CACI did not win as many high-value U.S. government deals as expected during the first quarter of fiscal 2018, CEO Ken Asbury said during the company's earnings conference call on Thursday. Asbury made the admission when asked about bids CACI submitted on a handful of $500 million-plus contracts.
The Arlington, Va.-based intel and defense IT specialist, No. 16 on the CRN Solution Provider 500, said some similar-sized contract opportunities remain in the pipeline. However, Asbury does not expect the company's 30 to 50 percent program capture rate to hold steady for the time being.
"We had a couple (bids) where we outpointed the incumbent contractors, but it probably wasn't enough for the customer to take the risk to be able to do it. It was close-but-no-cigar," Asbury said. "Another, we submitted a superior proposal, and the customer kind of went bottom-feeding and took somebody that was marginally qualified but had a much lower cost. We'll learn from those."
In addition to the big-deal whiffs, CACI indicated that a "material" number of its recompete contracts were bridged – stop-gap solutions meant to prevent service interruptions – rather than awarded during the quarter. Only 40 percent of its contract awards were recompeting, with the remaining 60 percent coming from new business dealings.
CACI COO John Mengucci attributed some of those contract bridges to administrative delays caused by "major" reorganizations at certain agencies. The duration of those bridges have typically varied from a full year to less than six months, he said, but the overall level of bridging CACI experienced in the quarter was higher than anticipated.
Some intelligence customers, Asbury added, could bridge certain contracts "in perpetuity" because CACI provides mission-critical services that government leaders would not want to disrupt.
"Maybe we won't see an impact of same magnitude as we saw in first quarter, but we're more than likely to see more bridging," Asbury said. "Bridging has become a very common behavior. It's the first time we've seen it at this level … It's hard to predict."
CACI's stock price has fallen $8.60 (6.05%) to $133.55, as of 12:35 p.m. ET on Thursday.
CACI plans to evaluate the balance of its contract bids portfolio moving forward, aiming for a roughly even mix of professional services, managed services and solutions bids over the next 12 months. That would be a "better mix than what we're experiencing now," according to COO John Mengucci.
Asbury added that CACI is looking to build the products side of the business, investing in advanced capabilities such as electronic warfare and machine learning that he believes will expand what the company can offer in the intel services market. The broad focus is to prioritize solutions over services, he said.