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CACI CEO: Trump Administration's Defense, Border Protection Initiatives Play Well to Our Strengths

Michael Novinson

CACI President and CEO Ken Asbury said President Donald Trump's push for more border protection, national security spending, and regulatory and corporate tax relief will bolster some of CACI's leading practices.

"Several of the incoming administration's initiatives resonate well with CACI's core competencies and capabilities," Asbury told Wall Street analysts Thursday morning.

Trump's border protection initiatives will require extensive monitoring and surveillance, which aligns well with solutions on the market today from the Arlington, Va.-based company, No. 17 on the 2016 CRN Solution Provider 500, Asbury said. CACI's pursuits and capabilities around cybersecurity and aerospace should also fare well under the Trump administration, he said.

[RELATED: CACI Has Eyes On Growth Thanks To $550M Acquisition]

But the biggest benefit of Trump's administration for federal contractors such as CACI might be promised regulatory and corporate tax relief.

CACI was having to devote more and more time to sustainability regulations, with the solution provider forced to add staff and build tools to collect, process and report sustainability information on an ongoing basis, according to Asbury. CACI also has had to deal with requirements around reporting differences in labor categories inside its workforce, which could no longer be an issue under Trump.

The federal government also has been hampered by complex regulations detailing who has the authority to act on the threat posed by unmanned drones, said John Mengucci, CACI's chief operating officer and president of U.S. operations. Regulatory changes by the Trump administration around protecting critical domestic infrastructure could lead to more sales of CACI's SkyTracker product, he said.

There is discussion, Asbury said, that the Trump administration might bring back a contracting vehicle that allows for more competition between the government and outside providers to see who can provide the best value. A move like that would be of interest to everyone in the federal contracting space, he said.

Asbury said he also is keeping an eye on how, if at all, the Trump administration adjusts the federal government's current small-business strategy. Trump met Tuesday with small-business leaders, Asbury said, although those in attendance went well beyond the government contracting space and represented all industries. CACI is one of the federal government's larger contractors.

"With the major push of bringing back a lot of jobs, I would be surprised if there is not a lot of emphasis on all kinds of businesses to do that," Asbury said.

CACI's sales for the quarter ended Dec. 31 soared to $1.06 billion, up 27.3 percent from $830.4 million the year prior. This edged out Seeking Alpha projections of $1.03 billion.

Net income increased to $42.4 million, or $1.69 per share, up 39.3 percent from $30.5 million, or $1.23 per share, the year prior. That crushed the Seeking Alpha earnings estimate of $1.46 per share.

CACI's stock was up 6.3 percent in trading Thursday morning to $131 per share. Earnings were announced after the market closed Wednesday, and the company held its call with Wall Street analysts early Thursday.

Over the past three or four years, Asbury said CACI has moved away from viewing the industry through the lens of specific customers and instead adopted a market-based strategy focused around growing sectors like cyber or business solutions.

CACI's acquisition strategy will therefore by informed by critical gap analysis conducted by the company around what skills or capabilities the company would need to better service certain parts of the market, Asbury said. When it comes to acquisition, Asbury said CACI is most focused on strategic fit, financial suitability and adding strength in particularly attractive end markets.

CACI has carried out 67 acquisitions in its history, and Asbury said the deals have helped the company reposition itself fairly well over the years. One of CACI's largest acquisitions was its $550 million purchase of L-3 Communications Holdings' National Security Solutions (NSS) subsidiary, which closed in February 2016.

CACI's sales to the Department of Defense rose to $684.7 million, up 25.9 percent from $543.7 million the year prior. Revenue from Federal Civilian Agencies increased to $308.1 million, up 32.3 percent from $232.8 million last year.

And commercial and other revenue increased to $64.8 million, up 20.1 percent from $53.9 million the year prior.

For CACI's 2017 fiscal year, which ends June 30, the company has increased its projection to earnings of $155 million to $162 million, or $6.18 to $6.45 per share, on sales of $4.15 billion to $4.3 billion. Analysts from Thomson Reuters had been projecting annual earnings of $6.48 per share on sales of $4.22 billion.

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