CACI Says It’s Set To Ride Federal Growth Wave With Recent Acquisition

Government solution provider CACI International – No. 16 on CRN’s 2015 Solution Provider 500 list -- is perfectly positioned to take advantage of increased federal IT spending after adding security expertise with a recent acquisition, according to CACI CEO Ken Asbury.

CACI's $550 million acquisition of L-3 Communications Holdings' National Security Solutions (NSS) subsidiary, which closed Feb. 1, paired with legislation and increased IT spending commitments from Washington leave the Arlington, Va.-based company in a good position for the future, he said.

The recent passing of federal legislation -- including the Bipartisan Budget Act -- during CACI's second quarter will provide a more stable fiscal platform for CACI customers to plan and allocate funds late into the 2017 fiscal year, Asbury said.

[Related: CACI Snares L-3 Government Unit In $550M Deal]

"We expect this legislation to have a favorable impact," he said on the company’s quarterly earnings call Thursday morning. "Not only on the contracts that we hold today, but on those that may be awarded during the fiscal year 2016 and into FY 17."

The outlook continues to be favorable, Asbury said, due to Defense Secretary Ashton Carter's reported aim to double the amount of money the U.S. is spending to combat the Islamic militant group ISIS and increase spending in cybersecurity.

"Those are all areas that are in our sweet spot at the moment," Asbury said. "We are confident in our ability to win business in this environment."

Carter has also been "very clear about the need to bring in newer, innovative technology," Asbury said, which will create new opportunities for CACI.

Asbury said he believes the need for a new strategy around the way the government will collect, process, share and store its information was highlighted when the CIA tapped Amazon Web Services for its storage needs, and when information from the National Security Agency was allegedly copied and distributed without authorization by former federal government employee and contractor Edward Snowden.

"It is going to take a lot more companies like us that really understand the inner workings of the intelligence community, working with the government to try to bring in many of these commercial providers," he said.

L-3's NSS group is strategically important to CACI's success as it moves to capture the business associated with that new technology, providing CACI with past performance on large-scale federal managed service contracts, something the company has not procured on its own.

"They [NSS] already have a footprint there," he said, "and we have a footprint there [in the federal space] -- together we have two big feet in this marketplace.’

The NSS unit, when it was owned by L-3, was a struggling business that reported a 19 percent drop in sales during the first nine months of 2015 and reportedly saw a 50 percent plunge in operating income.

However, according to Asbury, CACI has acquired different parts of NSS that are not entirely representative of the reported numbers, and CACI has already been implementing synergies between the two companies that will bring down the company's operating expenses "almost immediately."

During its latest earnings report, released before the stock market opened Thursday, CACI reported $830.4 million in revenue, up 1.8 percent from the second quarter of 2015, and earnings of $30.3 million, 23.1 percent growth over the $24.6 million it reported during that same quarter.

"The only thing that is keeping us back [from additional growth] right now is the pace of government contract awards," Asbury said.

"This is the best time we could have ever added such skill and capability," he said, adding that there is a lot of money "floating into" federal information technology associated with the intelligence community.