CACI International (CACI) 5 Nov 172017 Q3 Earnings call transcript

Company Profile

Participants

Dave Dragics	IR
Ken Asbury	President and CEO
John Mengucci	COO
Tom Mutryn	CFO
Cai Von Rumohr	Cowen and Company
Jon Raviv	Citi
Krishna Sinha	Vertical Research Partners
Ben Klieve	NOBLE Capital Markets
Sheila Kahyaoglu	Jefferies
Brian Kinstlinger	Maxim Group
Tobey Sommer	SunTrust
Adam Friedman	Seaport Global
Brian Ruttenbur	Drexel Hamilton
Justin Donati	Wells Fargo Securities
Joseph Vafi	Loop Capital

Call transcript

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the CACI International Q1 FY '18 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] A special reminder to our media guests who are listening, please remember that during the question-and-answer portion of the call, we are only taking questions from the analysts. At this time, I would like to turn the conference call over to Dave Dragics, Senior Vice President of Investor Relations for CACI International. sir. ahead, go Please

Dave Dragics

with good President and CACI of pleased providing to we're and our as Dragics, we practice, International, I'm Senior very are participate able you're Vice Investor slides. that today. morning Allison, And gentlemen. is ladies presentation Dave and us Thanks, Relations of

number to So let's slide move two.

forward-looking law. historical Now, differ written disclosures oral statements statements and about results. as fact views today be do and call as current that anticipated results this and to that and cause in statements such, reflect our are to constitute our our actual from These important not commentary. address under could There of materially will factors subject

as are could factors of cause and release are Safe evening's should Commission bottom our and in on that earnings we incorporated is non-GAAP financial last to our today should of And exhibit performance materially Exchange described as of discussion part a isolation I'd our include in These GAAP. Harbor prepared Securities Now will and substitute anticipate statement company call. be at non-GAAP included considered out in transcript that listed filings. not the also to measures point measures measures. also accordance or the results presentation like differ actual from with of any be for those this this

to up Chief discussion our open And this Ken X. slide of Officer Executive and to CACI Asbury, here's turn President let's International. So morning, Ken?

Ken Asbury

results Operating John is Greg good results. Kingdom. Chief fiscal Officer; and year me discuss year quarter U.S. of quarter fiscal our thank Limited, of President we XXXX. our morning, the United Last our Gray, With from Chief Mutryn, Thanks us our CACI operations to first us are morning XXXX you, everyone. Bradford, released Mr. Financial for joining President Tom night, Well, DeEtte Officer; Dave, who for and joining this first Mengucci,

provide you on you the of morning, an per some income John Tom give cover quarter and We the results and financials share positioning. update and strategic quarter. details net guidance. the the earnings aspects first to also on I'll operational This will raised going is

Let's deck FY line revenue with plan generating in delivered our 'XX the and Operations started in start quarter for growth our slide turn consecutive please. overview. positive quick in plans with first a for profit right revenue to and organic the third excellent shape. X getting quarter, I'll

reduction moment. is elaborate net which Our and benefited associated earnings accounting, to income from tax share-based going per a just in Tom compensation share a with on

income for result, raised and net accounting As EPS this a guidance our we benefit.

to continued We flow cash also the track quarter. of record strong cash in generating flow million $XX operating

quarter number of submitted for billion solid this what material on us and won than more new to quarter, bridges, the contributed awards. of to Turning quarter quality I despite we a value liked outlook just years. bids have a being appears year. have at The which go XX% really seen of start our There there won solutions to was recompete our first for to puts think were us a in first business total place. would that fractional the loved in positive had outcomes way. a couple of said, we to terms short-term and of which awards the really of have all-in-all, will the in say our awards. to previous incredibly a John moment. a the great I was But that level in That I quarter. key overall we that amount we at our this We contract significant factor significantly have quarter, which X.X in done lower the

years two returned to book-to-bills a more, has to both will built large also continue larger our strategy, addressable a continue and of win X.Xx and bid 'XX and bid one larger, increasingly as to I'm 'XX. strategy within Our the less strategy significant FY serve last very This full-year and with a we'll confident market. successful in backlog. organic we growth execute pipeline the high-quality company us been well

year Let's are been slide emphasize There Senate and in but that X, turn authorization XXXX a and probably, we have, place has current fully-appropriated the will to House both on movement indicators probably I budget fiscal government XXXX. side our current our particularly, before be our numbers Homeland CACI, passed. and and working. drive to will In industry and Defense, spending, positive appropriation bills If is Security which closing, the strategy Intelligence for increased budget have country. be yet enacted, will end

win to and with and quality continue new execute business We value.

solution We with program as across we content. on growth be consolidator areas. we a And CACI initiatives strategic also contracts continue M&A larger in through investing are capital XX to emphasis our will particular growth. our a market for are pursuing deploy

organic our of addition All goals growth to our better in achieve annually. times by long-term expanding ability our of financial in to this to margins our our market, to X -- XX points me addressable X% and basis to gives continued X revenue success X% confidence than XX

to it take to Tom? over going Tom financials. turn the you to of details I'm through Now, the

