Welcome to CACI International Q4 and Year-End FY 2019 Earnings Conference Call. Today’s call is being recorded. [Operator instructions] At this time, I would like to turn the conference over to Dan Leckburg, Senior Vice President of Investor Relations for CACI International. Please go ahead, sir.

Well, thank you, Nicole, and good morning, everyone. I’m Dan Leckburg, Senior Vice President of Investor Relations for CACI, and I thank you for joining us this morning. We are providing presentation slides. So, let’s move to Slide number 2. There will be statements in this call that do not address historical facts, 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. Those factors are listed at the bottom of last night’s press release and/or described in the company’s SEC filings. Our Safe Harbor statement is included on this exhibit and should be incorporated as part of any transcript of this call. I would also like to point out that our presentation will include discussion of non-GAAP financial measures. These should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP. Let’s turn to Slide 3, please. To open our discussion this morning, here is John Mengucci, President and Chief Executive of CACI International. John?

Thanks, Dan and good morning everyone. Thank you for joining us to discuss our fiscal year 2019 fourth quarter and full-year results. With me this morning are Tom Mutryn, our Chief Financial Officer and Greg Bradford, President of CACI Limited, who is joining us from the UK. Let’s turn to Slide 4 please. Last night, we released our fourth quarter and full-year results for fiscal 2019, and I am pleased with our performance. We delivered several significant accomplishments during the year including record revenue, record operating income, record cash from operations, record awards and record staffing levels. We booked $10.3 billion of awards, $6.9 billion of that for new business. We went up against the best incumbents in the best competitors in our market space and won. In fact, we were successful on seven of every 10 new business competitions in 2019 and establish new beachheads in the areas of secure communications, electronic warfare, SIGINT and cyber. We won nearly 90% of our recompetes for $3.4 billion of awards. We finished the year delivering 11.6% revenue growth and EBITDA margin expansion in excess of our commitment, which Tom will cover in more detail. We also opened our shared services center in July 2018, which is performing exceptionally well and further enables us to invest in long-term growth and employee initiatives, maintain competitive rates and deliver on our commitment to expand margins. We are utilizing our M&A program to further differentiate by adding new capabilities and customers across our addressable market. Slide 5 please. We continued to successfully execute our strategy to win larger, more enduring contracts with a focus on technology, which will sustain both organic revenue growth and margin expansion. A few examples of these awards are a seven-year $880 million task order to develop software for the Army’s…

Thank you, John and good morning everyone. Please turn to Slide number 9. Our fourth quarter revenue is $1.4 billion, 17.4% greater than last year with 2.8% organic growth in strong performance from our acquisition. Net income for the quarter was $50 million, tapping off of the year of exceptionally strong performance and in line with our expectations and guidance. As we noted in our may earnings call, there are two items to note when comparing this year’s fourth quarter to last. First, we adopted ASC 606 in fiscal year 2019, which had the effect of spreading award fees throughout the year. This reduced the award fees in the fourth quarter of 2019 by $7 million when compared to 2018. Second, we made $13 million of one-time investments in the fourth quarter of 2019 for IT systems to drive enhanced security and efficiency for increased business development and IR&D given a robust pipeline of opportunities and for some HR initiatives. Mastodon and LGS’s contribution to the quarter were consistent with our expectations. during the five and four months as part of CACI, they added $150 million of revenue with a combined EBTIDA margin of around 12%. Given our forecast and pipeline, we continue to expect 17% EBTIDA margins for the first 12 months. for mastodon, the timing of product orders and deliveries will create fluctuations in profit and margins from quarter-to-quarter. Their products are highly specialized, which results in very high margins, but with orders coming into street batches. We are confident that mastodon will drive significant value. Please turn to Slide 10. full year revenue was $5 billion; up 11.6% also with 2.8% organic growth. Net income was $266 million assuming a full year of tax reform in fiscal year 2018, which is detailed on our earnings release. Net…

Thank you, Tom. Let’s go to Slide 15. in closing, I am very pleased with our performance in fiscal year 2019 and confident in our prospects going forward. We delivered record financial results for the year, including sustained organic revenue growth and margin expansion. We won a record amount of contract awards in areas of our market that will continue generating profitable growth and we expect accelerating organic revenue growth and continued margin expansion throughout 2020. this team’s successful execution of every element of our strategy, gives me great confidence in our ability to deliver on our commitments in fiscal year 2020 and beyond. None of this happens without the talent, innovation and commitment to our customers’ missions by our employees. I’d like to say how incredibly proud I am, and I thank you all for what you do each and every day. With that, Nicole, let’s open up the call for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Gavin Parsons of Goldman Sachs. Please go ahead.

