ARLINGTON, Va.--(BUSINESS WIRE)--CACI International Inc (NYSE: CACI), a leading information solutions and service provider to the federal government, announced results today for its second fiscal quarter ended December 31, 2017.
CEO Commentary and Outlook
Ken Asbury, CACI’s President and CEO, said, “I am pleased with our second quarter and first half results. We produced another quarter of organic revenue growth, record operating income, and strong cash flow. These results reflect continued high-quality execution for our customers across our company and are in line with our expectations to deliver on our long-term organic revenue and margin expansion goals. We are raising our net income annual guidance to account for strong operating performance year-to-date and expectations for the remainder of FY18. In addition, we are incorporating the benefits we have derived from the recent Tax Cuts and Jobs Act in our guidance.”
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Second Quarter Results as Reported |
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| (in millions except per-share data) | Q2, FY18 | Q2, FY17 | % Change | ||||||||||||
| Revenue | $1,087.9 | $1,057.5 | 2.9% | ||||||||||||
| Operating income | $88.3 | $80.3 | 10.0% | ||||||||||||
| Net income | $142.8 | $42.4 | 236.6% | ||||||||||||
| Diluted earnings per share | $5.66 | $1.69 | 234.7% | ||||||||||||
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Second Quarter Results Excluding the Impact of Tax Reform(1) |
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| (in millions except per-share data) | Q2, FY18 | Q2, FY17 | % Change | ||||||||||||
| Revenue | $1,087.9 | $1,057.5 | 2.9% | ||||||||||||
| Operating income | $88.3 | $80.3 | 10.0% | ||||||||||||
| Net income, excluding the impact of Tax Reform(1) | $50.5 | $42.4 | 19.1% | ||||||||||||
| Diluted earnings per share excluding the impact of Tax Reform(1) | $2.00 | $1.69 | 18.5% | ||||||||||||
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(1) See Reconciliation of Net Income to Non-GAAP Net Income excluding the impact of Tax Reform page 11 |
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Revenue for the second quarter of Fiscal Year 2018 (FY18) increased compared to the second quarter of Fiscal Year 2017 (FY17), driven primarily by on-contract growth of existing work and new business wins. The higher operating income was due primarily to improved program execution. The increase in net income was due to the factors noted above and the impact of the passage of Tax Reform legislation, as depicted in the above table and further explained below. Cash provided by operations in the quarter was $76.1 million.
Tax Cuts and Jobs Act
The Tax Cut and Jobs Act (“Tax Reform”) was enacted on December 22, 2017, and is reflected in our second quarter net income and EPS. On an ongoing basis, our statutory federal income tax rate will be 21 percent versus 35 percent, and we will be impacted by several other Tax Reform provisions. In addition, our second quarter net income benefited from a reduction in our net deferred tax liability of $94.8 million due to the lower tax rate, partially offset by a tax expense of $9.7 million associated with cumulative foreign earnings. We expect our net effective tax rate in Fiscal Year 2019 and beyond to be approximately 24 percent under the current law. Tax Reform increased second quarter net income by $92.3 million (or $3.66 per diluted share). See page 11 of this release for a reconciliation of second quarter results as reported to second quarter results excluding the impact of Tax Reform as reported.
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Additional Financial Metrics |
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| Q2, FY18 | Q2, FY17 | % Change | |||||||||||||
| Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), a non-GAAP measure (in millions)(1) | $105.4 | $98.8 | 6.7% | ||||||||||||
| Diluted adjusted earnings per share, a non-GAAP measure(1) | $6.31 | $2.30 | 173.8% | ||||||||||||
| Days sales outstanding | 61 | 60 | |||||||||||||
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(1) See Reconciliation of Net Income to Earnings before Interest, Taxes, Depreciation and Amortization, to Adjusted Net Income on page 10 |
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Second Quarter Awards and Contract Funding Orders
Our contract awards in the quarter were $1.1 billion, which excludes ceiling values of multi-award indefinite delivery, indefinite quantity (IDIQ) contracts. Our contract awards were primarily in the Business Systems and Intelligence-related market areas. Approximately 40 percent of our significant awards were for new business.
Contract funding orders in the second quarter were $750 million, equal to the second quarter of FY17. Our total backlog at December 31, 2017 was $10.9 billion. Funded backlog at December 31, 2017 was $1.9 billion.
Other Highlights
- CACI has been ranked by Fortune magazine as a World’s Most Admired Company for 2018, our seventh time on the list. Fortune’s Most Admired Companies survey identifies companies that enjoy the strongest reputations within their industries as business leaders who deliver valuable solutions and services with ethics and integrity. CACI ranked fifth in the IT Services industry worldwide.
