CACI International
Annual Report 2019

Plain-text annual report

EXPERTISE AND TECHNOLOGY FOR NATIONAL SECURITY 2 0 1 9 A N N U A L R E P O R T SUCCES S BUILT ON GOOD CHAR AC TER AND INNOVATION | Our Culture Sets Us Apart IDEAS That Inspire. TECHNOLOGIES That Matter. EVER VIGILANT. CACI is better positioned than ever to grow our business by leveraging our substantial expertise, innovation, and technology to deliver the enterprise and mission outcomes our customers desire. For more than 57 years, CACI has supported our customers in the protection of our nation’s interests and the transformation and optimization of government operations. As we continue to attract new customers and enhance our performance, we remain grounded in our culture of good character and innovation. Our successful strategy to win new business, deliver operational excellence, and deploy our capital for long-term growth has provided the blueprint for sustained, profitable growth. Our talented employees are often commended by our customers as they continue to demonstrate the highest levels of expertise and professionalism. This commitment to excellence and ethics is the foundation for how we do business. Fortune magazine backs this up by recognizing CACI eight times as a World’s Most Admired Company. Our support for veterans hiring has led to recognition from multiple sources, including a Best for Vets ranking by Monster.com and the Military Times. We provide a work environment and infrastructure that promotes innovation and increases productivity for our employees. This resonates with CACI employees as they voted the company a Top Workplace in locations across the U.S., including Washington, D.C.; San Diego, CA; Memphis, TN; Tampa Bay, FL; Baltimore, MD; and the states of Colorado, Oklahoma, and South Carolina. We invest in our employees with enhanced professional development, expanded training and certification opportunities, and greater work flexibility. We keep benefit costs stable and promote a culture that supports individual health and wellness. We support our employees, communities, and the environment with respectful and efficient use of energy and materials at our facility locations around the globe. Our culture of good character and innovation provides the foundation for success, and we take pride in upholding the highest standards of ethics and integrity. We remain ever vigilant in serving our customers and our nation, and we look forward to continuing to provide our shareholders with exceptional and enduring value. GROW TH THROUGH E X PERTISE , INNOVATION , AND TECHNOLOG Y F Y 1 9 F I N A N C I A L H I G H L I G H T S REVENUE ($M) NET INCOME * ($M) DILUTED EARNINGS PER SHARE * SHAREHOLDERS’ EQUITY * ($) ($M) 4,986 4,468 4,355 3,744 3,313 301 266 2,371 2,107 11.93 10.46 1,794 1,607 1,480 164 143 126 6.53 5.76 5.17 | Positioned for Success in Fiscal Year 2020 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 Income Statement Data (in thousands, except per share data and percentages) Year ended June 30 Revenue Operating Income Net Income Diluted Earnings per Share Weighted-average Diluted Shares Balance Sheet Data (in thousands, except percentages) Year ended June 30 Total Assets Working Capital Shareholders’ Equity Return on Equity 2019 % Change $4,986,341 377,867 265,604 10.46 25,395 11.6% 10.9% -11.8% -12.3% 2019 % Change $5,086,843 339,798 2,371,466 11.9% 26.1% -13.4% 12.6% -23.2% * 2018 $4,467,860 340,700 301,171 11.93 25,255 * 2018 $4,034,206 392,210 2,106,887 15.4% * Net income for FY18 benefited from a net reduction to income taxes of $103,273, or $4.09 per diluted share, related to the enactment of the Tax Cuts and Jobs Act in December 2017. WINNING new business. DRIVING operational excellence. INVESTING our capital for future growth. 