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CACI International (CACI) Q2 Earnings Beat, Revenues Up Y/Y

Zacks Equity Research

CACI International CACI reported second-quarter fiscal 2019 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. The company benefited from organic revenue growth, expanding margins, and record awards and contract funding.

Earnings for the quarter were $2.71 per share compared with $2 in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate of $2.30.

Quarterly revenues were $1.18 billion, up 8.6% from the year-ago quarter. The rise was primarily attributable to new business wins, acquired contracts and on-contract growth, which aided organic expansion. However, the top line fell slightly short of the Zacks Consensus Estimate of $1.19 billion.

CACI International, Inc. Price, Consensus and EPS Surprise

CACI International, Inc. Price, Consensus and EPS Surprise | CACI International, Inc. Quote

Quarter Details

Contract awards in the reported quarter were worth $1.3 billion, up 16.4% year over year, of which approximately 70% came from new businesses. Contract funding orders were $1 billion, up 33.6%.

Total backlog as of Dec 31, 2018 was $12.6 billion, 15.7% higher than prior-year quarter. Funded backlog at the end of December was $2.5 billion, up 29.3% year over year.

In terms of customer mix, the Department of Defense (“DoD”) accounted for about 70.6% of total revenues in the reported quarter. Federal Civilian Agencies contributed about 24.4% while Commercial and other customers accounted for 5% of revenues.

During the quarter, awards bagged by CACI International included a five-year, $73 million contract with the Naval Surface Warfare Center. Its acquisition of the Systems Engineering and Acquisition Support Services Business Unit led the company to secure this award.

Moreover, a five-year, $318 million task order by a DoD customer and another five-year $125 million task order from U.S. Navy’s Military Sealift Command were among the notable wins in the quarter.

Margins

Operating income for the quarter came in at $102.3 million, up 15.9% from the year-ago quarter. Improved program execution, product sales, and indirect cost control primarily led to growth in operating income.

Operating income margin expanded 60 basis points (bps) year over year to 8.7%.

Adjusted EBITDA for the fiscal second quarter increased 3.3% to $122.3 million.  Adjusted EBITDA margin of 10.4% increased 70 bps.

Balance Sheet and Cash Flow

At the quarter end, CACI International had cash and cash equivalents of $70.7 million compared with $75.49 million in the previous quarter.

Total long-term debt was $1.01 billion.

Cash flow from operations at the end of December was $139.5 million compared with $83.11 million in the previous quarter.

Guidance

Encouraged by improved core business and approximately $125 million revenue contribution from its acquisitions of LGS Innovations and Mastodon Design, CACI International raised guidance for fiscal 2019. Revenues are now expected in the range of $4.88 billion to $5.03 billion, up from the previously guided range of $4.7-$4.9 billion.

The company also raised its net income and earnings guidance for fiscal 2019.

Net income is now expected in the range of $255-$265 million, up from $250-$260 million guided earlier.

Earnings per share is now expected to be between $9.96 and $10.35, up from the previously projected range of $9.77-$10.16.

However, a one-time transaction cost, net of tax of approximately $13 million is expected to remain an overhang.

Zacks Rank & Stocks to Consider

CACI International currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Computer and Technology sector are Synopsys, Inc. SNPS, Twitter, Inc. TWTR and Marvell Technology Group Ltd. MRVL, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Synopsys, Twitter and Marvell is projected to be 10%, 22.05% and 9.38%, respectively.

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