CACI International Inc

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the CACI International Second Quarter Fiscal Year 2019 Earnings Conference Call. Today's call is being recorded. At this time, all lines are in a listen-only mode. Later, we will announce the opportunity for questions and instructions will be given at that time. If you should need any assistance during this call, please press star zero and an operator will help you. At this time, we would like to turn the conference over to Mr. Dan Lechberg, Senior Vice President of Investor Relations for CACI International. Please go ahead, sir.

Thanks, Phil, and good evening, everyone. I'm Dan Lechberg, Senior Vice President of Investor Relations for CACI International, and I thank you for joining us this evening. We are providing presentation slides, so let's move to slide number two. About our written and oral disclosures and commentary. There will be statements in this call that do not address historical facts and, as such, constitute forward-looking statements under current law. These statements reflect our views as of today and are subject to important factors that could cause our actual results to differ materially from anticipated. Those factors are listed at the bottom of this evening's earnings release and described in the company's SEC filings. Our safe harbor statement is included on this exhibit and should be incorporated as part of any transcript of this call. I would also like to point out that our presentation will include discussion of non-GAAP financial measures. These non-GAAP measures should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP. Now let's turn to slide three, please. To open our discussion this evening, here's Ken Asbury, President and Chief Executive Officer of CACI International. Ken.

Well, thanks, Dan, and good evening, everyone. Thank you for joining us to discuss our fiscal year 2019 second quarter results and our two most recent acquisitions. I'd like to thank you all for your flexibility in joining us tonight. With the acquisitions coinciding with our earnings call, we wanted to provide you all with an opportunity for a fulsome discussion and questions as soon as possible this evening rather than waiting until tomorrow morning. And with me tonight are John Mingucci, our Chief Operating Officer, Tom Mutrin, our Chief Financial Officer, Diet Gray, President of U.S. Operations, and Greg Bradford, President of CACI Limited, who is joining us from the UK. Let's turn to slide four, please. Earlier this evening, we released our second quarter earnings for fiscal year 2019 and announced two very exciting acquisitions. I'd like to take a minute to walk through the highlights related to our quarter, then turn to the acquisitions, which John and Tom will comment on as well. We delivered record revenue and operating income in our second quarter fiscal 2019. We continue to generate organic revenue growth while expanding margins at the same time. On top of that, we won $1.3 billion worth of contract awards with 70% of that business that is new to CACI. As you know, the government was partially shut down for much of January and now fully open. We saw no revenue or profit impacts as a result of that in our second quarter. In January, there was a very minimal impact to our outlook given the partial nature of the shutdown and the business concentration we have in defense, national security, and other essential missions which were fully funded. Lastly, we are raising our revenue and net income guidance for fiscal 2019, reflecting strong continuing operational performance of our core business and incorporating our two recent acquisitions, which I'm gonna turn to and comment on now. Let's turn to slide five, please. On Friday, January 25th, we signed an agreement to acquire LGS Innovations. LGS is a cutting edge technology company supporting the national security mission of the federal government with a legacy of innovation and invention, going back to the original Bell Laboratories. They have over 1,300 employees, a combination of high-end scientists and engineers, of which almost 80% hold security clearances. And given the proprietary and unique nature of their products and solutions, a majority of their revenue is contracted for on a sole source basis. On Tuesday, yesterday, January 29th, we closed on our acquisition of Mastodon Design. Mastodon provides rapid design and manufacturing of rugged SIGINT, electronic warfare, and cyber operations products and solutions. Their modular designs are small form factor, lightweight, consume much less power, and provide mission flexibility to a number of very sophisticated buyers. While both companies are impressive as a standalone, The combination of CACI, LGS, and Mastodon will be truly powerful in the market. We will produce highly relevant products and solutions to address current and future signals intelligence, electronic warfare, laser communications, C4ISR, and cyber requirements. Current CACI products and solutions will utilize the technologies and manufacturing capabilities of both LGS and Mastodon. Likewise, LGS and Mastodon can integrate CACI's set of capabilities into their products and solutions, while greatly expanding their access to the CACI customer base. Combined, we will be able to provide truly differentiated offerings in real-time spectrum management, signals analysis and exploitation, again, EW, photonics, and cyber. I'd like to take a moment to frame our acquisition of LGS and Mastodon in the context of our long-term strategies. Over the past several years, M&A has been our priority for capital deployment to add high-value, highly relevant capabilities. Our acquired companies fill specific gaps aligned to the broader market opportunities and emerging customer requirements. LGS and Mastodon are a continuation of that strategy as we started this about five or six years ago with the acquisition of 6-3. And they will contribute to our growth margin expansion, and our ability to solve our customers' most difficult challenges in important areas of each of our markets. Slide six, please. We are purchasing LGS for $750 million and Mastodon for $225 million with a combined purchase price of $975 million. There is also a combined transaction associated tax asset worth about $140 million on a net present value basis. Based on our expectations, This represents a forward EBITDA multiple of about 10 times net of the value of the tax asset. We expect the combined contributions to be accretive to top-line growth, EBITDA margins, and net income in the first year, excluding one-time transaction costs. This is an all-cash transaction utilizing our existing credit facility. The LGS acquisition is subject to customary regulatory approvals and is expected to close by March 1, 2019. Let's turn to slide seven, please. This transaction is going to drive significant value and capability to our combined customers. Our unified software-defined open architecture offerings will be highly differentiated within the market, and putting these companies together strengthens the security of our software and hardware supply chain. This is a key risk area that our customers are paying a great deal of attention to. Our combined employees will share a commitment to values, integrity, and customer missions. We see that already. And in addition, LGS and Mastodon employees will have access to enhanced professional development, training, research and development resources, and a broader customer base. And importantly, the combination will unlock significant growth potential and value for our shareholders. While we expect it to be accretive over the next 12 months, we're most excited about the long-term value of this combination. With that, I'll turn the call over to John, who will dive a bit deeper into the transactions.