CACI International Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended March 31, 2023. Although the request metadata says “2022 Q3,” the filing covers CACI’s fiscal third quarter of 2023.
Business context
CACI provides expertise and technology to U.S. government enterprise and mission customers, with most revenue tied to federal government work. Approximately 70% of revenue comes from defense-related customers, including the Intelligence Community. The filing is unaudited.
Financial performance
| Metric | Q3 FY2023 | Q3 FY2022 | Nine months FY2023 | Nine months FY2022 |
|---|---|---|---|---|
| Revenue | $1.744 billion | $1.584 billion | $4.999 billion | $4.561 billion |
| Operating income | $155.0 million | $125.4 million | $418.7 million | $376.5 million |
| Net income | $100.7 million | $95.4 million | $277.0 million | $273.8 million |
| Diluted EPS | $4.33 | $4.04 | $11.76 | $11.56 |
| Operating margin | 8.9% | 7.9% | 8.4% | 8.3% |
Quarterly revenue rose 10.1% and operating income rose 23.7%; net income increased 5.6%. For the nine months, revenue increased 9.6%, operating income 11.2%, and net income 1.1%. DoD revenue grew 16.1% in the quarter, while federal civilian revenue declined 6.6%. Management attributed revenue growth primarily to new awards and expansion of existing programs; the nine-month increase also reflected prior-year acquisitions. Higher interest expense and taxes tempered earnings growth.
For the nine months, cash from operations was $236.0 million, down from $593.0 million. Management cited higher income-tax payments, unfavorable working-capital timing, and increased revenue volume; MARPA receivable sales partly offset the decline. Capital expenditures were $40.8 million. Investing cash outflow was $39.2 million, versus $653.6 million in the prior-year period, which included acquisitions. Financing cash outflow was $207.9 million, including $270.4 million of common-stock repurchases. Cash ended at $106.8 million, compared with $114.8 million at June 30, 2022.
At March 31, 2023, total debt was $1.803 billion, up from $1.733 billion at June 30, 2022; cash was $106.8 million. Current assets were $1.309 billion and current liabilities $1.064 billion. The $3.2 billion secured credit facility had $625.0 million drawn on its revolver and $1.187 billion in term loans outstanding. The effective borrowing rate, including swaps, was 4.77%; CACI reported compliance with its financial covenants. A $1.2 billion notional amount of interest-rate swaps hedged part of floating-rate debt.
Backlog, outlook and management commentary
Total backlog was $25.3 billion, up 7.7% from $23.5 billion a year earlier; funded backlog was $3.4 billion. Remaining performance obligations were $8.4 billion, with approximately 49% expected to be recognized within 12 months and 71% within 24 months. Backlog includes unexercised options and is not assured of conversion to revenue.
Management described the federal budget environment as constructive, citing bipartisan support for defense and national-security spending. The enacted FY2023 appropriations increased defense and nondefense discretionary funding by approximately 10% and 6%, respectively; the FY2024 budget request proposed increases of approximately 3% and 8%. Management cautioned that continuing resolutions can delay program starts and awards. It said available cash, operating cash generation and borrowing capacity should meet anticipated needs for the next 12 months; the filing gives no specific earnings or revenue guidance.
Risks, contingencies and unusual items
- Higher rates remain a risk: management estimated a 1 percentage-point rate change would alter nine-month interest expense by approximately $8.3 million. The company transitioned its credit facility and swaps from LIBOR to SOFR effective April 3, 2023 and did not expect a material financial impact.
- A tax-law change requiring five-year amortization of domestic research and development costs was expected to reduce FY2023 operating cash flow by $95 million and increase net deferred tax assets by a similar amount. Actual effects depend on incurred costs and possible legislative or regulatory changes.
- Government contracting risks include procurement delays, protests, funding changes, contract terminations, audits, and competition to recruit and retain cleared personnel. The company also cited technology, execution, acquisition-integration and foreign-exchange risks.
- In the Al Shimari litigation, plaintiffs estimated compensatory damages of $6.0 million to $9.0 million and punitive damages of $23.5 million to $64.0 million. A motion to dismiss remained under advisement. CACI says it is vigorously defending the cases; it states that routine claims and government audit adjustments are not expected to have a material adverse effect.
- The board authorized a $750 million repurchase program in January 2023. CACI paid $250 million under an accelerated share repurchase agreement and reported $487.3 million of remaining authorization at March 31. The final share count under the ASR is subject to settlement.
Investor facts to verify
- Whether operating cash flow recovers as the tax-payment and working-capital timing effects change.
- Debt levels, borrowing costs, covenant compliance, and the effect of floating-rate exposure despite hedges.
- Conversion of funded and total backlog into awarded, funded work and revenue.
- Subsequent developments in the Al Shimari and Abbass litigation and government contract audits.
- Final ASR settlement and the pace and funding of additional share repurchases.