2 0 1 9 C A C I A N N U A L R E P O R T | 1 To Our Fellow CACI SHAREHOLDERS We continue to invest in our long-term growth with the goal of staying ahead of customer demand and technology trends. Through internal R&D, we are developing technology that enables the convergence of signals intelligence, electronic warfare, cyber, and communications. These solutions provide software-defined agility and enable multi-domain operations within the electro- magnetic spectrum. We’re also delivering situational awareness tools to address the critical and now-contested space domain, and investing in other innovative technologies, including photonics. Our long-term approach to investing in differentiated technolo- gies that address our customers’ most pressing challenges will sustain organic revenue growth and margin expansion, leading to greater shareholder value. We also continue to invest in the growth of our talent base, ensuring that we attract and retain the best and the brightest. This includes enhanced employee benefits and work-life balance, including parental leave, increased 401(k) match, greater work flexibility, and extensive training and certification programs. Our efforts are paying off, as CACI has been recognized as a top workplace in eight locations across the U.S., with the Washington Post naming the company as a Top Workplace in Washington, D.C. for the fifth consecutive year. These rankings are based on our employees’ feedback in third-party surveys that evaluate CACI’s leadership, culture, and benefits. We also remain focused on the growth of our leadership team to take CACI to new levels. During FY19, we added several strategic hires in important areas of growth for CACI. These senior leaders have the right vision and experience to drive continued success across many areas of our business. Our customers frequently ask us, “Can we move from concept to fielded system faster?” Responding to their requests requires that we have a willingness to invest ahead of need to make certain that customers are able to rapidly transition new technologies to the field. This is where our vision is focused – to remain ahead of need, to quickly produce prototypes and demonstrations, and then to move directly to contract award. This product-based solutions approach is helping us to win longer-term programs and aligns with the path set forward by our customers. Positioned for Sustained Success Our performance maintained its upward trajectory in FY19 with another year of consistent and profitable growth. We remained focused on the steady execution of our long-term strategy to win new business, drive operational excellence, and deploy our capital for future growth. We were successful in our pursuit of larger, more complex, and enduring work with a greater focus on technology, further expanding our customer base and portfolio. Our four acquisitions, including LGS Innovations and Mastodon Design, helped us expand our capabilities in the high-growth areas of signals intelligence, electronic warfare, cyber, and secure communications. We finished the year by delivering record revenue with a growth of 11.6 percent, record operating income, and record cash from operations. We booked $10.3 billion of awards, including $6.9 billion for new business, and started the new fiscal year with a record backlog of $16.9 billion. Our strong performance in FY19 positions us well for continued success in FY20. 2 | 2 0 1 9 C A C I A N N U A L R E P O R T We are focused on helping our customers meet their greatest enterprise and mission challenges in national security and government moderniza- tion by leveraging our star distinctions in expertise, innovation, and performance excellence. In FY20, we will increase our investments in new technologies, including signals intelligence, electronic warfare, and cyber, as well as emerging communications and photonics. We will continue to make investments in artificial intelligence, enterprise IT, and machine learning to further enhance our enterprise-related offerings. And we will continue to invest in every aspect of our business to ensure quality and efficiency. Our priorities going forward have not changed. We will continue to successfully execute the strategy we put in place several years ago, main- taining our positive momentum, and focusing on continued growth in a broad sense: growth of our capability set to stay ahead of customer demand and technology trends; growth of our talent base to deliver value for our customers; and growth of our leadership to take CACI to new levels. By achieving these priorities, we will continue to deliver long-term value to our customers and shareholders. Dr. J.P. (Jack) London Executive Chairman and Chairman of the Board, CACI International Inc John S. Mengucci President and Chief Executive Officer, CACI International Inc | Financial Accomplishments Driving Shareholder Value Revenue of $5.0 billion, 11.6% greater than the $4.5 billion of last year. Operating income of $377.9 million, 10.9% greater than the $340.7 million of last year. Contract awards of $10.3 billion, 14 consecutive quarters of awards greater than $1 billion. Total backlog at fiscal year-end of $16.9 billion, 49.6% greater than the $11.3 billion last year. Net operating cash flow of $555.3 million,* 72.7% greater than the $321.5 million last year. * Includes $192.5 million from CACI’s master accounts receivable purchase agreement. 