Tom Mutryn

All morning, thank Ken, you, and right, everyone. good

X. go Let's to number slide

tax $XX year Net the driven revenue million, last X.X% quarter income was first billion, related XX% equity-based for $X.XX than first the quarter X.X% was with up compensation. benefits by quarter to growth. Our organic greater

modestly income, to expenses for our quarter XX% was Our driven GAAP $XX.X investment in million adjusted initiatives various but bit. Operating to non-cash Gross at the a the future in efficiencies. income growth related down and dollars was X.X%, greater systems spending which net expenses, than drive margin several quarter, income. indirect net grew by excludes increased

September tax in of quarter. deductions value sheet guidance compensation X share-based FY to specifies Let the rule mechanics of new interest. when invest the we with were as significant in executive portion initially that align share-based compensation and balance compensation flow the at differences The adopted Restricted benefit the accounting from stock quarter, payments. the In tax statement. typically between of granted 'XX, the recorded discuss the shareholder our me of income A related and end years the tied when was treated differences an X. equity, through adjustments. to are annually is Previously, the to awards units vest

and of material quarter $X increase days stock operating rate. highlights. $XX X be in we Accounts almost units our savings, to by retire We payable also of XX mentioned, earnings typical the reflected down X September the income due at million cash on Given guidance price, reported. fluctuations the to our the to And growth please. corresponding collections. quarter's up net trailing is the days, and of tax Operating been XX $X.X As the full-year And year Net We June, our to income. times, at here's flow Ken sales our the we was times end please. $X NSS in to leverage this at equity-based compensation outstanding to X.X grew billion. from of provide was Ken days due which our which higher John of using operational rate realize expect track payment September resulted our net initially to absence With X.X effective divested tax and flow timing. XX-month was compelling upper Slide XXX% in have acquisition. increased lower In expansion with generated the in the cash compared following ratio per approximately normal this all articulated. range billion and of tax than acquisitions, deductions now from tax last it debt Slide now flow raising to share debt. in XX% our of significantly EBITDA generated This are effective end million at XX.X% to lastly, to net we annual reflect cash margin benefit, increases organic are range. that, with goals, debt

John Mengucci

Tom, market-based revenue slide notable quarter. We organic line backlog positive We for forward growth several and go X Thanks healthy our please. our our strategy strategic is indicators right in continued plan a to the with delivered delivered confirm had and and accomplishments working. Operations growth, first revenue our in areas. let's profit invest remains to

quality, we by in growth Positive fiscal the invest organic on for in year driven growth with better won we continue continued And future. 'XX. strategic high business initiatives the us was and new customer position to revenue deliver satisfaction. During our to contracts quarter, to value we the

new example, sophisticated in highly For investing we're capabilities. warfare electronic and differentiated

Efforts other to $X.X are emerging like these innovative new We also market contract solutions of important We won requirements. and customer an future quarter. are this awards billion accelerator incubating threats in differentiation. and address approaches

quarter. than a Ken amount material As bridged in we of saw awarded the rather recompete noted, contracts

than volume we positively lower our contributes business, of this in to While resulted award it continuity the expected.

would've XX% only XX% awards our recompetes. in expected contract least quarter fact, bridges. if for were not the In at the of We

about strong business New awards at $XXX quite the million. in quarter were

We of for night be did also a U.S. which growth. backlog. million please. $XXX contract contracts awards very But our we will important Slide example, develop the added or directorate. to number integrate not to One include vision, a is XX, in that systems IDIQ future and technologies our an Army electronic

Backlog our stands XXXX, revenue provides on very worth positive. billion, years trailing XX-month remain more indicators than fiscal X of basis. forward at rest the a $XX.X at Looking of which

results. is stand those prior to business stands CACI. fiscal following new XX% award pending CACI. with XX% now at first for at new with business existing to billion, of bids quarter business, years, recompete very remains our X.X And pipeline opportunities robust. composition revenue X% our Our and profile X% This consistent Submitted of

XX% new on business market-based another XX.X strategy. with In our We to remain submit over expect that we the two to of executing next quarters CACI. billion focused closing,

value pursue With innovative We emerging services solutions Ken. addressable back I'll our in large turn to that, the and and where bids our to will call missions. bring customers' market our over significant continue to enduring

Ken Asbury

thank appreciate Well, comments you, your morning. this John. I Tom, Thank you,

Let's the slide please. package, all turn XX to in

I'd take impacted to like the we moment questions U.S. a discuss that take Texas, hurricanes this Islands. Puerto to Before Florida, and Virgin Rico the morning,

employees, team. who we selflessly contributed out customers, than quick incredibly out mission first with events. to customer X,XXX -- country. and our during leave and time, to that be our With responders go homes amount employees hope able for At damaged call the incredibly immediately other a folks has more the across hard these of We this of character that had prayers help open be was displaced, our time. CACI back response significant those to are to own made to incredible to impacted. up A These and our their thankful who proud and after that thank selfless time, the a and all these you our their events. online are The worked to here thank were various were gave everybody long customers, help part and thoughts demonstrated safe. questions. special those outstanding your the company Our impacted commitment all to goes of to from same CACI capabilities annual bring for And I mission, various -- passed. our by the we're dedication. employees me let's that them natural so suffered organizations storms who storms and mission a you to these for happy Allison, that, recovery recovery report the volunteered families to weren't impacted employees and our donated our their all

