CACI Reports Strong Third Quarter FY08 Results

 

Diluted earnings per share increased 24.1 percent to $0.73

Net income increased 20.9 percent to $22.3 million

Revenue increased 34.1 percent to record $634 million

Organic revenue grew 19.9 percent

Contract funding orders increased 22.4 percent to $706 million

Contract awards totaled approximately $897 million

 

Arlington, Va., April 30, 2008 - CACI International Inc (NYSE: CAI), a leading professional services and information technology solutions provider to the federal government, announced results today for its third fiscal quarter and nine months ended March 31, 2008. CACI provides innovative solutions to meet America’s needs in national defense, intelligence, homeland security, and the transformation of government, and is a leading strategic consolidator in its market space.

 

Third Quarter Results

 

For the third quarter of Fiscal Year 2008 (FY08), we reported record revenue of $634.2 million, up 34.1 percent over third quarter of Fiscal Year 2007 (FY07) revenue of $473.1 million. The increase during the quarter was driven by both organic and acquired revenue. Operating income for the quarter was $43.5 million, up 26.1 percent, compared with operating income of $34.5 million in the year earlier quarter. The operating margin was 6.9 percent compared with 7.3 percent in the third quarter of FY07. The change in the operating margin was primarily due to continued strong growth in subcontractor content integral to the solutions we deliver to our clients. Income before taxes for the quarter was $36.7 million, 24.3 percent higher than what was reported in the third quarter of FY07. Our tax rate increased to 39.3 percent from 37.6 percent in the year earlier quarter. Net income for the third quarter was $22.3 million, 20.9 percent higher than the $18.4 million reported in the third quarter of FY07. Diluted earnings per share were $0.73, a 24.1 percent increase over the $0.59 reported in the year earlier quarter. Operating cash flow in the quarter increased to $62.8 million from $50.3 million in the year earlier quarter. Days sales outstanding at the end of the quarter were 67, the same as at the end of the third quarter of FY07. Earnings before interest, taxes, depreciation and amortization (EBITDA), a non-GAAP measure, were $55.8 million in the quarter, an increase of 26.4 percent over EBITDA of $44.2 million in the third quarter of FY07. The EBITDA margin, a non-GAAP measure, was 8.8 percent compared with 9.3 percent in the year earlier quarter.

 

Third Quarter Highlights

Major highlights and accomplishments during the third quarter of FY08 include:

·

Contract awards with an estimated value of $897 million. The awards in the quarter include:

o

Four awards, with a total estimated value of $93 million, won through our Strategic Services Sourcing (S3) contract vehicle with the U.S. Army: a four-year, $26.8 million contract to continue engineering support for the C4ISR On-The-Move Product Management Office, which enables us to help assess emerging technologies for the Army’s Future Combat System; $30.6 million in new work added to our contract with the Army’s Project Manager, Force XXI Battle Command Brigade and Below, which expands the technical and professional services we provide for Army command and control systems ; and two two-year awards, valued at $36 million, with the Army’s Night Vision & Electronic Sensors Directorate, including a recompete award with the directorate’s Science and Technology Division, and a new contract for supporting advanced technology sensor programs. With these awards, CACI has now won approximately $1.2 billion in task orders s ince receiving the S3 contract in March of 2006.

 

 

o

A four-year indefinite delivery/indefinite quantity contract with an estimated value of $82.8 million to continue providing professional services for the Department of Navy Chief Information Officer (DON CIO). CACI has been serving the DON CIO information management and technology activities in this capacity since 1998.

o

A five-year blanket purchase agreement with an estimated $54.8 million value to support the Defense Medical Logistics Standard Support-Defense Logistics Agency program. This new award continues our growth as a provider of healthcare logistics solutions for the Department of Defense.

o

A five-year, $49 million prime contract from the U.S. Navy’s Space and Naval Warfare Systems Center   (SPAWAR) in Charleston, SC to help the Navy provide operational support to the Federal Bureau of Investigation (FBI). This new award is the first prime contract SPAWAR has awarded to CACI’s Charleston operations, substantially increasing the scope and value of our SPAWAR business in Charleston as well as our support for the FBI.

 

·

Contract awards for the first nine months of FY08 with an estimated total value of $2.3 billion, equal to the awards received during the first nine months of FY07.