Hey, good morning everyone.

Good morning, Gavin.

You guys have a look at the revenue growth for the year, obviously really strong bookings in the quarter and in the year, and I think on the guidance call, you had mentioned if you got a two-year budget deal, you think you’d be towards kind of the right end of that growth goalpost. So maybe, just an update on kind of what the upside risks are to kind of the range of revenue organic growth.

Yes, Gavin, thanks. So, one of the things that we haven't had in the past was a very solid next two-year budget. We are starting FY 2020 strong with the – with our business awards. And as we look at risk to hitting our guidance, we don't see any risk going forward. If we look at the high end, if we get the awards awarded on a timely basis, which is what we haven't planned within our FY 2020 plan, if some of those were pulled to the left, that would allow us to start some of these larger technology-based development program sooner. As it pertains to our Mastodon folks, the only risk there is if we see any move to the right of some of the product orders that we have planned for the year. We don't see that in our near-term view now due to budgets and due that the contractual vehicles that we need are already in place. So we're very confident on the midpoint of our guidance. Should we be able to get some awards coming in sooner, that would help us keep our momentum forward and finish somewhere closer to the right side.

And then as I think about the target to outgrow the market organically, it hasn't been the case the past few years, the 7.5% at the midpoint, maybe, it wouldn't be as fast versus the public peer group as you've been looking for. But the bookings are a little lot stronger. So maybe, what innings kind of do you think you're – what inning do you think you're in as far as kind of the strategy to kind of pivot towards the products and solutions. Obviously, it's paying off in booking, but do we see that outgrowth kind of accelerate going forward over the next couple of years versus the market?

Yes, Gavin, thanks. So, I’ll focus on two areas. One is our focus on long-term, sustainable growth for this company as we've done the last 57 years, also focus on the fact that we are looking to drive both top and bottom-line growth. So we too read of other top line growth. We're actually focused on the strategy we have, which is looking at the markets that we serve today, making actually certain that our IR&D investments are being made ahead of customer need so that when budgets arrive, CACI is ready to deliver. We're very, very proud of the awards of the book of business that we did during 2019, I mean who wouldn't at $10.3 billion. But a lot of that is also representative of us moving to longer-term contractual relationships with some of our technology-driven customers. If I were to look back over the last five to six years, where the majority of our business was on with expertise, those contract turns were three to three to four years. And during LPTA time, it was closer to, every year, to 18 months. So we're looking this coming year to nearly double the level of organic growth. At the same time, we don't have a three-year plan to grow margins. We have a year-over-year plan to grow for margins. And last two years, being able to exceed 10 basis points to 30 basis points is what we believe shareholders are going to be looking for not only now, but in the future.

Our next question comes from Cai von Rumohr of Cowen. Please go ahead.

Yes. Thanks so much and good quarter. So, the $13 million investment in the fourth quarter, give us a little more color about what percent was to each of the items you mentioned. Where is it in the P&L? And are you considering kind of doing more special investments in FY 2020?

Yes. So, in terms of the – I can't give you specific details. In terms of kind of order in magnitude, the B&T in IR&D was the kind of largest item either followed by the internal IT investments, followed by HR initiatives. And let me point out that there's a variety of other HR initiatives, which are ongoing and sustainable, but these are more unique activities to jump-start certain activities associated with those. And we had – it will all flow through the indirect expense line on our P&L.

Cai, you also asked around some special investments, is there any plan in FY 2020. When we did – when we announced early in the third quarter those special investments in the fourth, we're looking at what our FY 2020 plan looks like. We were within all of our guidance ranges for the full year FY 2019, and we found it prudent for the long-term growth of this company for us to make some of those investments in the fourth quarter of 2019. As we look at FY 2020, will we do the same exact thing? It will most likely be in two areas if we happen to do that. Some of the technology investments that we have may or may not require additional investment for us to hit customer need ahead of – to hit customer plans ahead of need, and we will always be investing in not only retaining the best and brightest folks, but attracting them, and that is an ongoing focus that CACI has, and we will continue to make the prudent investments. I will say all the while making certain we're living within our very competitive rate structure. So we're not looking at making investments to then push our rates greater. We're actually balancing cost and spend.