Operator

come first Rumohr [Operator will from Von Cai Instructions] how Company. question Cowen with Our and

Cai Von Rumohr

ODCs your quarter, first to the pattern kind X%, can items up understand going of year-over-year of terms the us X%. year? help remainder have of those in Maybe labor direct are what growth was down over the you two So were in

John Mengucci

this Cai, John. is

headcount number labor, our that means our to due a direct true a factors. it's did So which bit decline of

we couple it's services middle of survived and year. continued result Intel a delay we've of the that find we on our of had couple in that protest losses of we sitting it. won, First, a ourselves And an last of the protests recompete third program

spoke major of EIT 'XX we our believe delay I about during FY call. a the guidance that program, Second,

But see all that we'll And contracts, running particular. are the our win quarter. phase to with which in We strategy. they're move in of have startup based more those subcontract subcontracts, over into life contracts. part effort relies on of would than that third little JIDO on phase continue which bit initial are we of be then, one the other a the see

-- labor what some direct that talent. So of types share long-term we're with we're I'm of how optional really programs -- The the the subcontracting term sure those will bottom we're is, attract of regarding views growth items. line direct we're these right some outweighs comfortable going at Ken in short and where to

Ken Asbury

things delivering And to able Good is incredibly done that. value a to to Yes, to Cai, customers. differently this is we've CACI do couple to assure we're this of important our year talent Ken. Adding that morning. that

FY first explained quarter. I so what think direct X ODCs we're our full-year little bit 'XX up labor a in plan the for about points and And is. had that off John just each,

going ODCs on think to the I we're see around continue in to as going things fluctuations world.

Our labor. on direct concentration is right now

place things did of this each is leaders' that is we institute One year. year the of of based labor for they XX% on compensation our direct the incentive put in meeting one goals

labor that So labor tight recognize very we're in some clearances. a very that market. we in cases, tight a And market needs

quite to rules government And there through the I great that of be the bit clearance a discussing the does frank, spent the CEOs. are will deal just benefit time so So having industry, the that, formed CACI. doing time issue so regulations. Hill process we've of we're of believe impact why entirety of and on which it a take not the security on and mid-tier long I've all get industry what to many as a an And we've the amongst group services why spent

talked this We one efficient retain which all marketplace. recruiting, that CHRM second us Finally, we that just systems about from Workday went efficiencies, in built of Workday. attract of we believe management is own adopted for ago, our we and investments we have our completed couple a and being make phase, a a people to will more of company opportunity years which the in

Cai Von Rumohr

A quick follow-up.

bit You mentioned bit like slight both X% realistic points in Is looks plan and aggressive. DL can that a that X the for up, a it so? year. like them of that the was It or ODCs looks -- be

Tom Mutryn

Tom. is this Cai, Yes,

X% get on our it's it's kind staff kind mentioned, a Ken And more it, kind of As on of is kind predictable, we primary fixed growth. focus DL, that episodic. kind of of okay. the the DL the than of unpredictability more lot contracts. if the it do that's DL. In of X%, it some given forecast material monthly basis, the activity we're does ODCs, control, in is with when comfortable purchases, the Ken from to more larger price grow mentioned they A support

growth, be so comfortable or X%. ODC with least of it's X% If kind So the we're at DL higher, convinced it.

Operator

from Jon of Our next Citi. question will come Raviv

Jon Raviv

driving Can give in resolving with or some you that of the defense some customer you do just And not? how this bridging behavior civil? what's on itself see perspective are activities? more you seeing or And it in

John Mengucci

Yes, Jon, the increases recompete material and It's some delayed seen our in some John. programs. have true, this of we is bridge

major agencies of with are related would we that frankly the are reorganizations. directly that it's what delays. And midst call to Some in those administrative are clear

middle in mean market, very of work recompetes. and are tempo not I folks, clearly, missions. important now, to Intel prosecuting In postpone looking the really provided larger some customers Intel services programs, addition, our services much are customers [indiscernible] And for on our some data op frankly, in seeing our and bridge high which break the our them in we the to are is services of relevant analytics the critical a fight. that we Intel really those

very of to win contract greater that to recompetes. on simply delivery. the through that it's And I But recompete than continue we're XXX say achieve what our delta not our the in a XX% period, Jon, because first that rate our during revenue as flush would impacts continued quarter, million. was all under about is we've to numbers. So awards awards tell remaining to you, We're the reminder, our related pleased

Jon Raviv

quick then the And on follow-up margin. it. a Got

some ongoing initiatives guys you efficiency the growth. in that of You referenced investing have

those of be of sorts to items Some tend sticky.

