Ladies and gentlemen, thank you for standing by. Welcome to the CACI International Q1 Fiscal Year ’17 Conference Call. Today’s call is being recorded. [Operator Instructions] At this time all lines are in a listen-only mode. At this time, I would like to turn the call over to your host, Dave Dragics, Senior Vice President of Investor Relations for CACI International. Please go ahead, sir.

Thanks, Jason and good morning, ladies and gentlemen. I’m Dave Dragics, Senior Vice President of Investor Relations of CACI International, and we’re very pleased that you’re able to participate with us today. And as is our practice, we are providing presentation slides. So let's move to slide number two. Now about our written and oral disclosures and commentary, 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 results. Now, factors that could cause our actual results to differ materially from those we anticipate are listed at the bottom of last evening’s earnings release and are described in the company's Securities and Exchange Commission filings. And our Safe Harbor statement is included on this exhibit and should be incorporated as part of any transcript of this call. And I also like to point out that our presentation today will include discussion of non-GAAP financial measures, and this non-GAAP financial measures should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP. So, let’s turn to slide number three. And to open up our discussion this morning here is Ken Asbury, President and Chief Executive Officer of CACI International. Ken?

Well thank you, Dave, and good morning to everyone. Thanks for joining us to discuss CACI International’s FY‘17 first quarter results. With me this morning are John Mengucci, our Chief Operating Officer and President of U.S. Operations, Tom Mutryn, our Chief Financial Officer and Greg Bradford, Chief Executive of CACI Limited, who is joining us from the U.K. Please turn to slide four. I’m pleased with CACI’s strong first quarter 2017 results. We won important new business, including larger, more complex solutions business, which is at the very heart of our long-term strategy. We delivered outstanding customer service and won a number of key and critical recompetes. Our focus on M&A for growth continues to pay off with exceptional financial performance and strategic value from our National Security Solutions acquisition. We could not be more pleased with them joining our team. Our achievements this quarter reflect the value that CACI solutions and services provide to our government customers. As our nation continues to face a broad spectrum of security threats, our customers increasingly rely on us to support them in responding to both enduring and rapidly emerging challenges to global stability. Our first quarter awards demonstrate our success in doing so. Let’s turn to slide five, please. While we won contracts in all of our market areas, we received a significant number of awards in intelligence systems and support, surveillance and reconnaissance and communications. These are all areas in which the government is currently investing to enhance its capabilities and in which CACI is delivering innovation and value to those critical national security missions. On that note, I’m happy to continue to note that this is the third consecutive quarter we have recorded more than $1 billion in awards, adding almost $2 billion awards this quarter. Across that $4.7 billion…

Yes. Thank you, Ken and good morning, everyone. Let’s turn to slide number six. We are off to a strong start for the year. Revenue in the quarter was $1.07 billion and net income was $36.7 million, ahead of our plans and the expectations we spoke about on our August call. The results reflect continued strong operating performance and some positive activities that took place in the quarter. Our revenue was up 30.5% year-over-year, driven by the $254 million revenue contributions NSS. In addition, unplanned material purchases late in the quarter added to our revenue, driving the better than expected revenue performance. Organic revenue in the quarter was down 1.3%. In terms of earnings, we had several contract actions which we are expected to take place in our second quarter but which occurred in the first. And we have strong performance on a number of fixed price programs, which also contributed to the strong earnings in the quarter. Our tax rate benefited from the adoption of the new accounting rules related to share-based payments, gains from the change in value of our deferred compensation assets invested in corporate owned life insurance policies and the benefit of the work opportunities tax credit. Slide 7, please. DSO or day sales outstanding were 59 days, a three day improvement from the June quarter, reflective of our focus on cash generation. We realized $58 million of operating cash flows in the quarter, or 157% of our net income, keeping us on pace to generate at least $240 million of operating cash flows in the year. Net debt at the end of September was $1.3 billion and our net debt to trailing 12-month pro forma adjusted EBITDA leverage ratio is now at about 3.7 times. Turning to our FY’17 guidance based on our first quarter results and our expectations for the rest of the year, we are reiterating our revenue and net income guidance. We are increasing our GAAP diluted share count guidance as a result of the new share-based accounting rule, which reduced our GAAP tax expense and at the same time increased share count. The lower expected tax rate is reflective of the tax items I mentioned earlier in my remarks. Now here is John to provide operational highlights, John?

