CACI International [CACI] on Wednesday posted higher sales and earnings in its fourth quarter due its acquisition earlier this year of L-3 Communications’ [LLL] government services segment coupled with a lower tax rate and the company reiterated its guidance for fiscal year 2017.
Net income rose 5 percent to $43.6 million, $1.75 earnings per share (EPS), in the quarter versus $41.4 million ($1.68 EPS) a year ago, with the acquisition of L-3’s former National Security Solutions (NSS) business the primary contributor to the gain followed by a lower tax rate. The per share results beat consensus estimates by 17 cents EPS.
Sales in the quarter increased 29 percent to $1.1 billion from $865.5 million a year ago due to the NSS deal that closed on Feb. 1. The NSS business contributed $255.3 million in sales in the quarter and some other acquisitions that CACI has made in the past year added another $8 million to the top line.
The company believes that in its fiscal year 2017 there’s the potential for “very modest” organic growth in the fourth quarter, Ken Asbury, CACI’s president and CEO, said on Thursday’s analyst call. Beyond FY ’17, one of CACI’s goals is to grow its organic revenue 1 percent to 4 percent greater than its market, the company said.
While organic sales remain lackluster largely due to declines in war-related activities, CACI’s order flow in the quarter was strong at $1.6 billion. However, $600 million of the potential new business is from three contracts that are under protest. CACI officials said on the investor call that they believe the protests will be resolved in the company’s favor.
The pace of the government’s award activity was strong in CACI’s fourth quarter and so far there had been no let up entering the federal government’s fourth quarter that concludes at the end of September, Asbury said. This could change after Oct. 1 when a continuing resolution is likely to go into effect at the start of the government’s new fiscal year, he said.
Backlog at the end of the quarter stood at $11 billion, up 15 percent from $9.6 billion a year ago. CACI said it will be adopting a new revenue recognition standard for FY ’19 that will include mandatory backlog reporting, which led the company to review its backlog reporting processes and definitions.
As a result, CACI said it reduced its backlog on a number of programs that probably won’t generate more revenue, leading to a $2.5 billion reduction in total backlog. The $11 billion backlog at the end of the quarter reflects the changes, company officials said.
For the year, CACI’s net income increased 13 percent to $142.8 million ($5.76 EPS) from $126.3 million ($5.17 EPS) on the NSS acquisition and lower tax rate. Sales increased 13 percent to $3.7 billion from $3.3 billion a year ago on the acquisitions.
CACI said it has successfully integrated the NSS business, achieving all milestones ahead of schedule.
CACI expects sales this year to be between $4.1 billion and $4.3 billion and net income between $150 million ($6.02 EPS) and $160 million ($6.43 EPS).