In programs highlighted are addition, perhaps you've that lower at some of running the levels. margin

full the you off improving is year-on-year confidence on achieving XQ's So margin, growth year-on-year visibility year what the EBITDA a which of margin basis? into gives down or to fiscal

Tom Mutryn

That turn of the margin, the off, it of kind statement, margin. DL, the income start drives I'll ODC kind is EBITDA so If margin mix drives margin, look of driving percentage. in operating -- turn Yes, in that I gross the Jon. gross top at

richer we grow sheet. that's have the going if mix down a DL or balance DL, So flow to

answer direct on same margin. answer the had is so we've And the effect labor in on

X.X%. to expense some quarter grand up for spent enough was some large the In million have initiatives. growth efficiency comment We to but scheme and indirect things, support of million, expense $X Indirect it's not amounts, upon. $X to initiatives worthy the of material

modest inflationary expenses Somewhat was the getting year-over-year, increases, like. annual pressures, increase there kind employees considering and of lease

drive larger major down to flow solution focus kind we're we're of make to are higher-margin DL, incremental be the PL. some margin investments. fixed content performance, able greater expenses, So programs, is to price controlling going program programs, which the But

John Mengucci

unfortunately, We're need the out put where than 'XX so -- investments as in cyber were. different -- analytics, plan. machine ISR Jon, data we're continues protect change, also June warfare in against this learning, from Those platforms We're current slightly airborne will the amazing growth analyst threats, to laid long-term of today to they looking in have is some how bringing And when Intel into that those quarterly our just a to I and to of and invest I timing We're the those critical investments, and a Yes, beyond world the and machines those amounts data timings again needs plan. those may solutions and to provide the tell growing of timing. going sensor mentioned the we very some the of times those are you links. we and about our -- need timing well real in have data FY in preliminary forward at protection today. we mean space-based the investing -- On does mentioned invest We've for And fit neatly electronic domains. you, training fights. at future don't of as the and work. in of do few, to to just to past, align continue

are to forward. However, we our financial critical we very being while the do investments vigilant plans at the extremely remain these confident time put that to growth, same long-term

Operator

come Our from Vertical Research with next Partners. will question Sinha Krishna

Krishna Sinha

some a the then the again talked not about long-term of And the So labor last that points direct tailwinds. you just XX that fixed-price. contracts. from of quarter, two I one basis payments converting other last and are three were quarter higher was incentive building cost-plus margin had and are repeat you -- this to that, And about course, you year. happened on in consolidation not you Obviously, charge, highlighted, to talked expected believe year third those a things of both -- contracts

I long-term not to and having not incentive just your and three if lever significant labor get of like you've me payments compare from and out telling you to XX higher direct take XX your I guidance, the the So to on you're based that building long-term sounds improvement on from that the contracts it to about basis have already points those And recur. then XX bps what margins. margin you your fixed-price, laid in cost-plus converting charge upside pieces

through year And, just the for you So there? going on three what run be to next pieces quarters? the in moving you is maybe trend can what the are margins and through the expecting

Tom Mutryn

and it Ken the maybe getting John take Yes, to first of articulate terms or in Krishna, want of will it. the at I'll some stab numbers, into

expenses, SkyTracker, are did programs, one-time calls You're drive of year-over-year grow appears for margin, will it solutions DLs, that sticking are and previous into moving let's to programs basis also -- 'XX of building margin. to year -- XX We to in the LTIP The terms we kind driving. those in types grow DLs, of which to factors were of kind fixed knobs to profitable kind improvement, that FY helpful XX which John We've in is some more guidance. talked price guide of me products, let's points kind margin we're last be significant to some that absolutely of and about right, we're had higher had comparisons. the kind of which charges

So year allow I quarterly the I we numbers. think that that last a this fees will impacting to have higher out will throughout get for still us our point year. And award margin the year,

the very and second The with are high third regards award and are first fourth the quarter and lower. to fees

factor so during with at look Again, a when particular periods FY a that's always I performance. fees standard of the in one will we quarter. new 'XX, award And revenue smooth the

Krishna Sinha

follow-up just then and one your revenues. Okay, on

to you So revenues much give winning us think made portions Can how year the the sunsetting I you just naturally the still in And to this naturally then you awards and of recompetes. So the you're someone awards. of how your recompetes, you many earlier, sunset? to that? that other XX%-plus of are two gap? awards then fill going have your need new comment much do how new order -- So talked win

you of those the bridge? can three give So revenue pieces just us

John Mengucci

this Yes, is Sure, Krishna, John.

year book-to-bill X.X our think watches. billion, that a that's X.X into program is about will figure revenue of to XX% come 'XX. guess I because our I'll be the million of do, also call, that's FY about in out indicator naturally billion I billion And in what cycle for leading coming that life end. answer 'XX natural during this sunset, I of believe I'll $X.X everyone we XXX or going If guidance FY -- seems a we a to to terms shared

through of -- apply about or line all awards, our that's of X.X book-to-bill or our right where -- 'XX. a much in XX% FY us slight you X.X if our new where not growth pretty our with flat we recompete, and ratio, trends working -- of organic keeps see out If X.X,

true is achieve. makes to bridge, that easier we've that for a of level that lot had it recompetes us Now

of revenue XX% today. also is we think our existing I shared

to track financial what absolutely appears numerically, the be on first beyond quarter financially goals. we're 'XX to achieve So FY our

Operator

Ben from NOBLE Markets. Klieve come will question next from Our Capital

Ben Klieve

towards is that bridges what a to agencies agencies believe administrative saw quarter largely continue sense challenges first one with as you event of you see do from evolving here. quick moving going will the regarding such of Or a quarter near that question term? recompete these this business Do now? you kind have things kind be into the this usual you Just with