2 0 1 9 C A C I A N N U A L R E P O R T | 3 ENTERPRISE As Defense, Intelligence, and Federal Civilian agencies seek to optimize their enterprise operations, CACI’s expertise and technology are helping our customers to streamline functionality, reduce costs, and improve access to services and data. Using our Agile-at-scale methodologies, we modernize applications, infrastruc- ture, and business processes to enhance performance and ensure end-user satisfaction. We have pioneered secure, enterprise cloud solutions to support the federal government with a series of “as-a-service” offerings for everything from IT services to predictive logistics and secure communications. We apply the latest in deep learning research and development to solve complex problems at scale, such as object identification and classification in both classified and unclassified environments. We develop data fusion and visualiza- tion technologies that aid customers in decision-making across a spectrum of problems. Our business process automa- tion tools shorten timelines and enhance productivity while providing a level of precision that was once unthinkable. CACI’s highly qualified personnel assist the federal government in nearly every aspect of its enterprise operations. From IT and logistics professionals to background investigators, CACI employees garner frequent accolades from our customers in their service to the nation. 4 | 2 0 1 9 C A C I A N N U A L R E P O R T MISSION CACI improves mission outcomes by delivering technology and expertise to customers throughout the Department of Defense, the Intelligence Community, and Federal Civilian government. Our leadership in understanding, optimizing, and exploiting the electro-magnetic spectrum was further strengthened by our acquisitions of LGS Innovations and Mastodon Design this year. Nearly every modern military weapons communication system relies on the availability and use of the electro- magnetic spectrum. With the rise of peer-state competition and the threat of multi-domain warfare, U.S. defense leaders have recognized the urgency of ensuring spectrum domination. CACI is actively engaged in developing and deploying advanced technologies that leverage the entire spectrum – from very low-frequency radio waves to the infrared and ultraviolet rays used for deep space communications. CACI is also at the forefront of developing fifth- generation (5G) technologies to meet the challenges of the newest cellular wireless communications. We are modernizing signals intelligence, full-spectrum cyber, and electronic warfare with software- defined solutions and products that permit defense and national security customers to receive ongoing updates, avoiding the obsolescence problem that has plagued so many traditional hardware systems, and providing greater efficacy and force protection. The outstanding performance of our men and women who support high-profile, high-risk operations across the globe has increasingly led to formal citations and customer recognition. We are particularly proud that this year two of our employees received the Medal for Valor – the highest civilian award presented by the Department of Defense. Our holistic approach to intelligence support – Tradecraft Tailored to Opera- tionsTM – forms the basis for continuous advances in developing and delivering the tools, expertise, and tradecraft needed for actionable intelligence and decision support for strategic and tactical missions. We provide analytic services in more than 50 native languages, scenario-based instruction in geospatial intelligence, and support for intelligence from collection to dissemination. Our visualization and intelligence fusion tools make use of artificial intelligence for multi-domain situational awareness and superior decision-making. The insights gained from our shoulder-to-shoulder support help inform the development