 

·

Contract funding orders totaling $706 million, a 22 percent increase over the third quarter of FY07. Contract funding orders for the first nine months of FY08 totaled $1.9 billion, an increase of 12 percent over the $1.7 billion received in the first nine months of FY07.

 

·

Intelligence Community revenue 71 percent higher than the third quarter of FY07, representing 36 percent of our revenue for the quarter. Over 4,000 CACI employees, or approximately 34 percent of our workforce, hold Top Secret or higher security clearances.

 

·

Recognition of CACI as a recipient of the “Best Overall Government Contractor Ethics Program” rating from the Ethisphere Institute, placing 3 rd among the 100 largest government contractors. This is strong confirmation of CACI’s solid commitment to the highest ethical standards.

 

·

Recognition of CACI as the 2 nd Most Admired IT Services Company, as well as the 2 nd Most Admired Virginia Company in Fortune magazine’s Most Admired Companies listing. These rankings demonstrate our continued focus on making CACI the best workplace for talented people to build a fulfilling career.

 

·

Election of CACI Executive Chairman Dr. J.P. (Jack) London to the U.S. Naval Institute Board of Directors, reflecting his outstanding lifetime contributions in both defense and business leadership.

 

·

Federal 100 recognition of CACI President and CEO Paul Cofoni by Federal Computer Week , honoring his record as an industry leader who has made a positive impact on federal information technology practices.

CEO Commentary  

Commenting on the company’s financial results, Paul Cofoni, CACI’s President and CEO, said, “We are extremely pleased with CACI’s solid third-quarter performance. Our record revenue was fueled by both acquisitions and strong 20 percent organic growth. The performance of our four recent acquisitions in intelligence and security services exceeded our expectations and contributed to 71 percent growth in our intelligence business over the third quarter of fiscal 2007. We believe there will continue to be priority funding in national defense, intelligence, and government transformation. These national priorities are CACI’s priorities. We remain focused on expanding the value-added solutions we provide our clients in countering global terrorism and improving government services. CACI’s continuing progress in meeting long-term growth goals positions us well for the remainder of this fiscal year and throughout fiscal 2009.”  

 

 

First Nine Months FY08 Results

For the first nine months of FY08, we reported record revenue of $1.77 billion, up 24.5 percent over the first nine months of FY07 revenue of $1.42 billion. Operating income in the first nine months of FY08 was $116.5 million, up 7.9 percent over $108.0 million reported in the first nine months of FY07. The operating margin was 6.6 percent for the first three quarters of FY08 compared with 7.6 percent for the same period in FY07. The effective tax rate for the first nine months of FY08 was 38.9 percent versus 36.9 percent for the same period of FY07. Net income for the first nine months of FY08 was $59.8 million, 3.6 percent higher than net income of $57.7 million for the first nine months of FY07. Diluted earnings per share were $1.96, a 6.3 percent increase over the $1.84 reported in the year earlier period. Operating cash flow for the first nine months of FY08 was $78.6 million compared with $120.7 million for the similar period in FY07. EBITDA was $151.9 million for the first nine months, an increase of 10.7 percent over the $137.2 million realized for the first nine months of FY07. The EBITDA margin for the first three quarters of FY08 was 8.6 percent compared to 9.7 percent for the same period of FY07.

 

This guidance represents our views as of April 30, 2008. Investors are reminded that actual results may differ from these estimates for the reasons described below and in our filings with the Securities and Exchange Commission.

Conference Call Information

We have scheduled a conference call for 8:30 AM Eastern Time Thursday, May 1 ^st , during which members of our senior management will be making a brief presentation focusing on third quarter results and operating trends followed by a question-and-answer session. You can listen to the conference call and view the accompanying exhibits over the Internet by logging on to our homepage, www.caci.com , at the scheduled time, or you may dial 1-877-719-9799 and enter the confirmation code 5383048. A replay of the call will also be available over the Internet beginning at 1:00 PM Eastern Time Thursday, May 1 ^st , and can be accessed through our homepage ( www.caci.com ) by clicking on the CACI Investor Info button.