Ken Asbury

is this Ben, Ken. Hey,

of the that we in particular, were two, I we community impacts in some some is And Intelligence think believe of that referring reorganizations. are the to ones M&A from. there these

think might I have bit a to just seen all several to longer-term. month that that's we've going duration. done. the them them shorter be full-year, are six couple term We have of to see of maybe A seen have -- been little bridges uniform not been some get to we've them then been couple and time even buy of

idea around So the there's no will of reorganization though, would take somewhat that. I their longer. uniformity suggest,

So at time, won't we seen impact to we're first a a more little behavior. the than very first see maybe magnitude become bit the saw it same quarter. likely in the common we've we to bridging. as level. see this Bridging It's an of But has more

we for be long particularly, The we other component that should say going critical are to Intelligence how believe time mission I it; where Services - I is persistent the providers, a in contracts, are arena. on is

those rhythm contracts. perpetuity the time of wants operational nobody to to because of be just take disrupt in contracts could extended try Some the to those

bigger is might performing better well been that the re-competing those. have to together on is, all here have we that point level we news of the our a bit we last we going we're So quarter. were the saw it's when they putting work; decide these it's plan May Good little saw it future in to we didn't hard at and to build we the to a some still June, when at news this. first in recompete time anticipate and sitting predict, contracts But

Operator

Our Kahyaoglu Sheila next from Jefferies. of come question will

Sheila Kahyaoglu

Just on the and broader margins line of profitability. questioning around

of XX.X bids You sort towards pipeline up. think do new How I of XX% have mentioned a impact margins? you business. billion does with And coming big that

Ken Asbury

business, going do customers' of a Well look look for Sheila, replace, services. would ultimately, that general profile. business that like to each a our pursuing we'd they're particular really is available what solutions business this. is to needs. a at to solutions than each is at in is end The is more leader the the margin of services. if those area of to We like But time in strategy responsive at these one do days, there's we then market there mix that Ultimately, to of have the contract don't our period a not higher

were ago. there's So past. But and a engineering hand, continue mix as the did the tasks, on or go and be elements Air such R-XG it consolidation a fixed-price large Network, of Control couple which in put a SX going of Engineering you things a do took the them they of to we years of It basis. together did sustaining Force lot much Satellite a pass-through some to that had a that where things of may program contracting few have that of the interesting. That three other we'd on set rather after elements of very important

time, That's the see we Over business So higher portfolio to margin. our our much support more you get going business, XX in a time our that kind basis that of driving And margin which market, over our that's portfolio. improvement. for of what's in performance. to points we'll goal get to control to kind is addressable the above we of your XX the be

Sheila Kahyaoglu

year? when the So the mix, does remainder that contract XXXX, improve we impact I guess of think or about throughout business new for

Tom Mutryn

minute the we of business look for revenue, the year of got it’s at new that both fundamentally expecting margin X% activities. The you get has of - revenue for kind direct assume composition a let's the the recompete that higher of the and of such for on 'XX, rest kind labor improvement So not is of when remainder new the margins, it. are a impact the And and it's that we're mathematics material increasing is existing on business.

John Mengucci

about Sheila, plus It's Tom I as months at and submitted timing, were of solution six we better over bids bids, XX might X/X, a to mix and If right. look want we a slightly to then also Services the another we next to X/X, add mix what now. look look mentioned. which mix at a all Ken the is that both X/X the about months, about better, Services be a it's and six to as Managed Professional we're experiencing out if

Ken Asbury

look, just higher fewer, to that that Sheila, teams believe complex is in go let we margin. and really more me deliver jobs ask add I'm out we development bigger, interested will as business our And there what

we core deliver pursuing now that of others bigger completely just learning, to with converted It's going now If not expand. you that, something time. for doing did people that are We powerful plans to programs what very product And that some industry in in other we machine signals and of over SkyTracker. not we electronic intelligence could want the warfare, different On business. we've mission to interested many the about derivative kind forward where related And going intelligence. that on a were that right that's hand, that's There build a this but but some our very looking anti-drone no bring side. has to that margin, we in have buying. may now to we very in on investing really be believe that products small, business talk we are similar in the that's

and, whole and about focused, the mean innovation, moving, such our discussion IPPS-Army. that going to but of activities in want I ODC. really nature services. of a of on parts So modernization going say, in series a there's product we whole that be to us really DL be more are to of the would will change that be enduring which part we're business there's various work I in will as going are But be with the business the the the And doing general, outcome

We with on great have position we well we where We've a and IPPS-Army that's the for in a go incredibly that. reference today. think performed future

bit a it in attempting look idea things do. So to doing that's the we're company. some better of we're of of just the cross gives what you hope little at I a a

Operator

will of come question next Brian Our from Group. Maxim Kinstlinger

Brian Kinstlinger

at or more. And that. million deals like didn't comments, to worth I from way those five Last mentioned, go it $XXX bids your quarter, or your submitted sounds had you some least you assume of seven about

So feedback and about if customers? the there success maybe you on rate can deals any common was the large from talk these