Terrific. And last one that 12% EBITDA margin for LGS, Mastodon in the four months and 17% next year with the sequential build, which would imply, I don't know, the exit rate's going to be 19% to 20%. Is that sustainable or is that just a function of when the Mastodon products deliver? Thank you.

Yes. thank you, Cai. Right now, it’s a little bit premature for us to talk about kind of margins to the performance of – in 2021. I would hope sustainable, and certainly that's our goal and our aspirations. But at this point in time, I think your latter comment that this could be some fluctuation, some quarters are going to be higher than others given those product kind of orders and deliveries will create some, again, nobody is associated with that steady state. So we get aspirationally kind of one inside, kind of higher margins, and I will point out that the margin characteristics of Mastodon are materially higher than the LGS. I think that's what we've disclosed when we purchased the acquisition. And so to the extent that, that organization can grow disproportionately, that would be very productive to markets going forward.

Yes. Can I also add a little more color? When we talk about Mastodon, we talk about MD&A product-based company. But they earn a large scale production company, right. So as we look at the quarter-to-quarter orders for what they create, it's not that kind of production model, where once we get through the first 20 or 40 units, we'll see even greater margins. It is really more than respectable margins on unique technology products that they deliver. So that mix of products will change from time to time. But as Tom mentioned, they came into us with a promise of materially greater margins and the rest of CACI, and we are very, very pleased to – we're very pleased with where we'll finish in FY 2020.

Our next question comes from Matt Sharpe of Morgan Stanley. Please go ahead.

Good morning, gentlemen.

Good morning, Matt. Welcome.

Thank you. So, I just wanted to touch, I know we've discussed this a bit thus far, but does the higher investment in R&D and infrastructure, how should we think about that as it carries forward? Will there be a continued sort of higher level into early fiscal 2020 and then sort of tail off as the year goes on? Or will the indirect be relatively consistent as a percentage of revenue throughout the year?

Yes, Matt. So, when we look at IRAD investments, we were looking at it in two different areas, where those areas we have to invest to sustain. When we go after these large-scale recompetes as we did on the Army cash program, we really looked at about two years before the recompete, what are those star distinctions or those type of differentiated technologies we have to put in place. So that was an investment to make certain that we are able to retain some of the business that we have, albeit delivering more of a technology bend. We're going to continue to increase our investments in signals intelligence, electronic warfare, communications and the like, and that's a very dynamic market. Those are very dangerous place, so that's continued to change. And the model that both LGS and Mastodon have brought into our business is one of continuous investments. So, to provide some kind of modeling guidance, I would say we're really looking at full-year bidding proposal in IRAD investments. I think you'll continue to see that level grow year-over-year, knock on wood, as we get out of FY 2020, continue to drive more technology solutions means greater investments. But again, never to a point where we are busting rates, which then make us less competitive. We really are looking to grow our innovative dollars within our means.

Yes. And looking at fourth quarter level indirect spend as a percentage of revenue, excluding those $13 million items, that's somewhat indicative of where we'll be kind of going forward in 2020. And as John mentioned, I'll just embellish, the higher kind of value-add solution technology requires a higher level of indirect support, laboratories, IR&D, smart people trying to solve problems in advance of customer to solve problems in advance of customer requirements. The good news is that customers are willing to pay for that, and the wrap rates that we're able to command in some of those areas are materially higher than average wrap rates. And so spend the money, the customers pay for them, and we can still deliver increasing margin and increasing profitability.

Got it. And then sort of on a related note on the CapEx side. How should we think about the profile that – from here? Obviously, 4Q was relatively high, and it's usually a light quarter for CACI. So, are you seeing upward pressure just given some of the acquisitions that are a little bit more product or solutions-based? And again, how do we think about that going forward? Does it revert back down towards the sub-1% level that you're traditionally at or just gravitate towards the current 1.3%?

Yes. So, we guided to full year CapEx of $55 million for 2020, approximately 1% of revenue for revenues, approximately 5% and $0.6 kind of billion. The absolute level is higher than we have seen in the past, two large buckets, some just – some internal IT, other kind of infrastructure to support a kind of large organization. The other bucket is facility expense. And as we win programs, oftentimes these programs need to be performed at CACI facilities. And to the extent that we need facilities in new locations, we need to make those investments for those facilities. Some of those facilities require skits or secured spaces, which are even more expensive. And so that is driving some of the higher absolute dollars of CapEx. I would think that going forward, that 1% seems to be about reasonable set of numbers for CACI, kind of borrowing any unusual type of program, which would require material CapEx.

