard to shrink, plus the looming arrival of Amazon’s second major headquarters in greater Washington, D.C.

“When you want me to bring the best and the brightest in, you’ve got to help me bring the best and the brightest in. I get to hire them, we get to train them, we get to provide them with outstanding perks so I don’t have to hear that question ‘Amazon’s coming to down, what’s going to happen?’”

Mengucci did answer his own question there: “I’m enthused Amazon’s coming to town.”