Under Mengucci, CACI keeps focus on new business & investing in growth

Investor day events companies hold usually take one of two approaches: either explaining a new long-term direction or updating how the current strategy is going.

CACI International opted for the latter for its September investor day in New York City and also explained some modifications it is making around investments tied to the current strategy.

I listened to that investor day via a webcast. So in a follow-up phone interview, the first question I asked CEO John Mengucci was simple: Why stick to much of what has been said before by his predecessor Ken Asbury?

“Sure there are going to be some tweaks. But for the most part, winning new business, delivering on commitment and investing for growth, that’s been a great strategy for us,” Mengucci said. “I needed them to hear: new CEO, clean transition, nothing worth reporting unless you’re going to talk about where this company is going to continue to go and maybe add some other capabilities and customers to our portfolio.”

CACI hit $5 billion in revenue for its most recent fiscal year, which saw it win seven out of 10 new business competitions to help lay a foundation for future growth.

In October, CACI added three other acquisitions to continue its push for more of a presence in what Mengucci calls the mission technology arena, which is mostly in national security and involves a product component.

Mission technology is one of the four quadrants CACI breaks its portfolio into. The other three are enterprise expertise, enterprise technology and mission expertise.

Two of the companies CACI just acquired are in the mission technology quadrant -- Next Century and Linndustries Shielding Specialties. The third acquisition of U.K.-based Deep3 business falls in the mission expertise piece with its application development, data analytics and cybersecurity services.

Deep3 also extends CACI’s business in the U.K. beyond the traditional commercial customer set and ties the work over there to what is happening in the United States, Mengucci said.

“We wanted to have a better knowledge base first-hand of having people working and walking the halls of U.K. MOD (ministry of defense) and their intelligence agencies to understand what their gaps are,” he said.

From understanding their gaps comes efforts to “take some of the products and solutions CACI is doing on this side of the pond, and begin to build an international presence for some of the products and solutions we are delivering in the U.S.”

There are also the almost $1 billion pair of acquisitions CACI closed almost simultaneously earlier this year in LGS Innovations and Mastodon Design, which grew the buyer’s holdings of intellectual property and patents that are key to making the CACI mission technology strategy work.

That is also where the slight tweaks come in to CACI’s investment strategy, which still has the component of bidding less contracts in total but going after more larger programs of longer durations.

Most research-and-development funds that contractors spend still come directly from government agencies, which leads to shared data rights between the company and its customers.

Mengucci said that CACI will push to own more of its IP uniquely, which means more R&D spending directly out of its own profit. Success on that would then benefit CACI on the bottom line as well.

“Some portions of what we had at heritage CACI, and a more material amount of the technology that LGS provides to us… their technology, a lot of that is stepped in taking those patents and creating intellectual property,” Mengucci said.

The idea there is to create a model similar to what is seen in the commercial markets that can sell into the government on a best-value pricing model.

“For me to be able to do that, I’ve got to invest ahead of customer need, which means I’m going to spend my own dollars,” Mengucci said. “I want to skate to where the puck’s going and make certain that when the customer says ‘I need this,’ I’m there ready with a commercial-like built model.”

CACI also is making investments in its own workforce both in terms of recruiting new employees and career development paths for the staffers already there. Mengucci said some of the macro factors present challenges, such as historically low unemployment across the country and flattening numbers of people getting into so-called STEM fields.

The company is investing in training and certifications for fields such as cyber and software engineering, whereas in the past that would typically require an advanced degree.

The benchmarks CACI uses to measure its success on the human capital front are not just for comparing the company to its contracting sector peers.

“Ken and I set out a goal, and I’ve continued this, that I want to compare ourselves to high-tech companies,” Mengucci said.

Speaking of high-tech companies: I also asked Mengucci what he has made so far of Amazon’s future second headquarters coming to Washington, D.C and got this glass-half-full response.

“Is more competition for a fixed set of talent better or worse? I would check worse. The more high-tech companies we have in the greater Washington area that would actually draw a larger pool of talent here, is that better or worse? That’s better," he said.