CACI International Inc. — FY2020 Form 10-K Summary
Reporting period: Fiscal year ended June 30, 2020, filed August 14, 2020. Although the request metadata says “2019 Q4,” this filing covers FY2020; fourth-quarter results are included below. Amounts are in U.S. dollars.
Business context
CACI provides technology and professional services primarily to U.S. government customers, supporting national security and government modernization. Its work spans defense, intelligence, federal civilian, enterprise IT, cyber, communications, engineering, and mission support. The federal government generated 95.6% of FY2020 revenue, including 69.9% from the Department of Defense. The company had approximately 22,900 employees.
Financial performance
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Revenue | $5.720 billion | $4.986 billion | +14.7%; organic growth 8.0% |
| Income from operations | $457.7 million | $377.9 million | +21.1% |
| Operating margin | 8.0% | 7.6% | +0.4 percentage points |
| Net income | $321.5 million | $265.6 million | +21.0% |
| Net margin | 5.6% | 5.3% | +0.3 percentage points |
| Diluted EPS | $12.61 | $10.46 | +20.6% |
| Operating cash flow | $518.7 million | $555.3 million | Down $36.6 million |
| Capital expenditures | $72.3 million | $47.9 million | Up $24.4 million |
FY2020 Q4: Revenue was $1.496 billion, operating income $133.7 million, net income $93.7 million, and diluted EPS $3.68. In FY2019 Q4, the respective figures were $1.374 billion, $81.1 million, $50.0 million, and $1.96.
Revenue mix: DoD revenue was $3.999 billion (69.9% of total), federal civilian revenue $1.468 billion (25.7%), and commercial and other revenue $253.0 million (4.4%). Cost-plus-fee contracts accounted for 57.2% of revenue, fixed-price for 28.5%, and time-and-materials for 14.3%.
Liquidity, debt, and backlog
- Cash and cash equivalents were $107.2 million at June 30, 2020, versus $72.0 million a year earlier; working capital was $316.7 million.
- Cash from operations was $518.7 million. Its year-over-year decline reflected, in part, lower net cash proceeds from receivable sales under the MARPA program; DSO improved to 48 days from 54.
- Principal debt outstanding was $1.414 billion: $844.6 million under the term loan and $569.0 million under the revolver. The credit facility matures June 30, 2024; the effective interest rate, including swaps, was 2.58%. CACI reported compliance with its financial covenants.
- Total backlog was $21.6 billion, up 27.8% year over year; funded backlog was $2.8 billion. FY2020 contract awards totaled $11.6 billion. Remaining performance obligations, excluding options and certain unissued task orders, were $6.4 billion; the company expected about 80% to be recognized within one year.
- Management said existing cash, operating cash generation, and available credit should fund operations, capital spending, debt service, and working-capital needs over the next 12 months. The company reported no material off-balance-sheet financing arrangements.
Changes, outlook, and material items
- Revenue growth reflected 8.0% organic growth and acquired revenue. DoD and federal civilian revenue increased by $509.4 million and $204.1 million, respectively.
- Operating margin improved, while indirect costs and selling expenses rose to 25.1% of revenue from 24.4%, attributed mainly to acquisition-related workforce and facility costs and increased research and bid spending. Interest expense rose 12.2%, primarily due to higher average debt balances.
- FY2020 included three strategic acquisitions completed in the second quarter, with aggregate consideration of approximately $109.4 million. CACI completed its approximately $350 million Ascent Vision Technologies acquisition on August 11, 2020, after fiscal year-end.
- COVID-19 reduced access to some customer facilities and billable work. CACI estimated an FY2020 impact of approximately $68.0 million in revenue and $17.9 million in net income. It described liquidity and cash flows as not significantly affected to date, but warned that further pandemic effects were uncertain.
- Management cited stable federal budget conditions and bipartisan support for defense and national security investment, while noting uncertainty over FY2021 appropriations and possible continuing resolutions. The filing provides no specific company revenue or earnings guidance.
- Material risks include dependence on U.S. government spending and contract awards, bid protests, contract termination or nonrenewal, funding delays, hiring and security-clearance constraints, fixed-price cost overruns, cybersecurity incidents, acquisition integration, and debt and interest-rate exposure. Goodwill totaled $3.4 billion; the annual impairment test found no impairment and management said reporting units were not then at near-term risk.
- Two Iraq detainee-related lawsuits, Al Shimari and Abbass, remained unresolved. CACI stated it was vigorously defending them and believed they were without merit; the filing gives no clear quantified potential loss. Management also said government audit adjustments were not expected to have a material effect and reserves were adequate.
- The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting. Revenue recognition using percentage-of-completion estimates was identified as a critical audit matter. A new lease accounting standard was adopted in FY2020, adding lease assets and liabilities to the balance sheet.
Key facts for investors to verify
- Whether backlog converts to funded work and revenue on expected timing; backlog includes unfunded amounts and unexercised options.
- How much of reported growth and future performance depends on acquisitions versus organic growth, and whether recent acquisitions deliver expected returns.
- Subsequent COVID-19 effects on facility access, billable hours, contract costs, customer payments, and the CARES Act reimbursement process.
- Debt repayment capacity, covenant headroom, floating-rate exposure, and the terms and renewal of the MARPA receivables program.
- Developments and potential financial exposure in the Al Shimari and Abbass litigation, as well as outcomes of government contract audits.
- The assumptions underlying percentage-of-completion revenue, award-fee estimates, and contract costs at completion, which involve management judgment.