Thanks, Tom. Let’s go to slide nine, please. I too I’m very pleased with our performance this quarter. We won a considerable amount of new business while protecting our revenue base through recompete wins. These awards and the successful resolution of key protests give us continued confidence in our full year guidance. Our backlog and pipeline remains very healthy and further validates our focus on mission-critical, enduring business and delivering valued solutions and high-end services. As Tom mentioned, revenue in the quarter exceeded expectations, driven by unplanned material purchases requested by our customers. As we have stated in the past, we do this type of purchasing as a service to the government when needed and we are extremely happy to be in a position with the right contracts to serve our customers evolving mission requirements. We view this as an end of government fiscal year purchase that will not continue beyond the first quarter. Our higher than planned profit was due primarily to core CACI contract performance and the timing of the certain contract actions. Slide 10, please. Turning to awards and funding, we continued to win business across all of our addressable markets. We won $1.9 billion in contract awards during the quarter, which as Ken mentioned does not include any value for our award of the OPM recompete since it is a multi-award IDIQ. These still results in a trailing 12-months awards over revenue ratio of 1.3 times, very healthy. It’s also important to note that two of our three protested awards with a combined value of approximately $500 million have been resolved in our favor as expected. The remaining $100 million awards made in the June quarter of our fiscal 2016 is still under protest although we do expect a similar positive outcome and no additional awards…

Thank you, John. Thank you, Tom. I appreciate your comments. Let’s turn to slide 12, please. We started FY’17 well. We delivered excellent financial results and we continue to build our backlog with the third consecutive quarter of awards above a $1 billion. And we reiterated our revenue and net income guidance for FY’17. CACI is focused on winning high-value solution business across each of our 11 market areas. And we look to the future with confidence in our strategy and in our supremely talented employees who are committed to ensuring our customers succeed in all of their critical missions. I thank all 20,000 CACI employees for our success. With that, Jason, let’s open the call up for questions.

Thank you. [Operator Instructions] And our first question comes from Brian Kinstlinger from Maxim Group.

Great. Thanks. How are you? Nice quarter.

Thank you.

My question -- I’ve always asked about business from new awards, so you posted about $380 million in the quarter and that was about flat year-over-year. And if we look at last year, new business awards were down. So, I guess my question is you are a bigger company, seems like the pace of awards at industry wide are improving. So, I’m curious if you could explain or maybe give your thoughts on the new business trends and sort of maybe what’s led to that decline and maybe how you see the future with new business awards?

Yes, great question. First of all, I’m very pleased with -- I think as you could tell from the call, we’ve set a record now over three quarters. We’ve never been at a $1 billion worth of overall awards and particularly with 32%, 33% of all these awards, about $1.5 billion in the last three quarters have been for business that is new to CACI. To me that’s representative of the way that our strategies have been working in the marketplace. As to first quarter, frankly, first quarter could have been a completely different number were it not for two weeks. CAMMO came in the latter part of the fourth quarter of FY’16. We had actually thought that it might be in the first quarter. So, frankly that’s a matter of timing. But the important part of that is that we are winning and we are winning these larger jobs at a rate that I think is consistent with where we want to be in the future, particularly around the higher value solutions business which to be honest they are harder. Takes more time, takes a lot much longer endeavor in order to be successful at that kind of business. But that’s sort of the bigger picture. I’m going to ask John to give you a few more stats on how you might also be thinking about how new business gets added into CACI. So, John?

Yes, sure. So, Brian, we always share numbers like bids we expect to submit in the next six months and pending awards. If we focus specifically on -- when we announced awards for the quarter, a little more transparency on what that number means. About 20% of our current awards in the first quarter were clearly for what we've always talked about the new business. Another 35% of that total, were for recompete awards. So, about 55% of that is what those new and recompete award categories traditionally are. What we don't talk a lot about is 45% of the awards in the first quarter are driven by growth on existing business. So this is particularly noteworthy for us and very reflective of the quality and the cluster relationships we have. When we look at that work, we internally talk about that as on-contract growth. But frankly as we all look at our awards number on a quarterly basis, we would consider that 45% work to be new because that is new to CACI, that is work that a customer could have put on anyone else's contract or the customer could have openly competed. And instead they made a decision to provide that new work to us. So if we look at the $1.9 billion in the first quarter, all up, 65% of that would be considered new and 35% of that would be considered recompete. And it's been that way for every quarter that we have shared that number. But we felt that it was probably time to be even more transparent as to what that awards number means.