But I’ll also add that those that will require a higher level of CapEx are most likely going to be technology-driven programs that have a – their own unique investment plan. I'm almost certain that we won't be able to predict CapEx by quarter, but I can tell you by the type of business that were out there, we need to always be within the right level of spend given the type of programs that we continue to win.

Our next question comes from Joseph DeNardi of Stifel. Please go ahead.

Yes. Thanks very much. John, when you look at kind of the pipeline of opportunities, the budget backdrop, your expectations for kind of the timing of some of the bigger awards that may be out there, can you maintain the type of book-to-bill that you had the last 12 months? Or should the expectation be that, that moderates some in FY 2020?

Yes, Joe, thanks. I always answer every award question where it's lumpy. I've been in this business far too long that when we celebrate the absolute highs, customer changes a couple of awards. And they award July 2nd versus June 28, and book-to-bill looks crazy. And can we maintain the book-to-bill? I'll tell you what we can maintain. We can maintain the level of success that we have had. It wasn't five or six years back when we were in a slightly different place. We really took the time to add the right business development talent. We actually drove market strategies, so that we were, in two words, disciplined and focused. I don't see anything different in our business development team as we come into FY 2020 other than discipline and focus. So, I would expect us to continue to win more than we don't. I would expect us to continue to bring back 90%, if not better, of our recompete wins, frankly, internally. We have an absolute goal of – we went 100% of our recompetes. And when we don't, we're not happy. So if I look at budget support, if I look at the investments, if I look at the areas of the federal government budget that CACI now plays in, I feel very confident that we are on the right path and we will continue to win new business of those recompetes at the FY 2019 pace.

Okay. I mean, does the nature of the pipeline in terms of duration and size support? I mean because I think that's been a tailwind for you guys recently. Does it support maintaining that type of book-to-bill? Or even if you're successful, that number will come down just because the duration may be changed? Just trying to set expectations a little bit given how strong it's been for you guys.

Sure. Given the nature of our pipeline, the type of business which is in there, we're pretty confident that we are continually finding larger programs for us to go out there and win. Okay. So, I honestly believe that we've got the right formula there. Now that pipeline is also going to trick – change a little bit, and maybe, it has the last couple of years, because you're bringing a company like Mastodon, which is really product deliveries that is probably a 30- to 90-day delivery cycle. So that's more choppy shorter term kind of business. But I have to tell you, we've got some multi-dollar bid submitted that we feel as confident as we ever had. So time will tell, but I can tell you is that what our plans for new business awards are very much support our FY 2020 guidance.

Our next question comes from Robert Spingarn of Credit Suisse. Please go ahead.

Hi, good morning.

Good morning, Rob.

Just following up on that, and I appreciate your answer before that your performance is going to be consistent, your relative performance to the others. But when I do look at the budgets, I'm wondering if this big surge in your backlog in your fiscal 2019 reflects the big surge in the budget, which peaked in fiscal 2018 – in government fiscal 2018. And so is this money that's coming into your this coffers this year, these orders? Is this fiscal 2018 money and it's kind of a onetime deal? Because clearly, the budget slows through 2021.

Yes, Rob, thanks. So let me answer that in a – from a couple different angles. Budget clearly helps, right, clearly, absolutely helps. But I think as much as the FY 2018 budget looked and as we go forward in FY 2019 budget. What I try to look at is when we get up to FY 2021, if the budget isn't going and it's flat, what does that present for CACI and sort of measure that against the business that we have in our backlog today? What is different, I think, with CACI than potentially other folks out there is that as we move more towards technology-based awards, those are longer term and they are fully funded. So we look at these five to seven-year $800 million, $900 million awards. Those are fully funded awards. So just like a long-term production program, it's really hard to change course when you had a five to seven-year technology development program that is very software intensive. I would also tell you that the fact that we are on that technology track, it also allows us to look at a very different addressable market. So, although budgets may be fluctuating, what CACI can go out there and capture with more than making a fist in kind of capabilities that grow. So $220 billion addressable market, which is fully funded, even a flat budget environment, we're a $5.6 billion company. So I look at our team all the time saying, if our addressable market is $220 billion, there are ample things we can go out there and invest in and go forward in and win. So it will be for the same percentage, perhaps not, but we're very confident on what our investment strategy has been over the long term and really believe large budget or not, the areas of budget are growing are in areas that we three or four years ago began to invest in.