About CACI

CACI International Inc provides the professional services and IT solutions needed to prevail in today’s defense, intelligence, homeland security and federal civilian government arenas. We deliver enterprise IT and network services; data, information, and knowledge management services; business system solutions; logistics and material readiness; C4ISR integration services; information assurance, information operations, and cyber security services; integrated security and intelligence solutions; and program management and SETA support services. CACI services and solutions help our federal clients provide for national security, improve communications and collaboration, secure the integrity of information systems and networks, enhance data collection and analysis, and increase efficiency and mission effectiveness. We add value to our clients’ operations, increase their skills and capabilities, and enhance their missions. CACI is a member of the Fortune 1000 Largest Companies of 2007 and the Russell 2000 index. CACI provides dynamic careers for approximately 11,800 employees working in over 120 offices in the U.S. and Europe. CACI is the IT provider for a networked world. Visit CACI on the web at www.caci.com .

 

 

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: the accretiveness of the Dragon Development Corporation and Athena Innovative Solutions, Inc. transactions to our earnings; regional and national economic conditions in the United States and the United Kingdom, including conditions that result from terrorist activities or war; changes in interest rates; currency fluctuations; 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; government contract procurement (such as bid protest, small business set asides, 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; 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); 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, (iii) competition for task orders under Government Wide Acquisition Contracts ("GWACs") and/or schedule contracts with the General Services Administration; and (iv) accounting for convertible debt instruments; 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.

(Financial tables follow)

Selected Financial Data

CACI International Inc

Condensed Consolidated Statements of Operations (Unaudited)

(Amounts in thousands, except per share amounts)

 

			Quarter Ended									Nine Months Ended
			3/31/2008			3/31/2007			% Change			3/31/2008			3/31/2007			% Change
Revenue		$	634,157		$	473,055			34.1	%	$	1,765,521		$	1,417,587			24.5	%
Costs of revenue
Direct costs			424,946			307,688			38.1	%		1,183,771			919,879			28.7	%
Indirect costs and selling expenses			153,406			121,201			26.6	%		429,898			360,482			19.3	%
Depreciation and amortization			12,334			9,687			27.3	%		35,389			29,247			21.0	%
Total costs of revenue			590,686			438,576			34.7	%		1,649,058			1,309,608			25.9	%
Operating income			43,471			34,479			26.1	%		116,463			107,979			7.9	%
Interest expense and other, net			6,751			4,934			36.8	%		18,641			16,505			12.9	%
Income before income taxes			36,720			29,545			24.3	%		97,822			91,474			6.9	%
Income taxes			14,428			11,103			29.9	%		38,048			33,766			12.7	%
Net income		$	22,292		$	18,442			20.9	%	$	59,774		$	57,708			3.6	%
Basic earnings per share		$	0.74		$	0.60			23.9	%	$	1.99		$	1.88			5.9	%
Diluted earnings per share		$	0.73		$	0.59			24.1	%	$	1.96		$	1.84			6.3	%
Weighted average shares used in per share computations:
Basic			30,076			30,835						30,034			30,719
Diluted			30,587			31,410						30,562			31,376

 

			Statement of Operations Data (Unaudited)
			Quarter Ended							Nine Months Ended
			3/31/2008			3/31/2007				3/31/2008			3/31/2007
Operating income margin			6.9	%		7.3	%			6.6	%		7.6	%
Tax rate			39.3	%		37.6	%			38.9	%		36.9	%
Net income margin			3.5	%		3.9	%			3.4	%		4.1	%
EBITDA*		$	55,805		$	44,166			$	151,852		$	137,226
EBITDA margin*			8.8	%		9.3	%			8.6	%		9.7	%

 

 

Selected Financial Data (Continued)

 

Revenue by Customer Type (Unaudited)

			Quarter Ended
(dollars in thousands)			3/31/2008						3/31/2007						$ Change			% Change
Department of Defense		$	474,903			74.9	%	$	339,651			71.8	%	$	135,252			39.8	%
Federal Civilian Agencies			129,404			20.4	%		105,241			22.3	%		24,163			23.0	%
Commercial			25,550			4.0	%		23,409			4.9	%		2,141			9.1	%
State and Local Governments			4,300			0.7	%		4,754			1.0	%		(454	)		-9.5	%
Total		$	634,157			100.0	%	$	473,055			100.0	%	$	161,102			34.1	%

 

