CACI International Inc. — Q1 FY2022 Form 10-Q
Reporting period: Three months ended September 30, 2021; comparison is with the three months ended September 30, 2020. CACI provides expertise and technology primarily to U.S. government customers.
Financial performance
| Metric | Q1 FY2022 | Prior year | Change |
|---|---|---|---|
| Revenue | $1,490.9 million | $1,459.5 million | +2.2% |
| Operating income / margin | $127.0 million / 8.5% | $134.4 million / 9.2% | Income down 5.5% |
| Net income / margin | $88.1 million / 5.9% | $93.6 million / 6.4% | Income down 5.9% |
| Diluted EPS | $3.70 | $3.67 | +0.8% |
| Operating cash flow | $186.0 million | $176.9 million | +$9.1 million |
| Capital expenditures | $10.2 million | $16.3 million | Down $6.1 million |
Revenue growth reflected 2.0% organic growth from existing programs and new awards, plus acquired revenue, partly offset by completed contracts. Federal civilian revenue rose 6.0%, commercial and other rose 18.4%, while DoD revenue declined 0.4%. Technology revenue increased and expertise revenue decreased year over year. Higher direct costs, including materials, and acquisition-related amortization contributed to lower operating income. Lower weighted-average shares helped diluted EPS rise despite lower net income.
Balance sheet, debt and liquidity
- At September 30, cash was $104.4 million; current assets were $1.24 billion and current liabilities $836.3 million. The current ratio was approximately 1.49.
- Debt principal was $1.70 billion ($1.69 billion net carrying value), compared with $1.74 billion principal at June 30. Debt included $915.0 million drawn on a $1.50 billion revolver and $785.9 million of term loans. The reported effective rate, including swaps, was 2.16%; $650 million of floating-rate debt was hedged. CACI reported covenant compliance.
- Operating cash flow was $186.0 million; investing used $126.5 million, including $116.3 million net cash for acquisitions; financing used $41.7 million, primarily reflecting net debt repayments. Cash increased $16.4 million during the quarter.
- Management said cash, operating cash generation and available borrowing capacity should meet operating, debt-service and other needs over the next 12 months. Receivables sales under the $200 million MARPA facility are also a liquidity source.
Backlog, outlook and notable items
- Total backlog was $23.9 billion, up 9.1% from a year earlier; funded backlog was $3.5 billion, up 2.9%. Quarterly contract awards were $2.4 billion. Remaining performance obligations were $7.5 billion, with approximately 80% expected to be recognized over the next 12 months. Backlog includes options and is not assured to convert fully to revenue.
- Management characterized the federal budget environment as stable and cited continued investment in defense and national security. The FY2022 appropriations bills had not been enacted; a continuing resolution signed September 30 funded government operations through December 3, 2021. Management noted potential delays to new starts and awards under continuing resolutions.
- No specific company revenue or earnings guidance is provided in the supplied filing text. Management said it believes available liquidity is sufficient for the next 12 months; quarterly results are not necessarily indicative of full-year results.
- Two acquisitions were completed for approximately $120.3 million, adding open-source intelligence, cyber and satellite-communications capabilities. Preliminary purchase accounting included $79.7 million of goodwill and $43.5 million of intangible assets.
- The company completed its $500 million accelerated share repurchase, receiving 2.0 million shares in total at an average $253.47 per share. Contract-estimate changes increased pretax income by $2.8 million, or $0.09 per diluted share, versus $7.8 million, or $0.22, in the prior-year quarter.
Risks and contingencies
Risks include dependence on government contracting and appropriations, award protests and delays, competition for cleared personnel, contract performance and audit outcomes, acquisition integration, and COVID-19 effects. CACI specifically cited possible workforce disruption and contract-performance or cost impacts from federal contractor vaccination requirements. Government cost audits and IRS examinations were ongoing; management did not expect these matters to have a material effect. The filing describes ongoing Al Shimari and Abbass litigation; management says it is vigorously defending the matters and believes the claims are without merit. No material adverse effect from ordinary-course legal matters was expected based on information available.
Key facts for investors to verify
- Whether backlog, RPO and new awards translate into funded work and sustained revenue growth.
- Whether margins recover as direct costs and acquisition amortization rise.
- Debt, interest-rate exposure, revolver availability and covenant headroom, particularly under changing rates or weaker cash generation.
- Effects of continuing resolutions, federal procurement delays, COVID-19 and contractor vaccination requirements on staffing, billable work and costs.
- Final acquisition purchase accounting and integration performance, and developments in the disclosed litigation and government audits.