Okay. And then just want to take a couple of things on the acquisitions on LGS and Mastodon. In terms of where you've been surprised on the upside and downside, sounds like the margins are coming nicely. But upside and downside there, I wanted to ask Tom if he could just clarify for us how much of this expansion in the backlog in the funded orders and so forth was acquired or was added at the time of acquisition. Possible you told us that last time, but I just wanted to get an idea of that. And then what is the M&A outlook with companies or for companies like these that are product-based? Is there more out there that you can expand this part of the business with? Thank you.

You bet, Rob. Thanks. So, let me take the first and third question. I'll have Tom handle the second. Look. So how do we feel about where LGS and Mastodon are and what has gone well, and then what hasn't gone so well. On the – let me start with the not so well, because I'm struggling with what it is hasn't gone well. Look, it's the first time we, as a company, reached out and stretched ourselves to close two acquisitions at the same exact time. So if you're a functional leader inside of CACI, my CHRO or my IT folks, we really stretched that. And frankly, in some areas, we most likely stressed the incoming employees from Mastodon and LGS because we weren't as sharp as we normally are when we do a single acquisition. The good news is, we're about five months in and most of those employees have forgotten that. On a more positive side, I'm really happy, Rob, with – over the last five months, the level of collaboration we've seen across core CACI folks, LGS and Mastodon folks. I'll give you a couple of examples, because for me to give you qualitative statements don't really mean much. LGS has already contributed with a triple million dollar award, $200 million to $300 million of an updated sole source, where it competes. And that's part of the business case for that part of our acquisition. It's also proved that the business does continue to operate just as they did prior to the integration. On our E3I award that I spoke about earlier, what's most exciting is that, that was a job won by CACI, and in the delivery cycle, we're watching LGS, Mastodon and CACI Technology being put into those capabilities, enhancing those. And also, on single award IDIQs that we have, we're combining all of the technology know-how for us to be able to spend more than what that customer's initial spend plan was. Tom, you want to talk about the second portion? I'll wrap up with comment on where we see the M&A with comment on where we see the M&A.

Yes. Thank you. I don't have the specific number that LGS or Mastodon has added to the backlog or the awards. We added those numbers at the end of the third quarter, and that was reflected in our market results. And I think it's reasonable to assume that their backlog is kind of relative to their size. Of course, CACI versus LGS is kind of a 10:1 ratio. So, while it is contributing, it’s not a huge driver in the overall kind of backlog number. And as John mentioned, going forward, it’s going be hard to subscribe backlog numbers to LGS or CACI given the fact that the credentials of both organizations, or parts of CACI, I should say, are driving kind of wins

So – and on the M&A piece, Rob, for everyone on the call, we are very much sticking with M&A strategy that we’ve had in the past. We know what our focus areas are. We know the markets that we serve. We review our market-based strategies twice each year to look for gaps, and then we turn our Corporate Development team on going to look for our new properties. In the areas, they’re going to be very technology-centric, everything from supporting Enterprise IT and business systems customer as they continually look for new creative enterprise-wide solutions. But closer to where Six3, Mastodon and LGS are, really in that SIGINT, EW, Cyber and communications area. I mean look, it’s no secret that our ad, vis-à-vis other great powers, has eroded and that needs to be rebuilt. We saw that about 36 months back. We started to build upon what CACI already was creating. We then went to Six3 and then did that with LGS and Mastodon. There are other properties out there that are – that could potentially fill other niche areas. For us, in this EW/SIGINT/Cyber world, but I have to tell you, I’m extremely pleased with everything we knew about LGS coming in and frankly, in the meetings I’ve been sitting in, learning even more of the areas that they covered. So we’re always involved in the M&As, we’re always looking for those long-term strategic targets, and I think you’ll continue to see more of the same for us in the near and the long-term future.

Our next question comes from Jon Raviv of Citi. Please go ahead.

Hey, good morning. Just first of all, clarification and a question here on the organic growth. The slides last month had 5.5% organic revenue growth in FY 2020. It’s now a 5% organic growth. Can you just bridge those two numbers for me, please? I don’t know, but any comment there. And just on the organic growth, can you just give us a sense of some of the programs and/or markets that were headwinds in FY 2019 that are rolling off in FY 2020 to prove out and to support the accelerated growth? How do you get to the 3% to 5%? Thank you.