of advanced technology that meets and anticipates emerging requirements. CACI UK won a substantial number of large contracts this year, delivering cloud-based digital systems and services and driving growth through strong performance and targeted investments. With the acquisition of MooD Enterprises, we strengthened our capabilities in soft- ware development, managed services, and cyber security – all of which will benefit our customers in UK local and national government. CACI UK is working with a major telecommunications enterprise to develop predictive pricing models using neural networks to analyze granular data and predict the impact of potential pricing changes. Results are delivered in an easy-to-understand dashboard format that facilitates rapid, informed decision- making. Our digital teams continue to stay at the forefront of the new wave of cloud and hybrid-cloud-based services, building on our relationships with Amazon Web Services, Microsoft Azure, and UKCloud. 2 0 1 9 C A C I A N N U A L R E P O R T | 5 | C ACI INTERN ATION A L INC Consolidated Statements of Operations (amounts in thousands, except per share data) 2019 2018 2017 Year ended June 30 REVENUE Costs of revenue: Direct costs Indirect costs and selling expenses Depreciation and amortization Total costs of revenue Income from operations Interest expense and other, net Income before income taxes Income tax (benefit) expense Net income EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Basic: Weighted-average shares outstanding Earnings per share Diluted: Weighted-average shares outstanding Earnings per share $4,986,341 $4,467,860 $4,354,617 3,304,053 1,218,544 85,877 $4,608,474 377,867 49,958 327,909 62,305 $265,604 24,833 $10.70 25,395 $10.46 2,978,608 1,076,356 72,196 $4,127,160 340,700 42,036 298,664 (2,507) $301,171 24,616 $12.23 25,255 $11.93 2,934,804 1,050,792 71,760 $4,057,356 297,261 48,642 248,619 84,948 $163,671 24,401 $6.71 25,069 $6.53 The financial information above should be read in conjunction with the consolidated financial statements and notes thereto included in CACI’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC). 6 | 2 0 1 9 C A C I A N N U A L R E P O R T | C ACI INTERN ATION A L INC Consolidated Balance Sheets (amounts in thousands, except per share data) 2019 2018 as of June 30 ASSETS Current assets: Cash and cash equivalents Accounts receivable, net Prepaid expenses and other current assets Total current assets Goodwill Intangible assets, net Property and equipment, net Supplemental retirement savings plan assets Accounts receivable, long-term Other long-term assets Total assets LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt Accounts payable Accrued compensation and benefits Other accrued expenses and current liabilities Total current liabilities Long-term debt, net of current portion Supplemental retirement savings plan obligations, net of current portion Deferred income taxes Other long-term liabilities 72,028 869,840 89,652 $1,031,520 3,336,079 436,115 149,676 92,736 7,381 33,336 66,194 806,871 58,126 $931,191 2,620,835 241,755 101,140 91,490 8,620 39,175 $5,086,843 $4,034,206 46,920 118,917 290,274 235,611 $691,722 1,618,093 92,291 205,339 107,932 46,920 82,017 259,442 150,602 $538,981 1,015,420 86,851 200,880 85,187 Total liabilities $2,715,377 $1,927,319 Shareholders’ equity: Preferred stock $0.10 par value, 10,000 shares authorized, no shares issued Common stock $0.10 par value, 80,000 shares authorized, 42,314 and 24,880 outstanding at June 30, 2019 and 42,139 issued and 24,704 outstanding at June 30, 2018 Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock, at cost (17,434 and 17,434 shares, respectively) Total CACI shareholders’ equity Noncontrolling interest Total shareholders’ equity Total liabilities and shareholders’ equity — 4,231 576,277 2,410,164 (43,156) (576,185) $2,371,331 135 $2,371,466 $5,086,843 — 4,214 570,964 2,126,790 (19,030) (576,186) $2,106,752 135 $2,106,887 $4,034,206 The financial information above should be read in conjunction with the consolidated financial statements and notes thereto included in CACI’s Annual Report on Form 10-K filed with the SEC. There are statements made herein which reflect our intent, belief or current expectations and do not address historical facts. Such statements could be interpreted to be forward-looking statements within the meaning of federal securities laws. Please refer to CACI’s Annual Report on Form 10-K as well as CACI’s other filings with the SEC, for a description of the substantial risks and uncertainties related to the forward-looking statements included herein. 