By Calvin Biesecker
CACI International [CACI] on Wednesday reported strong fourth quarter results with double-digit increases in sales and earnings driven by its work for the Defense Department as well as its work supporting the intelligence community.
The information technology and engineering services company isn’t seeing any threats to its business model from the Obama administration’s efforts to “in-source” some federal work currently being performed by contractors.
This is only happening on the “margins” of CACI’s business and the company’s government customers are saying their federal employee and contractor support ratios are where they need to be, Paul Cofoni, CACI’s president and CEO, and Bill Fairl, president of U.S. Operations, said on yesterday’s earnings call.
Net income increased 23 percent to a record $29 million, 95 cents earnings per share (EPS), from $23.5 million (77 cents EPS) a year ago. Operating margins were up 10 basis points to 7.2 percent. Sales increased over 11 percent to $728.9 million from $655 million, with nearly 11 percent of the gain organic. Intelligence related work was up 19 percent in the quarter and currently accounts for 38 percent of CACI’s business.
For the fiscal year net income reached a record $95.5 million ($3.14 EPS), up 15 percent from $83.3 million ($2.72 EPS) a year ago. Sales increased 13 percent to a record $2.7 billion from $2.4 billion, with organic growth 10 percent.
CACI executives said the company’s position in the national security space is strong and they maintained guidance for FY ’10. The company won $1.3 billion in contract awards in the quarter and its funded backlog was $1.6 billion, nearly 18 percent higher than a year ago. Bid and proposal activity remains robust, they said, with $3.5 billion in submissions outstanding and more than $5 billion in proposals expected before the end of 2009, 15 percent related to cyber security.
Cyber security is one of the key federal market areas CACI has staked out for growth. During the quarter, the company created a Cyber Solutions Division, led by Zalmai Azmi, senior vice president for Strategic Law Enforcement and National Security Programs.
The new division, which has a staff and its own contracts, will be working on business where cyber security is a key focus of the opportunity, Cofoni told Defense Daily in an interview after the analysts call. In addition to his own staff, Azmi will have a “virtual organization” of information assurance and other related cyber experts throughout the company, he said.
The first stage in the government’s cyber security is the ongoing inventorying of capabilities and gaps, Cofini said. Next will be the “long battle” to close those gaps and continue to fend off adversaries, be they terrorists or nation states, who be constantly “finding new angles of attack,” he said.
CACI is also focusing additional resources in other growth areas, healthcare and energy, making two recent hires to lead these efforts. The company currently has about $100 million in revenues in the federal healthcare space, primarily in supporting logistics related to the deployment of military field hospitals, information systems work for the DoD TRICARE Management Activity that manages the healthcare plan for the military, and information systems work for the Veterans Administration. CACI’s United Kingdom-based operations also recently acquired a company that does Web-based systems for the national health system there.
Over the next several years the goal is to grow the healthcare business to between $130 million and $150 million in revenues, Cofoni said.
CACI currently doesn’t have any business in the energy area and is developing its business plan. This is a “venture initiative” that “may or may not succeed” but with stimulus funding and more national level attention on energy there are opportunities for consulting and high-end systems engineering services, Cofoni said.
Strategic acquisitions in any of CACI’s targeted growth areas, which also include intelligence, homeland security and information technology modernization, are all possible, company officials said.
For FY ’10, CACI’s continues to expect sales between $2.9 billion and $3 billion and net income between $97.8 million ($3.20 EPS) and $103.9 million ($3.40 EPS).