Yes. So I’ll start. When we provided initial guidance, we guided from the midpoint of FY 2019 guidance to the midpoint of 2020 guidance, which kind of mathematically was a 5.5% kind of organic growth. We’ll be closing FY 2019 a bit higher than those midpoint numbers. And so if you keep 2020 intact, you’re getting 5% number. I will caution you all that using a point estimate is simply using a point estimate. We have a range of revenue, and I think it’s insufficient to say that inorganic revenue will be 5%, 5.5%, perhaps more given the upper end of the range, perhaps less with the lower part of the range. So I think that’s the – kind of, hopefully, that will clarify those set of numbers. In terms of kind of where the areas of growth are in supporting the higher organic growth, a lot of the areas that John mentioned. We’re winning a large number of awards. Our information that we put out talks about kind of awards and communication, secured communication, kind of electronic warfare, a number of Enterprise IT work, and those are all kind of supporting that growth. I would say the broad areas continue to be Enterprise IT business systems, electronic warfare, digital signal processing, C4ISR kind of larger areas, intelligence solutions, Intelligence Services.

And john, I would also add that it will quickly become tough for us to differentiate organic versus nonorganic. What I’d focus on is growth. We’re very clear about that we do M&As to drive long-term growth. An example of that is in our secure communications award, the $800 million-some award, there’s about $400 million of that which is programmed against current visible deliveries. The other $400 million of that single word IDIQ is funded seemingly. So when I look at the capabilities of LGS and Mastodon and look at how they could come up with even in more enhanced solutions, we could spend more of that $800 million and deliver even better capability for our customer. Frankly, whether I count that as organic or nonorganic, it’s outstanding growth that we’d have had I that had not done LGS and Mastodon.

Great. Thanks for that perspective. This is a follow-up on, John, you mentioned the two kind of maybe buckets in M&A, EIT and biz systems and then also SIGINT, EW, Cyber. Would it be fair to characterize the first as being a bit bigger in terms of deal size and the second being a bit smaller in terms of deal size? And then also on the call, on your prepared remarks, you mentioned that at 2.2 times net leverage, you have ample capacity. What is ample capacity when you do approach the M&A market and what do you think in terms of size?

Yes. Jon, thanks. So if I look at those two buckets, Enterprise IT and business systems, that, for us, if we look at the total addressable market, that’s a much larger market today. We have clearly long-term decade’s worth of experience there. So that’s a larger total addressable market, but a smaller growth rate. So you would expect deals in that area to be companies potentially of like size, if they fill capability and customer gaps, okay? If I find someone out there that’s just like us, where this becomes a volume buy, that’s not what we’ll be interested in. On the SIGINT/EW/Cyber comms, that second bucket, I think traditionally, what we’re looking for are companies that have the right kind of capabilities. I probably won’t share – in fact, I will not share any of those companies that we’re taking a look at. I wouldn’t say they’re all small, some could be larger as well. Some of the larger players, they’re most likely will fill even more gaps. So if we can find someone that fills four gaps versus small – four smaller companies that only fill one each, then it’s sort of a toss-up to have to meet our investment criteria, they have to have the right cultural fit as well. But hopefully, that provides some light. And, Tom, on our leverage?

Yes, capacity. So assuming a couple of reasonable kind of purchase price and margin of the acquired companies, we could undertake a kind of $1 billion purchase price acquisition while maintaining leverage south of four times. So if you want to take leverage up slightly higher than, there is even more capacity. So we feel pretty comfortable that we can kind of look for a wide variety of small independent-type companies with a all-cash deal.

Our next question comes from Edward Caso of Wells Fargo. Please go ahead.

It’s Justin Donati on for Ed. Thank you for taking my question.

You bet.

The first one I had, just on the new award that you’ve won over the last 12 to 18 months, how much of that has been from on-contract growth versus takeaways?

Yes, Justin, This is John. That’s a– I don’t have that number off the top of mind, but what I will tell you is this, as it pertains to going further for – going forward in future growth. Earlier to someone’s question, I used the term single word IDIQ and realized there may be folks out there that don’t understand how we explain that. Single word IDIQs are where a customer awards only CACI a large contract. We have been very successful. It’s shaping large ceilings as well. So although we won a job, an $800 million ceiling, what’s very creative to us is there may be $400 million worth of current book of business that we can see, but that’s $400 million of guaranteed on-contract growth. So we do have an absolute focus over the last few years. One of my focus areas coming into the CEO role is to put an even stronger focus on that. What we’re good at is when we sign a contract with our fiber broadband customers, we do deliver. We make things right, and what we’re going to really start doubling down on is how we continue to grow with on-contract growth. If you think about it, it takes very little investment, right? We’ve already won the actual vehicle for us to deliver on. We’re not competing against all the next five- to six-year task orders. So while I’m not answering your specific question, but I can tell you, it’s a healthy mix, and it’s one that supports growth going forward.