Great. That’s actually super helpful. I thought it was always new and expanded work, so that helps me out a lot. The CAMMO contract, was that recognized in fourth quarter bookings and was it new program, or will it be recognized in Q2 in bookings?

No, it was recognized in fourth quarter in bookings. We went through the protest. The protest has been resolved and what you will start to see now in the second quarter is the revenue ramp up as a result of the successful resolution of the protest. And by the way I should tell you that that was -- we thought the award might be late fourth quarter, early first quarter. We did plan the protest period into it. So the impact of the protest was thought of in our planning cycle. We plan for it to start in second quarter anyway.

Yes. We have to be fully up and operational by November 23rd and we are right on track for that.

Thank you. Our next question comes from Edward Caso from Wells Fargo.

Good morning, Ed.

Hi. Good morning. Tom, could you help us breakdown a little bit on outperformance in the quarter and how much was pulled forward? Obviously, you had suggested a very soft first fiscal quarter that came in tremendously well. So, how much was the pull forward and how much was an upside, help us with that?

Yes. So, when we provided some color to the first quarter, we told the market that we expected net income to be below $30 million. We came in higher than that. You see the numbers in front of you. Ken and John and I spoke about it in a couple different events, some pull forwards, some increases in underlying performance. I would say that kind of roughly speaking, the majority of that was kind of pulled forward activity. The remaining part was probably kind of one-time, kind of a singular event. There were some contract modifications where we were having ongoing discussions with our contracting officers about kind of changing some rate structures, other kind of our attaining pieces to our business. We expect those to be resolved favorably in the second quarter. Some of them are resolved favorably in the first quarter and some of those had some retroactive kind of pieces to it, so some of the kind of look backwards for several quarters and so that drove some kind of one-time event. The other piece was we had some fixed price programs and we do a very good job of managing fixed price programs. At the end of our accounting period every month, we true-up fixed price programs, look at the profitability of those and we had some goodness associated with that fixed price program.

My other question is on sort of comfort level with financial leverage and at what point do you get back in the acquisition mode again, maybe a sense of what the market is and what you are looking for out there in the market today? Thank you.

Yes. Thanks for the question. This is Ken. We consider ourselves to be a strategic integrator and so we're always looking at what’s going on in the market. Presently, I think we are at about 3.7 to 3.8 net debt to EBITDA ratio. So there is not a lot of dry powder in the house. There are some things that are in the marketplace and we continually look at them but that's just sort of our normal course of business. It is really important I think that as we have with our last couple of acquisitions to talk a little bit about what is it that we are looking for when we go? We value strategic capabilities that we could see and access to new customers as a result of acquisitions. And they’ve got to play a long-term grow rule in the growth of CACI in terms of getting us into areas. We don't want to buy sales. What we want to do is buy access to places where we think we could cross-sell or where we think we can expand, frankly expand the number of markets that we support by getting into completely new areas where we have. I think we are at a really good size today. So, we are not playing this game right now to look at scale or to add revenue. We are looking to add areas where we believe the market is going to grow such as we talked about in the acquisition of NSS. And I think as of the fourth quarter last year, it was better than 20% accretive for us and highly successful in terms of the people that brought to us, the velocities it brought to us, the scale and the entree points into some very key growing markets such as enterprise, IT and intelligence systems so. We will do something again in the market, that’s the third pillar of our overall strategy. But I couldn’t tell you that I would do -- that I couldn’t say anything about the timing of that right now.

Thank you. Next, we have Cai von Rumohr from Cowen and Company.

This is Lucy calling in for Cai.

Hi, Lucy.

So, follow-up on -- Hi. Follow-up on the question about the pull forwards. Are those coming out of Q2, or is spread through the rest of the year? And is it fair to assume that without the true-ups and some revenues being pulled forward to Q2, maybe sequentially down from Q1?

