CACI Q3 Earnings Way Ahead of Estimates - Analyst Blog

Technical service provider CACI International Inc. CACI reported relatively modest third quarter fiscal 2014 results with a focused market-driven strategy and strong cash flow. Adjusted earnings in the reported quarter stood at $1.78 per share versus $2.08 in the year-ago quarter. Although the non-GAAP earnings for third quarter fiscal 2014 decreased year over year, it was in line with the company's expectations and comfortably beat the Zacks Consensus Estimate of $1.23.

On a GAAP basis, third quarter fiscal 2014 earnings were $30.8 million or $1.19 per share, down from $38.4 million or $1.62 a share in the year-earlier quarter. The year-over-year decline was primarily attributable to a reduction in revenue and a full quarter of amortization of intangibles associated with the acquisition of Six3 Systems. Earnings per share were also adversely affected by the dilutive effect of convertible notes scheduled to mature on May 1, 2014.

Quarter Details

Quarterly revenues were down 0.6% year over year to $900.4 million due to delays in planned awards, lower run rates on professional services contracts, and reductions in Afghanistan-related material purchases. Revenues for third quarter fiscal 2014 marginally missed the Zacks Consensus Estimate of $901 million.  

Contract funding orders aggregated $794 million in the quarter and were up 21.2% year over year. This brought the total backlog tally to $7.3 billion as of Mar 31, 2014 with a funded backlog of $1.6 billion.

In terms of customer mix, the Department of Defense accounted for about 72.9% of total revenues in the reported quarter. Federal Civilian Agencies contributed about 21.0%, while Commercial and other customers accounted for 6.1% of total revenues.

Operating income stood at $60.5 million in the reported quarter versus $68.6 million in the year-ago quarter. The year-over-year decrease in operating income was primarily due to amortization expenses related to the Six3 Systems acquisition. Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased to $78.7 million from $83.1 million in the year-ago quarter. EBITDA margin for the quarter was 8.7% compared with 9.2% in the prior-year period.

CACI International received total contracts worth $700 million in the quarter – up 26.1% year over year. The company received awards in all 10 markets, one-third of which were in high-growth markets. Approximately 27% of total awards were in new businesses.
    
During the reported quarter, CACI International received indefinite delivery, indefinite quantity (IDIQ) contracts worth $137 million. This included a $95 million five-year award for operations and maintenance support services for the Business Integration Office at the Department of Interior. The company also received a three-year multiple-award contract worth $42 million to provide lifecycle sustainment, integration, acquisition, and technical support for Naval Electronic Surveillance Systems to the U.S. Navy's Space and Naval Warfare Systems Center Pacific Security Systems Branch.

Balance Sheet and Cash Flow

The company ended the quarter with cash and cash equivalents of $48.4 million. Long-term debt (net of current portion) totaled $1,262.6 million.

Net cash provided by operations for the first nine months of fiscal 2014 was $146.3 million compared with $148.0 million in the year-ago period.

Outlook

For fiscal 2014, CACI International reiterated its previous guidance. Fiscal 2014 revenues are expected within $3,500 million and $3,600 million. Net income is expected in the range of $130 million to $140 million. Earnings per share are expected within $5.12 and $5.51.

Moving ahead, CACI International expects to diligently focus on its operating plans to reward its shareholders with attractive risk-adjusted returns. The company also remains on track to fully integrate Six3 Systems with its operations.

CACI International intends to drive operational excellence by intensively focusing on its organic and inorganic growth strategies and strengthening its existing customer relationships while building newer ones. CACI International is also focused on its strategy to grow in larger markets, drive operational excellence, and leverage mergers and acquisitions to further increase its market share and create long-term value for its shareholders.

Other Stocks to Consider

CACI International currently has a Zacks Rank #4 (Sell). Stocks that look promising and are worth considering in the industry include Ebix Inc. EBIX, iGATE Corporation IGTE and NCI, Inc. NCIT, each carrying a Zacks Rank #2 (Buy).