That’s helpful. And then, as you’ve talked here today about more technology and solutions, can you just provide any more color on how much of that has been inserted into bids today versus maybe one to two years ago.

Yes. Thanks, Justin. Over the last – I would say when we brought Six3 in, both Ken and I had this vision of people know CACI as an expert – a provider of expertise and some level of technology solutions. What our vision was, and it’ll be my vision to enhance that going forward, is let’s talk about what technology means and how do we get ahead of where the government’s spending, so that we’re not trying to punch above our weight, but we’re actually punching at our weight. So if you look at technology offerings today, I would say our offerings today are materially different than they were five years back. There’s not as materially different, maybe over the last couple of years, but going forward, the addition of LGS and Mastodon, we will continually drive technological discriminators, everything that we’re out there bidding. Even on those programs where it looks like it’s a delivery of expertise or professional services, we’re really driving to put technological differentiators in there as well. If a customer who wants to have 45 people in an operation center, why isn’t our bid showing technologies if the customer only needs to have 20? And that repurposes their dollars. It drives our margins. It really is a true win-win.

Yes. And I will add, probably five years ago, the bids in the universe had the technology criteria – evaluation criteria, well we were not able to bid on those because we didn’t have the investments in those underlying capabilities. And so our aperture has changed materially given those investments. And so it’s – we can go after a lot of things today that we were not qualified to go after five to 10 years ago.

Our next question comes from Greg Konrad of Jefferies. Please go ahead.

Good morning.

Good morning, Greg.

Just to follow-up on some of the last questions. I mean more broadly speaking, it seems like a lot of the services companies are maybe pursuing a more product-focused M&A strategy. I mean, have you seen any noticeable change to the overall market, either from an M&A pursuit aspect or just overall competition in the market?

Yes. Greg. Thanks. When we look at our technology focused part of our business and talk about some of the competitive nature of what it is we’re going after, it sort of makes me think about where we delivered technology to solve a customer’s mission area. There’s a lot of different competitors there, very different from maybe the traditional government services providers who are really predominantly looked at and delivering expertise with that desire to go towards products. What I will tell you is that six years ago, we made a very defined move towards mission-type technology. And that’s what brought us Six3 and really has changed the conversation on these types of calls as it pertains to where this company’s going. The competitors in the technology place are very, very different. Some of those are going to be the larger aerospace and defense companies. Some of those are going to be niche tech firms that are out there trying to move up the food chain and take some of that government budget. What – so I think we’ve done a great job on with supporting FY 2020 growth is making certain that as we’ve been building our technology plan out, we’ve been trying to get involved in a conversation of what our customers need. And you haven’t heard us talk about AI very often or machine learning because, frankly, as the CEO of this company, I believe that those terms have been greatly overused, maybe harkening back to 12 years back when we first heard about cyber. We’ve been doing artificial intelligence and machine learning to support space-based assets for 1.5 decades. We just didn’t call it that. So our technology is going to be set up such that the larger companies who are looking at attacking this technological market with a product, we’re looking at our device being delivered as software definable. And that means that I can build software to put in a device. I can also take that same software, put it on a much larger scale system and be able to get back customer both mobile and fixed site coverage to what their problems are. So – and a lot of times, what we’ve learned with the LGS capabilities, the word uniqueness comes to mind. And then what they do, there’s most times few, if any, competitors that can do what that national asset does, and clearly, no one out there who can do it better than them.

Thank you. And then just kind of as a follow up, two-part. One, any color around what organic head count growth was in fiscal year 2019? And then as part of that, I would assume as solution grows, it’s probably a less headcount-based business. Has there been any change around HR initiatives or what you’re seeing in terms of competition for talent in the market?

