CACI
#Yes, thanks for the question.
This is <UNK>.
We're all ---+ we consider ourselves to be a strategic integrator.
So we're always looking at what's going on in the market.
Presently I think we're at about 3.7 to 3.8 net debt to EBITDA ratio, so there is not a lot of dry powder in the house.
There are some things that are in the marketplace and we continually look at them, but ---+ and that's just sort of our normal course of business.
The ---+ it is really important, I think, that we ---+ as we have with our last couple acquisitions to talk a little bit about why it ---+ what is it that we're looking for when we go.
We value strategic capabilities that we can see from ---+ and access to new customers, as a result of acquisitions.
And they've got to play a long-term role in the growth at CACI.
In terms of getting us into areas, we don't want buy sales.
What we want to do is buy access to places where we think we could cross sell or where we think we can expand ---+ frankly expand the number of markets that we support by getting into completely new areas where we have.
I think we're at a really good size today, so we're not playing this game right now to look at scale or to add revenue.
We are looking to add areas where we believe the market is going to grow.
Such as we talked about in the acquisition of NSS.
And I think as of the fourth quarter last year, it was better than 20% accretive for us, and highly successful in terms of the people it brought to us, the philosophies it brought to us, the scale, and the points into some key growing markets such as enterprise IT and intelligence systems.
We will do something again in the market, that is the third pillar of our overall strategy, but I couldn't tell you that I would do ---+ that I ---+ I couldn't say anything about the timing of that right now.
Yes, I'll start off.
The pull forwards were generally from Q2.
I think that's the ---+ a fair assumption.
As you know we're reluctant to get in the habit of providing quarterly guidance, every time I try to dip my toes in the water ---+ I've been proved wrong.
I'm going to refrain from talking specifically about the second quarter in the guidance.
<UNK> you're right.
It's due to the one-time material buys.
That increased the revenue in the first quarter.
It also changed that ratio we've been trending 50-50, and that's this quarter we had slightly more ODCs than direct labor.
That's not reflective of our direct labor base, that's more reflective of the one time material purchases.
Thank you.
<UNK>, this is <UNK>.
It's the incremental portion.
Yes, <UNK>, thanks.
First off, extremely proud that we were successful in this recompete.
It was our largest of the recompetes for FY 2017, in the ---+ and the team has done an outstanding job.
I will address two different pieces of this.
First, it's clear that the customer added two additional providers, and that's really so that we all collectively can get at this backlog issue, which has been out there for many, many years, and will continue to be a high level of backlog investigations.
Secondly, as we ---+ as we look at it and as <UNK> mentioned, the award value for OPM in our recompete numbers is zero.
We only book those awards as those task orders come in.
Frankly, we received new tasking each week, so as those come in, those are actually booked as incremental orders that will be considered recompete business.
I think we shared a couple quarters back, we were north of $100 million worth of revenue on an annual basis, that's about all we can say on that.
We would expect that number to stay the same, if not slightly greater based on number of background investigators we're able to continue to track.
I think what's very important is that there is plenty of work to be done, so for those of you who were looking at OPM having two providers, and now having four, that just means that more of the government's backlog will be addressed sooner versus all of us receiving some smaller amount of share.
Good morning, <UNK>.
Yeah, so thank you, <UNK>.
This is <UNK>.
We're still providing annual guidance, and what we said previously based on the mid-point of guidance, we respect our organic growth to be negative 5%, 5.5%.
A nice quarter for us due to those one time events.
But we are keeping our guidance intact.
So therefore organic growth guidance would be intact.
We expect to see some market improvements near the end of the year, in particular going to FY 2018, and FY 2018 driven by some of the new business wins that <UNK> spoke about already, that we anticipate.
And so that's kind of generally what the trend looks like without being very specific.
<UNK>, you may want to elaborate.
I think that was good.
<UNK>, thanks for the question.
So honestly, I think the bigger impact to our business is we've been growing all along but we've also been shrinking in certain parts of our business that have gone away.
I used the example in our guidance call of a single contract vehicle that had revenues of in the $840 million range in 2012, and about $75 million.
We are largely not planning on that business anymore.
And now we have a base of business that we know is more enduring.
Not, of course ---+ as example in the first quarter, we did see that contract come up with additional funding that wasn't in our plan, but that was consistent with sort of rebasing that plan.
And frankly I'll take that goodness and I'll give that support to that customer anytime of the day because that's what we do being a national security company.
Where the confidence comes from is three-quarters of greater than one billion dollars, 32% in the last three quarters that we've done, I expect a stronger quarter because of the way the contracts are laying out in the second quarter than we may have ever had historically.
We've got to win ---+ we still have additional business to win, but at the end of this year, once we get rid of the ---+ once our plan takes into full effect, the sort of reduction of those ODC pass-through work and replaces that with higher value solution, and higher in-services, that's where the confidence comes from.
And frankly, starting the way we have started first quarter does nothing but reinforce that strategy that we put in place four-years ago has been working.
It's taken its time to do that, but it really is a reflection of the newness of how customers are buying versus where we were positioned as a business three to four years ago.
This is <UNK>.
I'll answer that part of it.
We ---+ that is a projection around organic growth.
The thing that we strive most on here at the company is returning to organic growth.
It is much of our Senior incentive systems are based on that these days.
If we acquire somebody, that will be in that mix, but we're really looking to come to the street.
We saw the benefit in the first quarter of 2016 ---+ first and second quarter of 2016, we felt that we were there, but we had ---+ we weren't quite ready yet.
We think getting through 2017, redoing our plan in such a way that it's reflective of the new solutions business is really what's going to drive that.
So if we acquired then we would be growing more.
We grew year-over-year 13%.
So we like that, but that was acquired growth.