Yes. I will start off. The pull forwards were generally from Q2. So, I think that’s a fair assumption. As you know, we are reluctant to get into that habit of providing quarterly guidance. Every time I try to -- toe in the water I have been proved wrong. So, I’m going to refrain from talking specifically about the second quarter guidance.

And also -- so a housekeeping, just on the other direct costs that’s about 54% of your COGS, costs of goods sold that’s slightly above your typical 50 percentage level. Is that all of the material buys that you spoke of that’s one-time, or is there anything else in that?

Yes. Lucy, exactly right. It was due to those one-time material buys that both increased the revenue in the first quarter and also changed that ratio. We’ve been trending 50-50 and as you know in this quarter we had a slightly more ODCs in direct labor. That’s now reflective of our direct labor base that’s more reflective of a one-time material purchases.

Thank you. Next, we have Bill Loomis from Stifel.

Hi. Thank you. Good morning. Good quarter.

Thank you.

First, just one clarification, the 45% of the new business contract wins that are business driven by growth in existing business, is that 45% the value of the incremental portion or is it the total contract value, including what you were doing plus the incremental portion?

Yes, Bill. This is John. It’s the incremental portion.

Okay. Good. And then on OPM, I know you don't like to talk specifics about it but can you help us on how you see task order flow, the visibility you have? You said the contracts going to -- your task orders are running at the same run rate with the renewal. But how frequently are the task orders coming out for new jobs, how much visibility do you have over the next year on the work that you’re doing on OPM?

Yes, Bill. Thanks. I guess first off, extremely proud that we were successful in this recompete. It was our largest recompete for FY’17 and our teams done an outstanding job. I guess I will address two different pieces of this. First is, it’s clear that the customer added two additional providers and that’s really so that we all collectively can get at this backlog issue, which has been out there for many, many years and will continue to be a high level of background investigations. Secondly, as we look at it and as Ken mentioned the award value for OPM and our recompete numbers is zero. We only booked those awards as those task orders come in. Frankly, we received new tasks in each week. So as those come in, those are actually booked as incremental orders that will be considered recompete business. I think we shared couple quarters back we are north of a $100 million worth of revenue on an annual basis. That’s about all we can say on that. We would expect that number to stay the same. It’s not slightly greater based on the number of background investigators we are able to continue to track. I think what’s very important is that there’s plenty of work to be done. So for those of you who were looking at OPM having two providers and now having four that just means that more of the governments’ backlog will be addressed sooner versus all of us receiving some smaller amount of the share.

Thank you. Our next question comes from Jon Raviv from Citi.

Hey. Good morning. Thanks for taking the question.

Good morning, Jon.

Can you address sales growth linearity over coming quarters? This quarter seemed to be a little -- looked to be down about 1% organic, how do you see that trending going forward and how does that interplay with EBITDA margin as material purchases come off as mix improves?

Thank you, Jon. This is Tom. So, we are providing annual guidance. And what we said previously based on the midpoint of guidance we expect our organic growth to be negative 5%, 5.5%. Kind of a nice quarter for us due to those one-time events. But we are keeping our guidance intact and so therefore that organic growth guidance would be intact. We expect to see some good improvements kind of near the end of the year, particularly going to FY’18 and FY’18 is kind of driven by some of the new business wins that Ken spoke about already from that we anticipate. And so that’s generally what the kind of trends would look like without being kind of really specific and Ken, you may want to elaborate?

I think that was okay.

That was good. And then talking about FY’18, Ken, what gives you the confident on being able to outgrow the market by a 100 to 400 basis points? Is there a notion of how much more business or new business you have to go and get, or as far as you are concerned the vast majority of that has already in your backlog and in previously awarded vehicles?

