CACI's view of shutdowns then and now
CACI International CEO John Mengucci. CACI photo.
By
Ross Wilkers
In talking with Wall Street, CACI International CEO John Mengucci describes how selling through purchase orders is different than the last time there was a shutdown as the company makes more big bets on counter-drone tech.
All government shutdowns do end at some point, and each one has different characteristics from the others in terms of what functions remain active and those that pause.
Funding that carries over from one fiscal year to the next impacts whether a contractors’ program continues on or not, as do other details regarding the types of money involved.
During CACI International’s fiscal first quarter earnings call with investors Thursday, chief executive John Mengucci drew a distinction between the December 2018-January 2019 partial shutdown and the current one now in its third week.
Back then, CACI’s business mix still had a significant component of services work. Today’s revenue profile has more longer-term technology contracts, Mengucci said.
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“We have far more programs that we're investing in ahead of customer need and putting enhancements into that software baseline. We're selling them on a purchase order, so that has a very different funding schedule,” Mengucci said. “It doesn't take folks to sit around and do a down-select, they can buy these things off of a GSA-approved price list, so there are a lot of differences, at least to this sort of de minimis impact.”
So far, the shutdown’s impact to CACI’s revenue profile is in what Chief Financial Officer Jeff MacLauchlan described as “single-digit millions” that the company largely expects to recover during its fiscal year.
As CACI has shifted to more tech and product content, the company also sought to help agencies make purchases in a manner that supports the budget amount and type of funding they have to work with.
Some of the company’s tech offerings are funded through large multi-year programs, but Mengucci said it is also “more the norm that we receive our awards on purchase orders in a very commercial-like manner.”
CACI provides the item number, part number and price through ordering vehicles that agencies use to buy what they want. This allows for CACI to have a portion of its business that is “truly commercial” with “commercial accounting and commercial practices,” Mengucci said.
Much of the context for Mengucci’s remarks on CACI’s more commercial-like approach surrounded its counter-unmanned aerial systems business, which the company is touting as a key cog in its longer-term strategy.
During the call with analysts, CACI unveiled its Merlin system that is designed to detect and defeat drones at a distance of up to 46 miles away. The idea behind Merlin is to give operators more time to find what they are looking for.
That translates to “up to 15 minutes of time versus about 8 seconds of time” by using Merlin, Mengucci said.
From CACI’s vantage point, the problem and proliferation of drones across multiple industries beyond defense requires a different approach.
On the defense side, Mengucci does expect counter-UAS to represent “some portion” of the $150 billion to be spent on the Golden Dome missile defense architecture.
“It’s multiples of billions that will be spent on a layered defense that's going to have to defend against unmanned systems, and frankly, uncrewed systems are a very different beast,” Mengucci said. “Traditional radar is not going to find that. It's going to look like a bird, so it takes new technology, and then on top of that, we're not in a war time in somebody else's zone where the U.S. is assisting. We'll be defending this nation.”
Large domestic events like the 2026 World Cup across North America and 2028 Summer Olympic Games in Los Angeles will “have so many more things” to defend as well, Mengucci added.
Fiscal first quarter revenue of $2.3 billion was 11.2% higher than the prior year period, while profit of $268.6 million showed a 24.4% year-over-year increase in EBITDA (earnings before interest, taxes, depreciation and amortization). The quarter’s organic growth rate was 5.5% after excluding contributions from acquired businesses.