			Nine Months Ended
(dollars in thousands)			3/31/2008						3/31/2007						$ Change			% Change
Department of Defense		$	1,311,052			74.3	%	$	1,016,752			71.7	%	$	294,300			28.9	%
Federal Civilian Agencies			363,711			20.6	%		319,639			22.6	%		44,072			13.8	%
Commercial			76,738			4.3	%		66,508			4.7	%		10,230			15.4	%
State and Local Governments			14,020			0.8	%		14,688			1.0	%		(668	)		-4.5	%
Total		$	1,765,521			100.0	%	$	1,417,587			100.0	%	$	347,934			24.5	%

			Quarter Ended
(dollars in thousands)			3/31/2008						3/31/2007						$ Change			% Change
Time and materials		$	314,201			49.5	%	$	252,421			53.4	%	$	61,780			24.5	%
Cost reimbursable			181,775			28.7	%		127,429			26.9	%		54,346			42.6	%
Fixed price			138,181			21.8	%		93,205			19.7	%		44,976			48.3	%
Total		$	634,157			100.0	%	$	473,055			100.0	%	$	161,102			34.1	%

 

			Nine Months Ended
(dollars in thousands)			3/31/2008						3/31/2007						$ Change			% Change
Time and materials		$	904,973			51.3	%	$	735,154			51.9	%	$	169,819			23.1	%
Cost reimbursable			482,609			27.3	%		390,515			27.5	%		92,094			23.6	%
Fixed price			377,939			21.4	%		291,918			20.6	%		86,021			29.5	%
Total		$	1,765,521			100.0	%	$	1,417,587			100.0	%	$	347,934			24.5	%

			Quarter Ended
(dollars in thousands)			3/31/2008						3/31/2007						$ Change			% Change
Prime		$	516,273			81.4	%	$	388,022			82.0	%	$	128,251			33.1	%
Subcontractor			117,884			18.6	%		85,033			18.0	%		32,851			38.6	%
Total		$	634,157			100.0	%	$	473,055			100.0	%	$	161,102			34.1	%

 

			Nine Months Ended
(dollars in thousands)			3/31/2008						3/31/2007						$ Change			% Change
Prime		$	1,446,711			81.9	%	$	1,158,941			81.8	%	$	287,770			24.8	%
Subcontractor			318,810			18.1	%		258,646			18.2	%		60,164			23.3	%
Total		$	1,765,521			100.0	%	$	1,417,587			100.0	%	$	347,934			24.5	%

Reconciliation of Total Revenue Growth and Organic Revenue Growth

(Unaudited)

We are presenting organic revenue growth to reflect the effect of acquisitions on total revenue growth. Revenue generated from the date a business is acquired through the first anniversary of that date is considered acquired revenue growth. All remaining revenue growth is considered organic. We believe that this non-GAAP financial measure provides investors with useful information to evaluate the growth rate of our core business. This non-GAAP measure should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.

 

Reconciliation of Net Income and Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA)

(Unaudited)

EBITDA, a measure used by management to evaluate operating performance, is defined by us as GAAP net income plus net interest expense, income taxes, and depreciation and amortization, as shown on our Condensed Consolidated Statements of Operations. We believe that this non-GAAP measure is a valuable indicator of our operating performance. EBITDA is a commonly used non-GAAP measure when comparing our results with those of other companies, but EBITDA as defined by us may not be computed in the same manner as similarly titled measures used by other companies. The EBITDA margin is EBITDA divided by revenue. These non-GAAP measures should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.

			Quarter Ended									Nine Months Ended
(dollars in thousands)			3/31/08			3/31/07			% Change			3/31/08			3/31/07			% Change
Net Income, as reported		$	22,292		$	18,442			20.9	%	$	59,774		$	57,708			3.6	%
Plus:
Income taxes			14,428			11,103			29.9	%		38,048			33,766			12.7	%
Interest expense, net			6,751			4,934			36.8	%		18,641			16,505			12.9	%
Depreciation and
amortization			12,334			9,687			27.3	%		35,389			29,247			21.0	%
EBITDA		$	55,805		$	44,166			26.4	%	$	151,852		$	137,226			10.7	%

 

			Quarter Ended									Nine Months Ended
(dollars in thousands)			3/31/08			3/31/07			% Change			3/31/08			3/31/07			% Change
Revenue, as reported		$	634,157		$	473,055			34.1	%	$	1,765,521		$	1,417,587			24.5	%
EBITDA		$	55,805		$	44,166			26.4	%	$	151,852		$	137,226			10.7	%
EBITDA margin			8.8	%		9.3	%					8.6	%		9.7	%