How CACI thinks through the tech & talent legs of its strategy

Like all other government technology companies, CACI International will always have recruiting high on the agenda even amid changes in the cadence of its work for customers.

But CACI at least sees the correlation between headcount growth and financial success as not as direct compared to that of between five and seven years ago when the company itself was different.

During CACI’s fourth quarter and fiscal year-end earnings call Thursday, CEO John Mengucci told investors that is the case with revenue in its technology segment “growing faster” over that period than the other side of the business.

Employee headcount fell slightly year-over-year from 23,000 to 22,000 but CACI sees that as at least slightly in keeping with the company’s shift.

“It’s been a conscious road and conscious decisions that we have been making to make certain that our growth was not predominately based on our headcount,” Mengucci told analysts.

“We are at a point where we are large enough and capable enough for us to go win work, which we can differentiate on technology and our past performance and how we deliver, not on whether we were able to hire Susie, Julie or Johnny.”

That perspective is a notable point of difference during this financial reporting season from other companies who put recruiting at the top of their agendas, and in the case of Booz Allen Hamilton for instance back to the top given other priorities led the way for that firm.

Reston, Virginia-headquartered CACI breaks out its revenue profile into two segments: the technology side that houses much of the company’s product business, and the expertise piece that still has a tech element but is also more talent-dependent.

For CACI’s 2021 fiscal year ended June 30, nearly 51 percent of the $6 billion in total revenue was in technology with the remaining 49 percent in expertise. Technology showed year-over-year growth of 13 percent and expertise fell 1 percent, a shift in mix that was largely by design.

The $6 billion in total revenue was 5.7-percent higher compared to the prior fiscal year, while the fourth quarter alone saw sales grow 4.6 percent year-over-year to $1.5 billion.

CACI’s guidance for its just-started fiscal 2022 is for $6.2 billion-to-$6.4 billion in revenue, which indicates growth of 4 percent at the midpoint.

No impacts from the COVID-19 pandemic are factored into that outlook, which Mengucci attributed to how different that overall situation is today versus last year and some work the company has done to support the kind of dispersed workforce that has been the norm since March 2020.

Within itself, CACI stood up some of its own classified facilities to house company employees that were either locked out entirely or part of the time from their designated federal sites for much of 2020.

“If we look at COVID today versus where we were 12-18 months back, it’s our belief that both our customer set and CACI are much more prepared than we were a year ago to deal with this virus,” Mengucci said. “It’s a known risk with a battle-hardened solution.

“Second: we took the action years ago to build a technology infrastructure, as I’ve talked about in the past, to support a dispersed workforce. We actually did that being focused on being able to get cleared employees across the nation, and it actually did a great job of supporting us through the core COVID period.”

A second lens to look at CACI’s overall strategy shift through is the U.S.’ withdrawal from Afghanistan, which the company has tied a 2-percent expected revenue impact to in its new fiscal year.

Mengucci said that CACI’s employees previously based in Afghanistan are moving to other programs around the world and the kind of work the company does there is not limited by the geography.

“The Afghanistan withdrawal does not impact Iraq or other locations, so there's a lot of focus on the missions in those locations (that) is much broader than counterterrorism,” Mengucci said. “We're talking about near-peer threats and the like, and the analytical services that we provide are actually provided with a much broader focus in some of those other areas.”

One other immediate headwind to CACI’s business is the global computer chip shortage that everyone is dealing with, including other federal technology integrators.

Mengucci said CACI is seeing the impacts in its Ascent Vision Technologies business acquired last year along with customer delivery delays because no one was present to receive the finished products during the pandemic.

“We're working with our teams to make sure that we do some bulk buys of some of our previous long-lead items that are actually going to long, long-lead items,” Mengucci said.

“We have to usually do final article testing with them and throughout COVID, they were in every other week or every third week.”