CACI International Inc

Welcome to CACI International Q4 and year end FY19 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 would need any assistance during this call, please press star zero and someone will help you. At this time, I would like to turn the conference over to Dan Lechberg, Senior Vice President of Investor Relations for CACI International. Please go ahead, sir.

Well, thank you, Nicole, and good morning, everyone. I'm Dan Lechberg, Senior Vice President of Investor Relations for CACI, and I thank you for joining us this morning. We are providing presentation slides, so let's move to slide number two. There will be statements in this call. that do not address historical fact 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 last night's press release and are described in the company's FCC 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 should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP. Let's turn to slide three, please. Let's open our discussion this morning. Here's John Migucci, President and Chief Executive Officer of CACI International. John.

Thanks, Dan, and good morning, everyone. Thank you for joining us to discuss our fiscal year 2019 fourth quarter and full year results. With me this morning are Tom Mutrin, our Chief Financial Officer, and Greg Bradford, President of CACI Limited, who's joining us from the UK. Let's turn to slide four, please. Last night, we released our fourth quarter in full year results for fiscal 2019, and I am pleased with our performance. We delivered several significant accomplishments during the year, including record revenue, record operating income, record cash from operations, record awards, and record staffing levels. We booked $10.3 billion of awards, $6.9 billion of that for new business. We went up against the best incumbents and the best competitors in our market space and won. In fact, we were successful on seven of every 10 new business competitions in 2019 and established new beachheads in the areas of secure communications, electronic warfare, SIGINT, and Cyber. We won nearly 90% of our re-competes for $3.4 billion of awards. We finished the year delivering 11.6% revenue growth, an EBITDA margin expansion, and excess of our commitment, which Tom will cover in more detail. We also opened our shared services center in July 2018, which is performing exceptionally well and further enables us to invest in long-term growth and employee initiatives, maintain competitive rates, and deliver on our commitment to expand margins. And we are utilizing our M&A program to further differentiate by adding new capabilities and customers across our addressable market. Slide five, please. We continue to successfully execute our strategy to win larger, more enduring contracts with a focus on technology, which will sustain both organic revenue growth and margin expansion. A few examples of these awards are a seven-year, $880 million task order to develop software for the Army's force management systems, utilizing our Agile software development factory. In the five re-competes of this work, this is the first time an incumbent has re-won this business, which is a testament to CACI's people, our credentials in Agile software development, and the performance, value, and innovation we deliver. CACI also won an $810 million contract with the United States Air Force to develop, modernize, deliver, and sustain mobile and transportable command and control systems. This work is vital to our national security and was awarded on a sole source basis given our differentiated offering. And CACI also won two large signals intelligence and electronic warfare programs in the quarter. The first is a five-year $415 million contract. The second, a five-year $318 million contract. Both awards are to design and deploy new technologies to enhance capabilities in signals intelligence, electronic warfare, and cybersecurity. These awards illustrate the investments our customers are making in these critical areas and the differentiated, distinctive technology CACI delivers to solve our customers' most pressing requirements. Slide six, please. We continue to invest in long-term growth in a broad sense. First, growth of our capability set to stay ahead of customer demand and technology trends. Through internal R&D, we are developing technology at the convergence of singles intelligence, electronic warfare, cyber, and communications. These solutions provide software-defined agility and multi-domain operations within the electromagnetic spectrum where we are fielding capabilities in near real time to counter highly dynamic threats. In the space domain, we are delivering situational awareness tools to address a critical and now contested environment. And we are investing in other innovative ideas to include space-based photonic laser communications. We're also investing in the growth of our talent base, ensuring we attract and retain the best and the brightest. This includes enhanced benefits and work-life experiences and extensive training and certification programs. Our efforts are paying off, as CACI was recently recognized as a top workplace in seven cities across the U.S., in addition to being named the Washington Post as a top workplace in Washington, D.C., for the fifth consecutive year. These rankings are based on our employees' feedback from third-party surveys, evaluating CACI's leadership, culture, and benefits. This kind of recognition greatly supports our hiring efforts. And lastly, we remain focused on the growth of our leadership team to take this company to new levels. During fiscal year 2019, we added several strategic hires in important areas of growth for CACI. These are senior leaders with the right vision, and experience to drive continued success across many areas of our business. Slide seven, please. M&A remains our priority for capital development. We continue to pursue quality companies to fill capability gaps and drive further differentiation in our customers' most critical investment areas. During fiscal 2019, we acquired the Navy Systems Engineering business, which is a premier platform engineering and lifecycle support provider to nearly all Navy shipbuilding, and it's performing very well. It gives CACI the leading role in the revitalization and long-term operations of the nation's naval fleet and insight into future technology demands. In June, we acquired a small company in our UK operations, which provides proprietary data analytics software to the Ministry of Defense and national security community, growing our presence in priority areas to address UK national security. And in our third quarter, we acquired LGS and Mastodon, two exquisite companies with highly differentiated capabilities in the areas of signals intelligence, electronic warfare, communications, and cyber. As you saw in our record contract awards, these are areas of increasing priority and demand. During the first four months at CACI, LGS and Mastodon are performing very nicely, right in line with our expectations. we continue to expect the combined businesses to deliver 17% EBITDA margins as we look at fiscal year 2020. Given the nature of the Mastodon business and its schedule of part deliveries, profitability will naturally increase during the year with higher level of deliveries. And Tom will provide additional color on that in just a few minutes. Slide eight, please. Turning to the federal government budget, we are very encouraged by the recently signed two-year budget agreement providing healthy spending levels for defense and non-defense customers, particularly in areas aligned to CACI capabilities. This agreement dispenses with sequester cuts and suspends the debt ceiling through 2021, creating much needed fiscal stability. While 12 appropriation bills still need to be passed, the progress is very encouraging, allowing our customers to plan, program, and invest with greater visibility and consistency. But what's more encouraging is our customer spending priorities are in areas like system and infrastructure modernization, electronic warfare, cyber, and space, all of which are aligned with long-term CACI capabilities. In closing, we achieved a number of successes in fiscal year 2019 that will continue to serve us well in 2020 and beyond. We delivered record financial performance with expanded gross and EBITDA margins. reflecting a higher quality mix of business. We won a record amount of contract awards with high technology content. These awards now provide record backlog upon which we will continue to grow over the next several years. We closed on four strategic acquisitions during the year, adding differentiated capabilities in highly relevant areas of our market. And we continue to invest in technology offerings to differentiate and disrupt. These star distinctions continue to drive CACI's success within the market. As I look to fiscal 2020, we have nothing but success in mind. We have an industry-leading financial plan, 12.3% top-line growth with approximately double the organic growth levels we achieved in 2019. We expect to grow adjusted EBITDA margins by 100 basis points from 9.3% to 10.3%, and net income by 14.8%. We also plan to spend about $90 million of BNP and IRAD, levels that are materially higher than in past years, indicative of the technology business we are pursuing. And we come into the year with a $220 billion addressable market made larger by our investments, partnerships and acquisitions, and a federal budget and spending plan that's more than sufficient to support our growth. With that, I'll turn the call over to Tom.