Yes. Great. Thanks. So I think it was maybe – it was probably four or six quarters back where as we, as a company, moved to a mix of both delivering expertise and technology, we sort of moved away from how many noses we have in our business, because it really – it’s actually a misleading guide as to where CACI is going in the future. Now to answer your direct question, we’re very successful during FY 2018 to bring additional folks into this business. And it more than supported our FY 2019 growth rates. As we look forward, you’re absolutely right. Some of our solutions-based work doesn’t take as many folks. Especially as we move to software defined or definable, where you’re looking to having high quality folks out there delivering solutions we can build once, hopefully, I shouldn’t say hopefully, with an investment model that allows us to own the intellectual property that we can sell many times over. So on that solutions side, that’s what I would say there. Your other question was around sources of talent. Look, it’s a competitive labor market, we hear all the time. If I talk about the Washington, D.C. s area even more competitive. But what we have done is over the last four years, we’ve branched out to look at six to eight other major cities where there’s phenomenal universities out there that aren’t in the Washington, D.C. area where, oddly enough, you can actually still get people cleared and have those folks work collaboratively across these six to eight different cities. So it helps us bring great system and software engineers in. Earlier, we talked about addition FY 2019 investments. Some of those investments are, how do we do co-development across eight different sites, because we’re not going to penalize ourselves to only do development work in the greater Washington area. So that takes a great IT infrastructure. There’s many new government laws and regs out there to protect their information. So how do we put infrastructure in place sooner so we can take full advantage of being able to source candidates in numerous different cities. So overall, talent is always going to be a challenge. We continually work on how we reward and put different benefits packages in place for current employees and with our upcharge referral program looking to bringing in more people in. So thank you for that question.

Our next question is a follow-up from Joseph DeNardi of Stifel. Please go ahead.

Yes. Thanks for squeezing me in here. John, just want to go back to some of the commentary you and Tom had about making additional investments this year. I mean, obviously, you guys well exceeded the FY 2019 planned revenue and EPS and that kind of gave you the confidence to pull forward the investments. Is that how we should think about FY 2020? That you need to exceed the kind of guidance that you’ve provided us before you would consider making additional investments? Or if you’re on plan to kind of meet guidance, that would give you enough confidence to pull forward and make some additional investments? What’s the right way to think about that? Thank you.

Yes, I guess I’ll start out. As you know, it’s always a balancing act. So we’re wanting to invest in our business. We believe in the long-term – because prospects and the investments are kind of long term in nature. That being said, do we care about annual earnings and do we care about quarterly earnings, the answer is absolutely yes. And so kind of making those particular balancing acts. In addition, we have commitments to increase margins. We take those commitments seriously. And we also watch and maintain our rates. At the beginning of the year, we submit to the government what our billing rates kind of will be for the year. And if we make additional spending versus the plan, that has an impact on billing rates, and we want to maintain those particular rates. So I think the way I would characterize it is we will continue to make reasonable levels of investments, which will all be reflected in our plan, and anything beyond that, we would give a consideration. We’re not going to be bound by, well it’s not in the plan. We can undertake good decisions. We’re here to make good decisions, but we do take those commitments seriously.

Joe, I would also say, and one real example is in the third quarter of FY 2019, we won a couple of extremely large technology-based jobs and if I harken back to my earlier answer, we all sat around the table saying, we need quite a number of specialized people. We can go in alone and fight for talent in the Washington area, but we have these seven somewhat network locations out there. It sounds like the time for us to make those even thicker is right now. So the focus really was on the awards that came in and how quickly do we want to ramp those jobs up, and the entire leadership team said, we’ve got to go make the seven sites even thicker because of the rate we’re winning this technology business, we got to have a broader footprint to be able to bring people in. So yes, did it help? Was it one factor that we were on plan? Certainly. Is it the only factor though? No. So I really can’t give you the color at the end of 2020. We just have to wait toward 2021. Most times, we’re actually doing things in the current year for the current year. So time will – Tom will always be transparent, we always we talk about when our indirect spend comes up is what we’re spending on.

Got it. That’s helpful. Thank you.

Yes. Thanks, Joe.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to John Mengucci for any closing remarks.

Thanks, Nicole, and thank you, all, for your help on that – and thank you for your help on the call today. We’d like to thank everyone who dialed in and listen to the webcast for their participation. We know that many of you will have follow-up questions. So Tom Mutryn, Dan Leckburg and George Price are available after today’s call. Before you disconnect, I would like to remind everyone of CACI’s next Investor Day, which we’re going to hold on Tuesday, September 17, in New York. We’ll be presenting some of our innovative capabilities that we talked about today and that are absolutely aligned with our customers’ most critical missions. This is a perfect opportunity to see what differentiates CACI. We will also be discussing our plans to drive additional growth and profitability over the long term and how we expect to continue to deliver shareholder value. We really look forward to spending time with you all in September. With that, this concludes our call. Thank you. And have a great day.

Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.