Once we add organic growth to that, then I believe we will be hitting on all cylinders.
Yes.
This is <UNK>.
I'll take that.
When we provided our FY 2017 guidance, we spoke about a bridge from FY 2016 to FY 2017.
Some of the things which would add to revenue, new business from 2016 and 2017, in NSF and the like.
But we also had some reductions, some headwinds associated with our reduced pass through material purchases.
A couple recompetes which were being more commodotized ---+ which we were unsuccessful with part of the strategic strategy, in a natural contract life cycle.
Those are such that they spread out differently among each quarter.
And so I think to your question, if we expect five-year decline for the full year, the first quarter was down 1%, kind of mathematically that suggests the other quarters are down greater than 5%.
And those are concentrated more in the second and third quarter.
As we get closer to the fourth quarter, we expect to see some of those items I mentioned, the reduced pass-throughs, commodtized recompetes, in the natural contract life cycle to abate, and so that should provide a little bit more color as to how organic kind of revenue might flourish.
And this is <UNK>.
I think it's also useful that, in terms of executing our plan this year, as well as we did in the first quarter, there is three more quarters to go.
Against a little bit, not sure what the headwinds would likely be as a result of the budget.
There is an election going on, which I don't know that that has that big of an impact but it could have an impact on how Congress and the administration in a lame duck session tries to come to grips with what they do with a full year budget.
We hope that that happens.
But we still have 6% of our recompete and 3% of our new business to go out and capture.
We have a very strong pipeline.
Based on the way we started first quarter, I'm confident that we'll do that.
But I don't want to be overly confident, given that there's a lot of runway.
I'm never going to give up runway in front of me versus runway behind me.
So we continue to believe that reiterating guidance is a bit prudent at this point in time, but that should be ---+ we should know more about that by the end of the second quarter.
Well, so predicting the election is not something that I'm going to ---+ I've not been paid to do that, like many others, and so probably won't do that.
But here is what I can tell you, generally.
Having been in this business for 33 years, and been through a few of these.
Typically the first year you don't really see a great deal of impact.
First year is really about whoever the winner is, bringing on their staff, bringing on their team, and then you start to see a bit of the policy be played out in the second and third year.
and that's what I would be looking to see.
In the general macro sense of the things that would being a national security business, I don't think that our election is going to solve anything on the global front.
And so I read an article recently that says throughout everything else and every other industry in the world, the defense industry is probably going to be quite stable through this period of time, because I don't see our election having an impact on the thought processes in ---+ with some of the hotspots around the globe.
At least not anywhere in the near-term.
As far as longer term, I'm not ready to give FY 2019 to FY 2025 guidance quite yet, but I would tell you that in a stable environment, given that we have shifted away from a predominance or a certain part of a kind of business, such as the pass through contracting, to more enduring value added work.
I think that's sustainable over a longer period of time, and business systems are going to need to be bought.
Next generation IT systems are going to need to be put in place.
The efficiency of government is going to continue to be a very strong desire.
And we're in the midst of all of that, in addition to the things that we can't talk about because we have near peer parody with ---+ in a number of places that our government, in a classified sense, is going to continue to invest in very heavily.
Over the long run, I believe once we hit and once we get to FY 2018 in the goals that we have set for ourselves, I believe that is sustainable and I would be looking to increase that slightly every single year.
Yes, <UNK>, great question.
And let me start by answering it this way.
When we started adjusting the way we needed to address the changing market three to four years ago, we put in place a philosophy that said we needed to bid fewer, larger and more complex.
So why was that.
Well, we wanted to get away from the commoditized side of the business, which was where ---+ the short cycle part of the business is what became the bill payer in 2013 and 2014, in particular where we saw 10% declines in overall business of.
And so we need to look for ---+ at our size now we are capable of competing for and winning any job of almost any size that is not a hardware procurement inside of the federal government.
And that could be IT, it could be the O&M, major complex enterprises, such as we won with Air Force satellite control network, most recently.
And so what you described is exactly that philosophy.
There is one very large bid.
In fact, one of the changes we saw in our bidding from ---+ excuse me, in our bids to be submitted, was a very large bid that we didn't believe, after we did considerable work on it, that the customer was really serious about having something new happen, so we dropped it.
And that was a $5 billion contract opportunity.
There is another one that we're pursuing now which shall remain nameless, that is has a total value of about $8 billion over a seven or eight year period that will be submitted here in the next week, and that's part of the business to be coming.
But what you described is we are putting more effort into a smaller number of larger contracts and starting much earlier.
And it has taken some time to adjust to that, both culturally and ---+ frankly you got to get in front of the customer with enough cycles that they see you as a serious potential supplier to them.
And that's what I believe you have started to see with our billion dollar plus quarters, which typically we would have one on an annual basis and then we would be 600 or 700 million.
Some of that gets acquired, some of that is through acquisition ---+ but a lot of it is through ---+ we're winning bigger jobs and performing on bigger jobs.
Yes, I mean, absolutely.
And I'll have to tell you that in the private moments when we're talking about our business, that's really what we want to target.
But to be ---+ realistic and to be ---+ to not ---+ to get in front of our ski or overski our ski ---+ we put out a range and we put it out rather modestly.
That is our goal.
Our goal always has to be to win everything that we bid.
That's probably statistically not possible, but it's certainly a gel and you get better by trying to achieve that goal.
Well, thanks, Jason, and thanks for your help today on the call.
We would like to thank everyone who dialed in or logged onto the webcast for their participation as well.
We know many of you will have follow up questions.
And <UNK> <UNK>, <UNK> <UNK>, and Dan Leckburg are available for calls later this morning and today.
This concludes our call.
Thank you, have a very good day and we really appreciate our your interest in CACI.
We'll talk to you again soon.
Thank you.