Ken Asbury

successful Brian, been them. liked did we have some this as on we We weren't Yes would've of to and is Ken. as

As it do of of probably each we at the take had contractors, able where to for be the We look incumbent of wasn't them but them. one forensics we actually a customer the to it. to outpointed the risk couple enough

the but qualified, And of another we bottom customer and So a was it but went that kind proposal a cigar. much submitted had superior was somebody feeding sort no marginally took lower and of close one, a cost.

place, were we'll put in we in if a CAMMO we from we we a put but - bunch those, I year ago, So - go those back learn JIDA of put into place.

going is So capture XX% you we're continue win these tell I and same. to rate will XX% don't or our of of to to to I be going harder it’s XX% try to XX% think kind the jobs.

how those pretty we at looking we're have we're portfolio and balance the in We good probably bids. a place. - a think I to got of So

of new how at a up last built X.X two a that. we really with lot look of based a started basically - book-to-bills so this quarter plan year, lot of representative you have couple is X.X, the that lot of built years we're If and of sort momentum on of of - directly almost first of up and wholesome years on

Brian Kinstlinger

type pipeline? of in large follow-up, the handful Or in they assume, And mean I all awarded the I my still in a quarter? deals there's were

Ken Asbury

would seen a But the were had on close time. said, up the being contracting was be don't we - compel game run different SOF truly procurements customer to it? It was GLSS that I think good in outcome. had spectacular. I even I've was we one yes. the again, long the that one pipeline. was say are is to think a that to procurement, have might do quarter, it, I'd about will and again, be of making people in was That changer. And I those put different it but in the No, I a this a not in circumstances, probably still one biggest decisions, to of talked that to the we different was best Probably, government switch. had it it there about enough take able were we this you really but one fight some And

So it was that. see like I more a we hope pleasure to that. see

Operator

Our next question will come from Tobey Sommer of SunTrust.

Tobey Sommer

up accounting of particular, you on How there including could on takeaways if about, comment commentary on are new new, horizon then pipeline to will your Follow represent And think book-to-bill question of versus in much changes guidance with calculations? any the it XX% of work? new. kind being that

Ken Asbury

we? book-to-bill you think have a guidance in So change way. never that see We've I done don't calculation,

Tobey Sommer

awards, Contract I say. should

Ken Asbury

Tom, take you Okay. to it? want

Tom Mutryn

terms there you for The with guidance kind in in we adopted kind two lease 'XX, they'll primarily standards, FY years XXXX. some the which of of have fees of impacting other adopt Yes, treatment or in the accounting of minor will recognition following one be as revenue move were new associated will we new changes, issues into questions, us. award kind accounting

we're the funding kind recompete, of backlog, In of cleaning kind any in kind the of award, kind definition terms way changes. describing, anticipate - not do kind of of of backlog, of new what's up an

them I consistent on principles defined set we're well a think we a and rules of have basis. very applying

not So any do changes anticipate there.

Ken Asbury

Go ahead, Yes. Toby.

Tobey Sommer

is change to On of pass-through that to new revenues? is there the recognition, under revenue Or consistent treatment the any guidelines? going the remain

Tom Mutryn

under remain guidelines. consistent we Yes, the new

Operator

from come Global. Seaport will of Sullivan question next Josh Our

Adam Friedman

particular you of you Josh. for longer on contracts? strength duration any Are point Friedman Adam to actually there? can continuing And is This to guys win areas

Ken Asbury

where into When think, in we nobody industry's was was coming when knew program I a of sort to and silly we the it Act Budget Control moved the base. and saw towards come how, that, all first the some got general, from pretty and five-year back money realm. place. pipeline But of we there's are we've maybe a duration even I A that contracts in the that for been that in in on think put being short couple more competed have recently of seem And be side the other the to couple eight-year those. ten.

things So of them Because a coming to down. get you're the maybe great. profitable the where we enterprise contracts cash where, longer, a have for delivering side, infrastructure operations in you over reasonably the you particularly, tend customer. seeing beginning your time, is activity which and be at are it a once Those you're becomes on outlay basically

to in professional jobs is as we a do competition. be hopefully after require do differentiated able general, able different over to to being there's deliver a it. - that where duration I'm do So result. a want see time. longer What above-average profit you I of things. go long-duration a want to think And are the to assess go that jobs do to services after opportunities frankly, after we I period able not are level approach of go have risk to sure to I And because of

Adam Friedman

this from you guys in And past, few percent the then And of you or of generating But sort what out. you over have of the XX your sort that years? see do Top revenue customers? how broken your are quarters next changing

Tom Mutryn

you there? do it ten, do I definition to sure Navy show not of if civilian break that the John, customer. out. down there's we a we some we Army, the I'm that of break mean, is probably, have of in it agencies, sometimes. Part

John Mengucci

like in things that, current The way terms year, talk we of Adam, can about I looking at answer to markets.

actually the If the be and by are I four looked higher of enterprise systems because you intel area, markets areas services having federal out intel market, a us. that our government I'd L-X in our spend we of the feel market, business systems you the there. would those and one SixX large were level expected acquisition tell support three for by at acquisition driven, also second IT those

revenue. So of I our a to percentage larger those four I'd drive, five markets say guess FY 'XX