2 0 1 9 C A C I A N N U A L R E P O R T | 7 CACI Board of Directors Dr. J.P. London (1981) 3*, 4, 5, 7, 8 Executive Chairman and Chairman of the Board, CACI International Inc; Chief Executive Officer, 1984-2007. Director, Friends of the National World War II Memorial, U.S. Navy Memorial Foundation, Naval Historical Foundation, and CAUSE (Comfort for America’s Uniformed Services) Michael A. Daniels (2013) 2, 3, 4, 5, 6, 7, 8* Director of Blackberry and Mercury Systems, Inc.; former Chairman of the Board and Chief Executive Officer of Mobile 365, Inc.; former Director of Sybase, Inc., Verisign, Telcordia Technologies, and Luna Innovations; former senior executive at Science Applications International Corporation; former Chairman and Chief Executive Officer of Network Solutions, Inc; former Chairman of GlobalLogic William L. Jews (2013) 1, 2, 4, 5, 8 Director of Choice Hotels International, Inc.; former Director of the Ryland Group, Inc. and the CalAtlantic Group, Inc.; former President and Chief Executive Officer of CareFirst, Inc., CareFirst of Maryland, Inc., Group Hospitalization and Medical Services, Inc., and Blue Cross Blue Shield of Maryland, Inc.; former Chief Executive Officer of Blue Cross Blue Shield of Delaware Admiral Gregory G. Johnson (2006) 2, 3, 5*, 7, 8 Founder, Snow Ridge Associates; Admiral, U.S. Navy (Ret.); former Commander, U.S. Naval Forces Europe and Africa; Commander in Chief, Allied (NATO) Forces Southern Europe James L. Pavitt (2008) 1, 2, 5, 7*, 8 President of JLP Associates, LLC; former Principal of The Scowcroft Group; former Deputy Director for Operations, head of America’s Clandestine Service, and Chief of the Counterproliferation Division, Central Intelligence Agency; former Senior Intelligence Advisor, National Security Council team for President George H.W. Bush 8 | 2 0 1 9 C A C I A N N U A L R E P O R T John S. Mengucci (2019) 3 President and Chief Executive Officer, CACI International Inc; Chief Operating Officer, 2012-2019, President of U.S. Operations, 2012-2017. Former President of Lockheed Martin Information Systems and Global Solutions - Civil Product Line and President of Lockheed Martin Information Systems and Global Solutions - Defense Dr. Warren R. Phillips (1974) 1*, 3, 5, 6*, 7 Former Chief Financial Officer, Albanian- Macedonian-Bulgarian Oil Pipeline Corporation; former Professor of Government and Politics, Vice President for Academics, and Assistant Vice President for Administration for the University of Maryland; former Executive Vice Chairman and Chief Financial Officer, Maryland Moscow, Inc.; former Chief Executive Officer and Chairman of the Board of Directors, Advanced Blast Protection, Inc. Debora A. Plunkett (2018) 1, 4, 5, 7, 8 Director of J.C. Penney Company, Inc.; Senior Fellow at Harvard University’s Belfer Center and Professor, cybersecurity graduate program, University of Maryland; former Director, Information Assurance Directorate, Deputy Director of Information Assurance, and Senior Advisor to the Director of the U.S. National Security Agency; former Director, Office of Transnational Threats, United States National Security Council Charles P. Revoile (1993) 1, 2*, 3, 4, 6 Legal and business consultant; former Senior Vice President, General Counsel and Secretary, CACI International Inc; former Vice President and General Counsel of Stanwick Corporation; former Counsel, Communications Division, Westinghouse Electric Corporation General William S. Wallace (2009) 1, 4*, 5, 7, 8 General, U.S. Army (Ret.); former Commander, Fifth U.S. Corps during Operation Iraqi Freedom; former Commander, Joint Warfighting Center and Commanding General, 4th Infantry Division; former Commanding General of Army Combined Arms Center and National Training Center Front left to right: Dr. Warren R. Phillips, Dr. J.P. London, John S. Mengucci Middle left to right: Charles P. Revoile, Admiral Gregory G. Johnson, James L. Pavitt, General William S. Wallace Back left to right: Michael A. Daniels, William L. Jews, Debora A. Plunkett ( ) Denotes year elected/appointed a director of the Company * Denotes