Transcript CACI Earnings Release Conference Call

CACI International Inc
Fourth Fiscal Quarter FY10
Earnings Conference Call
August 18, 2010
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Forward-looking Statements
There are statements made herein which do not address historical facts, and therefore could be interpreted to
be forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995.
Such statements are subject to factors that could cause actual results to differ materially from anticipated
results. The factors that could cause actual results to differ materially from those anticipated include, but are not
limited to, the following: regional and national economic conditions in the United States and the United
Kingdom, including conditions that result from a prolonged recession; terrorist activities or war; changes in
interest rates; currency fluctuations; significant fluctuations in the equity markets; changes in our effective tax
rate; in connection with business combinations, including valuation of contingent consideration; failure to
achieve contract awards in connection with recompetes for present business and/or competition for new
business; the risks and uncertainties associated with client interest in and purchases of new products and/or
services; continued funding of U.S. government or other public sector projects, based on a change in spending
patterns, or in the event of a priority need for funds, such as homeland security, the war on terrorism or
rebuilding Iraq, or an economic stimulus package; government contract procurement (such as bid protest, small
business set asides, loss of work due to organizational conflicts of interest, etc.) and termination risks; the
results of government investigations into allegations of improper actions related to the provision of services in
support of U.S. military operations in Iraq; the results of government audits and reviews conducted by the
Defense Contract Audit Agency or other government entities with cognizant oversight; the insourcing of
contractor positions by the government; individual business decisions of our clients; paradigm shifts in
technology; competitive factors such as pricing pressures and/or competition to hire and retain employees
(particularly those with security clearances); market speculation regarding our continued independence; material
changes in laws or regulations applicable to our businesses, particularly in connection with (i) government
contracts for services, (ii) outsourcing of activities that have been performed by the government, and (iii)
competition for task orders under Government Wide Acquisition Contracts (“GWACs”) and/or schedule contracts
with the General Services Administration; the ability to successfully integrate the operations of our recent
acquisitions; our own ability to achieve the objectives of near term or long range business plans; and other risks
described in the company’s Securities and Exchange Commission filings.
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Q4 FY10
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Participants

Participants for today’s call:
— Paul
Cofoni
President & Chief Executive Officer
— Tom
Mutryn
Chief Financial Officer
— Bill
Fairl
President of U.S. Operations
— Randy
Fuerst
Chief Operating Officer, U.S. Operations
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Q4 FY10
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CEO Overview


Another year of meeting our major financial
objectives:
—
Organic revenue growth of mid- to high-single digits
—
Double-digit earnings growth
Remain confident in our outlook
—
Initiatives announced by Secretary Gates will present
new opportunities for CACI
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Q4 FY10
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CEO Overview


Excellent fourth quarter
—
Revenue grew over 16%; net income, nearly 9%
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Record level of contract funding orders
—
Strong operating cash flow
—
DSOs at a record low level
Exceptional fiscal year for CACI
—
Grew in each of our core competencies
—
Record revenue, net income, diluted EPS, operating
cash flow, and contract funding orders
—
Record year-end funded backlog
—
Revenue above $3 billion
—
Employee base over 13,000
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Q4 FY10
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CEO Overview

Confident that execution of our strategy will
generate results projected in FY11 guidance
—

Asymmetric threat of global terrorism remains high
Secretary Gates initiatives and CACI:
—
CACI work at BTA to be shifted to other organizations
—
Negligible impact by elimination of The Joint Forces
Command, OSD NII and J-6 organizations
—
Goal of initiatives is to apply savings to force structure
and modernization—same areas of CACI’s focus
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Q4 FY10
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CEO Overview

Demand continues high for CACI services in
C4ISR and Intelligence and Security Services

Vulnerability to cyber attacks will lead to
more demand for our cyber solutions
—

CACI a recognized thought leader on cyber threats
and solutions
Improving efficiency and effectiveness of
DoD’s IT infrastructure
—
—
—
Aligns with CACI’s expertise in IT modernization
and transformation of government
Already working with DoD customers to consolidate
and streamline architectures
Consistent with other projects across the
government
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Q4 FY10
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CEO Overview

Demand drivers give us the confidence that
FY11 will be another year of strong growth
—
—
—
Level of pending awards is higher than ever
Very full pipeline for next several years
Open personnel requisitions at a two-year high and
growing

Achieved CMMI© Level 3 rating across entire
company

Operational excellence drives our financial
performance
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Q4 FY10
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Financial Overview
Revenue
Operating Income
$ in millions
$ in millions
Up 16.4%
Up 2.7%
Revenue increase in quarter driven by:
• Organic revenue growth of 14.3%
• Direct labor growth of 9.0%
• ODC growth of 25.8%
Positive effect of growth in direct labor and
ODCs partially offset by higher stock
compensation expense and higher depreciation
and amortization
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Q4 FY10
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Financial Overview