Operator

will Drexel Brian Ruttenbur with question next Hamilton. from come Our

Brian Ruttenbur

questions. of Couple

all have fully up M&A? I'd all, that guys assume beat bidding your what's that You acquisition see the activity, going in lot already so you about one are I What on the a First my potential off issues with from the little forward? another you on of Do acquisition. gotten terms that bit going thought I integrated, on the a are foot and take of L-X talk now pedal on transformational horizon? plans

Ken Asbury

a in fit. this very kind spend looking. were put very I you're couple that good us a things think out you because different finicky and key in wonderful if we've you, today. morning. a will tell really, to looking L-X we're didn't was really Look, turned of done add about correct at addition strategic it find bit they could quarter team little first we're financially we some we such markets, turned out and to XX then that thank Brian, our be done we integrator, that of We We would've already I acquisitions. another a it. want we're But active, that time to were kind It properties. the the of the it

that learning of we digital not processing while our a asymmetric non-attribution you with I particularly, the Our a conference internally, machine are meeting, our customers commanders, make faster. that that be is do out to we the decision what in we business, came two folks last longer how our to a data of referred - We're number decision had that - a think will we is we fundamental makes got a business it week. the - on tell And what were themes helps that into all speed work saying I'm been the to we decision-making. do to in area it's we concerned and turn we're get and in threat in going an in adding military bias uniformed picked was technological analytics, of of Additions are towards I've data of helpful. no that going they And and government IT fact, going part all about, John - be quite we What up that's but into, today. bit very that strong a we solutions, signal would the areas to.

So that's going be. where to we're

a believe they The transformational going are. okay, as valuation, very active is been have There's far market in some up. looking. depend. than more properties one, worth just We're issues that with to they're people there's As come been some that's

companies capability we do proper it's in customer or them. that make fit. us. cool. sure were to that final I we've fit the add would But to And got cultural, we're But in really thing say, come their terms couple importantly, one a evaluating way didn't what they with really most going And they be would we across have And is a so financials the exposure. to of - see that

And - that are some so, trying things are do. not it's just worth worth to there not

that. that's So

Brian Ruttenbur

as quick. just follow-up then a And real

would it, for competing Your opinion opinion a won't that new on three. Vencore, versus entity? two. your that? be guess it against call put Are positioning I KeyPoint another you entity, directly to combined what's and And I those up, That quarter or roll guess, you with DXC together

Ken Asbury

with But team them, good Mac friend. is do He'll I terms also see with Well, a do Curtis we a good them it. and we where job commenting with compete in on of them. the

government has. So in to into deliver way one world, that in to able competimates, the we're all shape federal the this or form be requirements

a work. is - competitor our think OPM KeyPoint directly - I we So the part for

hand, On but DXC, maybe the of with some IT. the as that, Enterprise other that's not I believe I'm familiar

before, bit teaming in that of quite core spent some talking. a business we But doing I the think were Vencore yeah, time that is. we've and generally So was

have So lot I welcome things to we'll we There's we if very market, of this of done. in to an it of the and awful it look work out. do that slug myself, Mac nature lot But to continue will be slug the to them to to I'm need market. just and out, for sure important places continue awful that

I good think they will do job. a

Operator

question Fargo Securities. Justin from Donati next come with will Our Wells

Justin Donati

a the those off? on those bridge wondering headwind creates start to some roll contracts, Can kind and margin they are as if natural you color if some of profile of shed of higher

John Mengucci

there's government sure there looking only on just mentioned is company's more also better areas, markets. the looks move making this earlier, ourselves thing some these earlier put manner. do actually traditional time differentiated very that cautious as cost-plus that we've the a watching, a I why More fixed we're pricing of - and for more think Managed manner highly as we're that work. material is versus recompetes by to being nature, some not get Ken as cost-plus price, couple perhaps, into a which work only in to differentiator price at as clearly Ken of in around well, of solutions mix we're a earlier firm these The are Services, mean mentioned firm fixed I and or asked recompete this price potentially Justin, of work, but forward and that as someone

looked I of help be would driven. price if to going that on all are margins, the at but So some a I'm us the few there sure details, is that

I awards. see a on don't those So of recompete timing nor that overall, net-net, being based deterrent positive a large

Ken Asbury

say sell I'd volume. disproportionately a bottom to simply of just that are that can for not what development unique, Justin, can going for lot accretive higher the less. But be pockets it It's line very build we be margins. product to we're is - is a for the believe sustain and whole huge looking them but a product relevant we is because reasonable, we they're price going them that will to

where of level be of will never it be that's going to reaching so are, Those business. are a be impact. we not we but And will innovations impactful. just XX% who It’s our sorts

Justin Donati

to getting most the is agencies, is of going of X% the segment, where year? year? then of from customers. out that Josh's from this of question kind your kind come you is And the just your flat above coming to to defense as a civilian see earlier break your follow-up Can about back EC you revenue growth So kind X% market - target, growth to for

John Mengucci

larger is at in share would 'XX we Intel drive as this and Enterprise markets said We terms in four the services like it growth Justin, and look our business systems of plan. be IT, have we've markets to our Intel and would John. past that support systems that those that Yes, in the of