Chairmanship of Committee 1 Member of Audit Committee 2 Member of Compensation Committee 3 Member of Executive Committee 4 Member of Investor Relations Committee 5 Member of Strategic Assessment Committee 6 Member of Corporate Governance and Nominating Committee 7 Member of Security and Risk Assessment Committee 8 Member of Culture, Character, Integrity, and Ethics Committee Shareholder Information Corporate Headquarters CACI International Inc 1100 North Glebe Road, Arlington, VA 22201 (703) 841-7800 Annual Meeting The 2019 annual meeting will be held at 9:30 am EST, November 14, 2019 at: Sheraton Tysons Hotel 8661 Leesburg Pike, Tysons, VA 22182 Common Stock CACI International Inc is listed on the New York Stock Exchange (NYSE) under the symbol CACI. Daily quotes on the common stock can be obtained in most daily newspapers and online services. Quarter High Low High Low 2019 2018 1st 2nd 3rd 4th $200.85 $188.00 $187.07 $212.85 $ 166.80 $138.39 $139.21 $180.38 $142.85 $147.31 $159.40 $174.80 $118.10 $121.60 $133.00 $147.15 As of August 15, 2019, there were approximately 212 holders of record of CACI International Inc common stock, and 24,881,546 shares outstanding. Shareholder Services All questions concerning registered shareholder accounts and stock transfer matters, including name or address changes, transfers, and other services, should be directed to CACI’s transfer agent and registrar: Computershare P.O. Box 30170 College Station, TX 77842-3170 (800) 736-3001/(781) 575-3100 www.computershare.com/investor Independent Auditor Ernst & Young LLP 1775 Tysons Boulevard, Tysons, VA 22102 Annual Report on Form 10-K The annual report on Form 10-K to the Securities and Exchange Commission may be obtained without charge by addressing a request to: CACI International Inc Investor Relations 1100 North Glebe Road, Arlington, VA 22201 The CACI International Inc 2019 Annual Report is available from the CACI website at www.caci.com. An Adobe Acrobat Portable Document Format (PDF) file of the print version can be downloaded from this location. In addition, other documents can also be obtained at the same location. CACI on the Internet Information on CACI’s solutions and services can be found via the CACI website (www.caci.com). Financial results, corporate news releases, and other CACI activities can also be found there. Additional Information Inquiries from institutional investors, financial analysts, and portfolio managers should be directed to: Daniel Leckburg, Senior Vice President, Investor Relations (703) 841-7666, dleckburg@caci.com Inquiries from individual shareholders and registered representatives should be directed to: Mary Peevy, Investor Relations (866) 606-3471, mpeevy@caci.com Inquiries from the financial and other media should be directed to: Jody Brown, Executive Vice President, CACI Communications (703) 841-7801, jbrown@caci.com CACI’s 22,000 talented employees are vigilant in providing the unique expertise and distinctive technology that address our customers’ greatest enterprise and mission challenges. Our culture of good character, innovation, and excellence drives our success and earns us recognition as a Fortune World’s Most Admired Company. As a member of the Fortune 1000 Largest Companies, the Russell 1000 Index, and the S&P MidCap 400 Index, we consistently deliver strong shareholder value. Corporate Headquarters CACI International Inc 1100 North Glebe Road, Arlington, VA 22201 (703) 841-7800 www.caci.com European Headquarters CACI House – Kensington Village Avonmore Road London, England W14 8TS (01144207) 602-6000 www.caci.co.uk Visit our website at: www.caci.com Find career opportunities at: careers.caci.com Connect with us through social media: CACI (NYSE: CACI) is a member of the Russell 1000 Index and the S&P MidCap 400 Index and can be found on the web at www.caci.com Adobe, Amazon Web Services, and Microsoft Azure are registered trademarks of their respective corporations. Tradecraft Tailored to Operations is a trademark of CACI. CACI and CACI Ever Vigilant are registered trademarks of CACI. © CACI 2019 CACI... ENERGIZED about our opportunities CONFIDENT in our performance POSITIONED for sustained success CORPORATE HEADQUARTERS CACI International Inc 1100 North Glebe Road Arlington, VA 22201 (703) 841-7800 www.caci.com 

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