Yes, Jon. Thanks for the question. So, honestly, I think the bigger impact to our business is we've been growing all along but we've also been shrinking in certain parts of our business that have gone away. I used the example in our guidance call of a single contract vehicle that had revenues in the $840 million range in 2012 and about $75 million. We are largely not planning on that business anymore. And now, we have a base of business that we know is more enduring. Not -- of course, as an example in the first quarter, we did see that contract come up with additional funding that wasn’t in our plan. But that was consistent with sort of rebasing that plan. And frankly, I will take that goodness and I will give that support to that customer anytime in the day because that’s what we do being a national security company. But where the confidence comes from is three quarters of greater than a $1 billion, the 32% in the last three quarters that we've done I expect a stronger quarter because of the way the contracts are laying out in the second quarter that we may have ever had historically. We got to win. We still have some additional business to win. But at the end of this year, once we get rid of the -- once our plan takes into full effect, the sort of the reduction of those ODC pass-through kind of work and replaces that with higher value solution and higher end services, that’s where the confidence comes from. And frankly, starting the way, we have started first quarter. There is nothing but reinforce that the strategy that we put in place four years ago has been working. It’s taken its time to do that but it really is a reflection of the newness of how customers are buying versus where we were positioned as a business three to four years ago.

Thank you. Our next question comes from Amit Singh from Jefferies.

Hey guys. Thanks for taking my question. Just a follow-up on fiscal ’18 guidance, you are projecting revenue growth of around 5.5%. So is that completely organic or you are baking into potential M&A that might come along?

Amit, this is Ken. I will answer that part of it. That is a projection around organic growth. The thing that we strive most on here at the company is returning to organic growth. It is a much of our senior incentive systems that are based on that these days. If we acquire somebody that will be in that mix but we are really looking to come to the street. We saw the benefit in the first quarter of ’16. First and second quarter of ’16, we felt that we were there. But we weren’t quite ready. We think getting through ’17, redoing our plan in such a way that is reflective of the new solutions business is really what’s going to drive that. So if we acquired then we’d be growing more. We grew year-over-year 13%. So, we like that but that was acquired growth. Once we had organic growth to that, then I believe we will be hitting on all cylinders.

Okay. Great. And just in this year, this quarter the organic revenues were down slightly more than 1%, but full year you are guiding negative 5% to 5.5%. But the commentary seems to suggest that things should improve as we move forward in the year. So if you could help explain why sort of organic revenue growth will actually decline based on your guidance for the rest of the year?

Yes. Amit, this is Tom. I will take that. When we provided our FY’17 guidance, we spoke about a bridge from FY’16 to FY’17, some of the good things which would add to revenue kind of new business wins both from ’16 and ’17 and NSS and the like. But we also had some reductions, some headwinds associated with our reduced pass through material purchases. [: And those are concentrated more in the second and third quarter, as we get closer to the fourth quarter we expect to see some of those items I mentioned that reduced pass-throughs commoditized recompetes in the natural contract lifecycle to abate. And so that should provide a little bit more color as to how organic revenue by quarter. ] : And those are concentrated more in the second and third quarter, as we get closer to the fourth quarter we expect to see some of those items I mentioned that reduced pass-throughs commoditized recompetes in the natural contract lifecycle to abate. And so that should provide a little bit more color as to how organic revenue by quarter.

Amit, this is Ken. I think it’s also useful in terms of executing our plan this year, as well as we did in the first quarter. There is three more quarters to go against a little bit. I’m not sure what the headwinds would likely be as a result of the budget. There is also election going on which I don’t know if it has that big of an impact, but it could have an impact on how Congress and the administration in a lame-duck session tries to come to grips with what they do with a full year budget. We hope that that happens. But we still have 6% of or recompete and 3% of our new business to go out and capture. We have a very strong pipeline. Based on the way we started first quarter, I’m confident that we will do that. But I don't want to be overly confident given that there is a lot of runway. I’m never going to give up runway in front of me versus runway behind me. So, we continue to believe that reiterating guidance is a bit prudent at this point in time but that should be -- we should know more about that by the end of the second quarter.

Next, we have Tobey Sommer from SunTrust.

Hi. This is [Indiscernible] coming for Tobey. Thanks for taking my question.

You bet.

Given the upcoming election and assuming the polls stay the way they are now, what are you anticipating in terms of any changes to the pace of contract awards and if you could talk about your long-term organic growth beyond fiscal 2018 that would be great? Thank you.

