CACI International Inc (NYSE: CAI) is an international holding company, providing professional and information technology (IT) services through its subsidiaries to the United States Government and commercial clients worldwide. Some of its services include networking, data management, and security and intelligence services.
CACI earns over 70% of its annual revenue from the United States Department of Defense (DoD).  This clientele structure provides CACI with steady, long-term demand on its services. However, it also exposes the corporation to risk if the US government significantly curtails its dealings with CACI, imposes stringent restrictions on contracts, or decreases congressional defense procurement funding.
CACI operates in a highly competitive industry, against corporations which provide similar services and often have greater financial resources. It also faces the challenge of selling its services to government agencies which may already perform these services internally. Current industry trends such as increased Congressional oversight and frequent contract protests often slow CACI's contract award process and inhibit its ability to earn revenue.
CACI intends to drive future operations by aggressively seeking additional contracts with DoD and to continue selective strategic acquisitions.
CACI offers services in the following principal areas:
Since FY2006, CACI has acquired 12 corporations which provide services spanning the spectrum of these critical functions. These acquisitions have expanded CACI's capability to capitalize in the future on the increasing role of government contractors in non-combat wartime operations. Notable acquisitions include the following:
In 2004, the US Department of Army's Taguba Report concluded that CACI contractors participated in 36 percent of confirmed incidents of prisoner mistreatment at the Abu Grahib detainment facility. This event poses a risk to CACI's image as a reputable contracting company. In addition, four former Iraqi citizen detainees who were wrongly imprisoned and have since been released have filed lawsuits against CACI, as well as one of its competitors, L-3 services, for torture, war crimes, and civil conspiracy, among other violations of U.S. law.
CACI has maintained steady net income levels over the past three years. A notable increase in earned revenue is offset by nearly equal increases in costs of revenue, decreasing profit margin steadily from 4.8% in FY2006 to 3.4% in FY2008 . Over FY2008, revenue earned increased by 24.9% ($482.6 million); 13.8% from organic growth, 11.1% from acquisitions executed in FY2007 and FY2008. The largest component of direct cost increases in this period was the cost of direct labor. These increases came from organic growth in CACI's DoD business as well as from acquisitions.
CACI does not categorize revenue by services offered. Instead, it reports financial data in two segments: international and domestic operations. This is largely due to the integrated nature of its contract aggreements. Each contract often provides more than one service by the company and thus makes segmenting along services provided impractical. CACI evaluates segment performance based on net income.
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Business contracts awarded through US federal, state, and local governments, as well as US federal civilian agencies dominate 95.8% of CACI's revenues, the remaining 4.2 percent coming from commercial and other operations.
As CACI's primary customer, the US Government essentially controls the key trends and forces in its industry.
Allegations and formal legal charges brought against CACI have attracted increased Congressional oversight into the company's practices. Added oversight introduces significant delays into the procurement and contract award process, slowing revenue growth.
The award of large or Indefinite Delivery/Indefinite Quantity (IDIF) contracts are highly visible and often attract protest at CACI. One avenue to avoid contract protests is to seek award through a sequence of separate contracts in lieu of pushing through the initial proposal. While effective, this also delays the procurement process and impedes revenue growth.
With presidential elections and a change of administration, federal employee turnover will likely force time delays for CACI, as officials exit their stations before deciding on critical contract awards.
The growing popularity of compensation-for-performance contracts places pressure on CACI. Under this system of payment, CACI will only be compensated according to results achieved, rather than for simply providing a process to achieve results.
As combat roles become less important for the US's mission in Iraq and Afghanistan, a steady need for intelligence, logistics, and network capabilities will provide additional opportunities for the CACI and the IT and professional services industry at large.
CACI's major competitors:
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