Operator

will next Company. of Cai Rumohr and Cowen Von from Our question come

Cai Von Rumohr

to And to math, it next to vacations quarters. normally is little by have sort the at going of lower. a direct still my like the close you be three the really yet quarter for to So By implies with the or the quarter correct? over X%. X% was the you up And X% X% looking you that labor kind to of looks in first year. Tom, and to quarter your sequential December you're pattern; that have first in down get labor have fourth that direct growth Is quarter, said,

Tom Mutryn

X% we expect first to the So We kind guidance, your a mathematically quarter year. give increase In for X%. I'm full down but guidance, of not the not going question but math. quarterly are annual we

four. have in have on average We quarters two, increases and three, to

You mentioned staffing the the which by the and business vacations in, in more first and driver fact, the August activities second levels is big bit some kind up. seasonality. a our are quarter, our Christmas. quarter, Thanksgiving seasonality, vacations kicks there new is versus But There some getting of to some July, new impacted of of in is, little ramp

are add those all the hit to into it. labor drops. so go And growth that factors need But we directionally, those to additional

Ken Asbury

out content think it's going this have time be different I analysts to the doing goals we're and the which like. how on also solution such. is better has there's figure and to going do not it's profile, to we where going profile because you're different Ken. and point The have a solution discuss that probably if not of business, versus XXX how to direct ODC to to Cai, impact straight; an need is really goals it's just that our just explain labor a development. in We've to intel we a such like going labor in very how particularly, got be to factor

that time So make on as to we'll that better work goes on.

Operator

Loop from will Vafi next Our question of come Joseph Capital.

Joseph Vafi

of kind of sector cloud, of type lot Just kind shift of more forward commercial-like kind call the of on coming more some the bit on have and centric we may, the over is pure of of perhaps, the on out kind going that what was looking that's focused work, your M&A, activity, I business. deal services towards last to cloud wondering does of across of Internet call the and or growth a work it a of seem the peers IT cX-ISR say, civilian and five classic type - activity Thanks. and moving side I CACI like there's landscape of that views what commercial seven of what versus commentary years? or demand

Ken Asbury

are your Yes, observations Joe, good I think one.

think and IT bought primary some the I a folks over had of lot community. They that part a adopting why was pretty ago. - in frankly, offerings from reasons those a the arena. L-X next installed seen adopters of Particularly, good point They in the things little that in of L-X the intelligence that generation that business had an a what base. of were the year one in we we early the view, cloud

do what highly related found cloud it. gave it. our And that be done, some and we've - just to very, do that and been able doing companies for good very it meantime, a XXX of So we to do there's the out do We've But certified other gone people seen out think people AWS couple also have to assist that and us what work. to the get Azure put sale are for in doing investing couple of that of we we've to kind is to for this development, in to ways a to there we've certifications being started references for people able I it.

company, really looking this, government a starting some slow And it's really haven't out in inside bunch has of who on things for think is the the still we this, absolute we retention. do started don't available or other are of - advantage secure L-X. There that making that mean good thing. the it for there's seen we're skill a rate of there whole I basis the But So was think to we're adoption that when there space that and and in been a for. expanding cloud we customers now just customers a other the having

Enterprise that's time, there's so time. the same market one aspect for a some of think I the market. there IT quite At And

the with cloud the of questions As I important. do you earlier, data even that more of what the answered one is probably comes

I do interest that in view. Just would ability kind of proposition acquisition of what all that storage to you virtualization value an the data an sense. us even to capability you've companies cloud from a that have and think But point think be is as a of so stored do and better with that

Operator

Our Raviv come next question Jon will from of Citi.

Jon Raviv

unchanged quick for Just CapEx guidance clarification, a year? the is

Tom Mutryn

That is correct.

Jon Raviv

the the you how the start get Not investments to second XX see margin. the year. sense on horse over rest on as first then have understand that to basis. to EBIT year? in we a there some get And down planned? Or margin trying to Just the XX the pick quarter that just the to a dead Should for to see Again margins of in we expect we but more in for year-on-year starting beat quarter cadence more the are should next up in margin's expansion to the growth margin trying same that when quarter?

Tom Mutryn

so so be have fourth first margin. and have in absolute higher I terms how the award to fourth we they year's and kind margins in increases. expect see here those, average and numbers quarterly me, than and certainly those second quarter, So excuse and we do margins fees the the last versus we of will of more expect don't

could in that. could we I - have a regards call follow-up So to

Operator

Asbury question-and-answer the this conclude to remarks. further like will no I Ken Showing our would back closing turn conference questions, Instructions] any to for [Operator session. over

Ken Asbury

as help you, everybody who will Dan for participation and your throughout calls questions. thanks and you well. Dragics Allison, know We would logged Tom the tomorrow. available have thank are for webcast onto like Mutryn, for the today into We their follow-up to of the Well, on Dave and Leckburg thank many day call.

your in for interest have good a CACI, you Thank call. our concludes this and So day. very

Operator

is today's for you conference now presentation. The attending concluded. Thank

disconnect may You lines. now your

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