So, predicting the election is not something that I’m into. I have not being paid to do that like many others and so probably won’t do that. But here is what I can tell you generally, having been in this business for 33 years and been through a few of these. Typically in the first year you don’t really see a great deal of impact. First year is really about whoever the winner is bringing on their staff, bringing on their team. And then you start to see a bit of the policy be played out in the second and third year and that’s what I would be looking to see. In the general macro sense of the things that we are being a national security business, I don't think that our election’s going to solve anything on the global front. And so I’ve read an article recently that says you have everything else and every other industry in the world, the defense industry is probably going to be quite stable through this period of time because I don't see our election having an impact on the thought processes with some of the hotspots around the globe, at least not anywhere in the near-term. As far as longer-term, I'm not ready to give FY’19 to FY’25 guidance quite yet. But I would tell you that in a stable environment given that we have shifted away from a predominance or a certain part of the kind of business such as the pass-through contracting to more enduring value-added work, I think that’s sustainable over a longer period of time. And business systems are going to need to be bought. Next-generation IT systems are going to need to be put in place. The efficiency of government is going to continue be a very strong desire and we are in the midst of all of that in addition to the things that we can’t talk about because we have nuclear parity in a number of places that are government. In a classified sense it’s going to continue to invest in very heavily. So, over the long run I believe once we hit and once we get to FY’18 and the goals we have set for ourselves, I believe that is sustainable and I’d be looking to increase that slightly every single year.

Thank you. [Operator Instructions] Our next question comes from Mark Jordan from Noble Financial.

Good morning, gentlemen. Question relative to your backlog of submitted bids and what you are planning to put in the next two quarters. That totals about $27 billion. About $22 billion of that is new business by your numbers. I guess one my questions here is that's obviously a very large number, my questions around that. How do you prioritize what you're going after and is it possible to focus what you're going after and put more resources behind the bids to potentially increase your possibility of a successful conclusion?

Yes, Mark. Great question. And let me start by answering it this way. When we started adjusting the way we needed to address the changing market three or four years ago, we put in place sort of a philosophy that said we needed to bid fewer, larger and more complex. And why, what, why was that? Well, we wanted to get away from the commoditized side of the business which was where the shorts -- that short cycle part of the business is what becomes the bill payer in ‘13 and ‘14 in particular where we saw 10% declines in overall business. So, we need to look for at our size now, we are capable of competing for and winning job of almost any size that is not a hardware procurement inside of the federal government. That could be IT, it could be the O&M or major complex enterprises such we won with Air Force Satellite Control Network most recently. And so what you described is exactly that velocity. There is one very large bid. In fact, one of the changes we saw in our bidding from -- in our bids to be submitted was a very large bid that we didn’t believe after we did considerable work on it that the customer was really serious about having something new happens so we drop it. That was a $5 billion contract opportunity. There was another one that we are pursuing, which is nameless that has a total value of about $8 billion over a seven or eight year period. That will be submitted here in the next week and that’s part of the business to becoming. But what you described is we are putting more effort into a smaller number of larger contracts and starting much earlier. And it has taken some time to adjust to that, both culturally and frankly you’ve got to get in front of the customer with enough cycles that they see you as a serious potential supplier to them. And that’s what I believe you have started to see with our $1 billion plus quarters, which typically we would have won on an annual basis and then we would be $600 million or $700 million. Some of that gets acquired. Some of that is through acquisition but a lot of it is through -- we are winning bigger jobs and performing on bigger jobs.

Okay. I guess the final question related to that. As an outcome of that strategy as the process matures, if you have sort of unique or surprisingly positive outcomes, then you could be in a position where you could meaningfully surpassed that 1% to 4% organic growth in excess of market?

Yes. I mean, absolutely. And I have to tell you that in the private moments when we were confident about our business that’s really what we want to target. But to be realistic and to be not ski -- at the front of our ski or over ski or skis I should say, we put out a range and we put it out rather modestly that is our goal. Our goal always has to be to win everything that we bid. That’s probably statistically not possible but it certainly is a goal and you get better by trying to achieve that goal.

Thank you. And that will conclude our question-and-answer session. I will now turn the call back to Ken Asbury for closing remarks.

Well, thanks Jason, and thanks for your help today on the call. We would like to thank everyone who dialed in or logged on to the webcast for their participation as well. We know that many of you will have follow-up questions and Tom Mutryn, Dave Dragics and Daniel Leckburg are available for calls later this morning and today. So this concludes our call. Thank you. Have a very good day. And we really appreciate your interest in CACI. We will talk to you again soon. Thank you.

Thank you. Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. You may now disconnect.