Non-cash stock compensation expense:
—
—
—
Revised in 2009 to provide performance-based
restricted stock
Stock vesting ratably over three to four years
2009 and 2010 grants based on FY10 net income
•
—
Expense for equity grants with performance metrics
and graded vesting must be recorded on an
accelerated basis
•
—
FY10 net income performance metrics exceeded
Expense previously recorded on straight-line basis
Impact on FY10:
•
•
$14 million of additional stock-based compensation in
FY10 compared to FY09, $9 million in 4th quarter
Reduced operating margin in quarter by 110 bps, full
year by 45 bps
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Financial Overview

Treatment of acquisition-related contingent
consideration (earnouts):
—
—
In FY10, acquired three companies, all with 2 year
earnouts
New accounting rules require:
•
•
—
Determination of fair value of expected earnout as of
acquisition date; record on balance sheet
Re-evaluation of fair value of expected earnout each
quarter; reflect changes in income statement
Earnout reduced by $3 million in 4th quarter
•
Reflected as a reduction in indirect costs and selling
expenses
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Q4 FY10
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Financial Overview
• UK operations:
• Revenue up 41.8% in quarter, 47.1% for the year
• Net income up 42.0% in quarter, 59.7% for the
year
$ in millions
CACI Net Income
Up 8.8%
$0.96
$0.91
Diluted EPS
Up 6.5%
Effective tax rate—37.8% for the quarter,
36.5% for the year
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Q4 FY10
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Financial Overview
DSOs

Cash and equivalents at 6/30 of $255 million

Cash flow from operations at $209 million for the year,
$86 million for the quarter

Free cash flow (operating cash flow – capital
expenditures) = $187 million

Diluted adjusted EPS in FY10 of $5.39 vs diluted GAAP
EPS OF $3.47
—

Diluted adjusted EPS in 4th quarter of $1.55 vs diluted GAAP EPS
of $0.96
Net debt of $277 million at 6/30
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Q4 FY10
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CACI Guidance for FY11
(As of August 17, 2010)
FY11 Guidance
Revenue (millions)
$3,250 - $3,400
Net Income (millions)
$116 - $122
Diluted EPS
$3.70 - $3.90
Diluted shares (millions)
31.3
FY11 revenue expected to be 3 – 8% over ’10
FY11 net income expected to be 9 – 15% over ’10
FY11 diluted EPS expected to be 7 - 12% over ’10
This guidance represents our views as of August 17,
2010. Investors are reminded that actual results may
differ from these estimates for reasons described in our
Safeharbor Statement and our filings with the SEC.
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Q4 FY10
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Operations Overview

Contract funding orders grew 16% in the
quarter; 14% for the year
—

Received approximately $293 million in
awards; $2 billion for the year
—
—

80% of projected FY11 business to come from
contracts already held; 20% from recompetes and
new business
Won all major recompetes in FY10
Recompete win rate equal to FY09; best rate over
the past 6 years
Prime position on $2.6 billion in estimated
ceiling value on other multiple-award IDIQ
contracts won in FY10
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Q4 FY10
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Operations Overview

U.S. Operations achieved CMMI© Level 3 rating
—
—

Intelligence business grew 20.4% in the
quarter, 21.2% for the year
—

Norfolk division achieved CMMI Level 5 rating
High-level CMMI recognition assures our clients of
high quality and best practices in software and
systems engineering
Represents 39.8% of our revenue
At the end of June:
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$5 billion in proposals submitted for evaluation
•
—
Majority currently scheduled for award by the end of
December
Expect to submit > $8 billion in new proposals by the
end of December
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Q4 FY10
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Operations Overview

Open hiring requisitions > 400

Total of approximately 20 employees working
at JFCOM, OSD NII and J-6

Approximately 160 people at BTA
—

Will see no negative impact as a result of closure
FY10 voluntary attrition rate lowest in 6 years
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Q4 FY10
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Operations Overview

Performance metrics of U.S. Operations point
in right direction:
—
—
—
—
—
Contract funding orders and funded backlog
Recompete win rate
Opportunity pipeline
Hiring
Retention
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Q4 FY10
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CEO Closing Comments

Expect to deliver another year of strong financial
performance in FY11

Our services and solutions are vital to the most
critical missions
—

Our services are aligned with funding priorities
of proposed FY11 budget
—

Demand remains strong
Will support government’s transformation efforts
Confident that we can meet our major financial
goals for FY11 and beyond
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Q4 FY10
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