CACI International [CACI] on Wednesday afternoon reported a strong first quarter with higher earnings and sales and the company raised its earnings guidance for the rest of the year.

Net income soared 88 percent to a record $78.8 million, $3.10 earnings per share (EPS), from $42 million ($1.67 EPS) a year ago, topping consensus estimates by $1.06 EPS. The strong earnings were driven by a lower tax rate, higher sales, strong operating performance and cost controls.

CACI President and CEO Ken Asbury
CACI President and CEO Ken Asbury

Operating margin in the quarter was 8.5 percent versus 6.2 percent a year ago. Operating income benefited from higher award fees, some sales that occurred earlier than expected, and a gain from a fixed-price contract, Tom Mutryn, CACI’s chief financial officer, said Thursday on the company’s earnings call.

Sales were up 7 percent to a record $1.2 billion from $1.1 billion a year ago, with 3 percent of the growth organic. Work with the Defense Department, CACI’s largest customer, drove the higher sales while revenue with federal civilian agencies were down.

Orders were a record $2.5 billion, with about 60 percent of the awards from new business. Total backlog at the end of the quarter stood at $13 billion, nearly 8 percent higher than a year ago.

CACI raised its earnings guidance to reflect a lower than expected tax rate and stronger than expected operating performance. Net income is expected to range between $250 million ($9.77 EPS) and $260 million ($10.16 EPS) in fiscal year 2019, a $16 million increase from the prior outlook. Sales are still forecast to be between $9.7 billion and $9.9 billion.

Most of the company’s expected sales for fiscal year 2019 are accounted for in existing business, 92 percent, and the remainder is evenly split between recompetes and new business wins. CACI said its pipeline of submitted bids is $8.9 billion, with about 60 percent representing potential new business. Over the next two quarters the company expects to bid on another $11 billion in business.

Ken Asbury, CACI’s president and CEO, said the company’s priority for capital deployment remains mergers and acquisitions. Free cash flow in the quarter was $73.7 million, excluding $90 million to acquire the Systems Engineering and Acquisition Support Services Business Unit of CSRA, which was acquired by General Dynamics [GD].