CACI International Inc. — Q2 FY2024 Form 10-Q
Reporting period: Quarter and six months ended December 31, 2023. CACI provides expertise and technology, primarily to U.S. government customers. Figures below are unaudited.
Financial performance
| Metric | Quarter | Six months |
|---|---|---|
| Revenue | $1.834 billion, up 11.2% | $3.684 billion, up 13.2% |
| Operating income | $133.3 million, up 1.9% | $270.7 million, up 2.6% |
| Operating margin | 7.3%, versus 7.9% | 7.4%, versus 8.1% |
| Net income | $83.9 million, down 3.7% | $169.9 million, down 3.6% |
| Diluted EPS | $3.74, versus $3.68 | $7.50, versus $7.44 |
| Operating cash flow | Not presented separately | $141.9 million, versus $207.1 million |
Revenue growth was attributed mainly to new awards and growth on existing programs. DoD revenue rose 17.1% for the quarter and 20.2% for the six-month period; federal civilian agency revenue declined 2.5% and 3.2%, respectively. Direct costs grew faster than revenue, while lower indirect-cost ratios reflected efficiencies. Higher interest expense—up 38.0% for the quarter and 46.9% for six months—was attributed to higher rates and debt balances, contributing to lower net income despite higher operating income.
Six-month operating cash flow fell by $65.2 million year over year. Management cited lower net cash received through receivables sales and unfavorable working-capital timing, partly offset by lower tax and CARES Act payroll tax payments. Capital expenditures were $29.4 million; operating cash flow less capital expenditures was approximately $112.4 million. Investing cash outflow was $38.3 million, including $10.9 million for acquisitions. Financing cash outflow was $90.8 million, including $155.8 million of common-stock repurchases.
Balance sheet, debt and liquidity
At December 31, 2023, cash was $128.9 million and current assets and liabilities were $1.304 billion and $986.1 million, respectively. Debt principal was $1.781 billion ($1.7747 billion net of discounts and issuance costs), compared with $1.704 billion principal at June 30, 2023. The company had $617.5 million outstanding on its revolving facility and $1.1638 billion on its term loan. The effective rate, including swaps, was 4.96%; $1.1 billion of floating-rate debt was hedged. CACI reported compliance with credit-facility covenants. Management said cash, operating cash flow and available borrowing were expected to cover needs for the next 12 months.
Outlook, risks and unusual items
- No specific company revenue or earnings guidance is stated in the provided filing text. Remaining performance obligations were $9.8 billion; CACI expected to recognize about 45% within 12 months and 65% within 24 months. Total backlog was $26.9 billion, including $3.7 billion funded; backlog includes unexercised options and is not assured to convert fully to revenue.
- Management described the federal budget environment as constructive for defense and national security, while warning that continuing resolutions or a shutdown could delay awards, program starts and spending. Other cited risks include procurement protests, contract recompetes, pricing and talent competition, government audits, performance obligations, interest rates and acquisition integration.
- Required capitalization and amortization of domestic R&D costs under the Tax Cuts and Jobs Act was expected to reduce FY2024 operating cash flow by $75.3 million. Congressional action could change the provision, but management said it could not be assured.
- Contract-estimate changes increased pretax income by $14.6 million for the quarter and $17.0 million for six months, versus $5.8 million and $11.5 million in the prior-year periods. The UK digital-transformation acquisition had approximately $25.5 million of consideration, including estimated contingent consideration; purchase accounting remained preliminary. A separate acquisition agreement for approximately $67 million was signed January 11, 2024, with closing expected in Q3 FY2024.
- The Al Shimari litigation was set for jury trial on April 15, 2024 after the Fourth Circuit denied CACI’s mandamus petition. Plaintiffs’ prior stated estimates were $6.0–$9.0 million in compensatory damages and $23.5–$64.0 million in punitive damages. CACI says it is vigorously defending the matter and believes the claims are without merit. The company said ordinary-course legal matters were not expected to have a material adverse effect; the filing does not provide a clear estimate of any probable loss for this case.
Important facts for investors to verify
- Whether revenue growth can translate into stronger operating margins as direct costs rise faster than sales.
- Working-capital and receivables-sale trends, including the effect on cash conversion and liquidity.
- Debt, variable-rate exposure, interest costs and compliance with credit covenants.
- Conversion and funding of the $26.9 billion backlog and $9.8 billion of remaining performance obligations.
- Potential developments in Al Shimari and the outcome of the pending acquisition and preliminary purchase accounting.
- Actual cash-tax effects of the R&D capitalization rule and any changes to the law.