- CACI’s Cyber Range test environment, which enables cyber exercises to be conducted in a realistic “live-fire” virtual environment, received certification against the International Organization for Standardization (ISO) 27001:2013 credential, confirming that it adheres to best practices for information security as defined by the ISO standard.
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Six Months Results as Reported |
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| (in millions except per-share data) |
Six Months,
FY18 |
Six Months,
FY17 |
% Change | ||||||||||||
| Revenue | $2,173.7 | $2,130.8 | 2.0% | ||||||||||||
| Operating income | $155.6 | $149.9 | 3.8% | ||||||||||||
| Net income | $184.8 | $79.1 | 133.7% | ||||||||||||
| Diluted earnings per share | $7.33 | $3.16 | 131.6% | ||||||||||||
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Six Months Results Excluding the Impact of Tax Reform(1) |
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| (in millions except per-share data) |
Six Months,
FY18 |
Six Months,
FY17 |
% Change | ||||||||||||
| Revenue | $2,173.7 | $2,130.8 | 2.0% | ||||||||||||
| Operating income | $155.6 | $149.9 | 3.8% | ||||||||||||
| Net income excluding the impact of Tax Reform(1) | $92.6 | $79.1 | 17.1% | ||||||||||||
| Diluted earnings per share excluding the impact of Tax Reform(1) | $3.67 | $3.16 | 16.0% | ||||||||||||
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(1) See Reconciliation of Net Income to non-GAAP Net Income excluding the impact of Tax Reform on page 11 |
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Revenue in the first half of FY18 increased compared to the year earlier period due primarily by on-contract growth of existing work and new business wins. Operating income and net income increased primarily due to the factors noted above. Net cash provided by operations in the first half of FY18 was $155.8 million, 15 percent higher than net cash provided by operations in the first half of FY17.
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Additional Financial Metrics |
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Six Months,
FY18 |
Six Months, FY17 | % Change | |||||||||||||
| Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), a non-GAAP measure (in millions)(1) | $189.4 | $187.0 | 1.3% | ||||||||||||
| Diluted adjusted earnings per share, a non-GAAP measure(1) | $8.62 | $4.37 | 97.0% | ||||||||||||
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(1) See Reconciliation of Net Income to Earnings before Interest, Taxes, Depreciation and Amortization, to Adjusted Net Income page 10 |
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CACI Raises Its FY18 Net Income Guidance
We are increasing our FY18 net income guidance to reflect strong operating performance. In addition, the recent Tax Reform legislation is expected to add approximately $100 million to net income, which is also incorporated in our updated guidance. The increase in guidance for diluted earnings per share is driven by the higher net income. The table below summarizes our FY18 expectations and represents our views as of January 31, 2018.
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(In millions except for tax rate and earnings per share) |
Current Fiscal Year 2018 Guidance |
Fiscal Year 2018 Excluding Tax Reform Guidance(2) |
Previous Fiscal Year 2018 Guidance |
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| Revenue | $4,350 - $4,500 | $4,350 - $4,500 | $4,350 - $4,500 | |||||||||
| Net income | $277 - $283 | $177 - $183 | $171 - $179 | |||||||||
| Effective corporate tax rate | -3.4% | 33.4% | 34.5% | |||||||||
| Diluted earnings per share | $10.95 - $11.19 | $7.00 - $7.23 | $6.76 - $7.08 | |||||||||
| Diluted weighted average shares | 25.3 | 25.3 | 25.3 | |||||||||
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(2) Non-GAAP guidance (excluding the impact of Tax Reform) |
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Conference Call Information
We have scheduled a conference call for 8:30 AM Eastern Time Thursday, February 1, 2018 during which members of our senior management team will be making a brief presentation focusing on second quarter results and operating trends followed by a question-and-answer session. You can listen to the conference call and view the accompanying exhibits over the Internet by logging on to our homepage, www.caci.com, at the scheduled time. A replay of the call will also be available over the Internet and can be accessed through our homepage (www.caci.com) by clicking on the CACI Investor Info button.
CACI provides information solutions and services in support of national security missions and government transformation for Intelligence, Defense, and Federal Civilian customers. A Fortune Magazine World’s Most Admired Company in the IT Services industry, CACI is a member of the Fortune 1000 Largest Companies, the Russell 2000 Index, and the S&P SmallCap600 Index. CACI’s sustained commitment to ethics and integrity defines its corporate culture and drives its success. With approximately 18,700 employees worldwide, CACI provides dynamic career opportunities for military veterans and industry professionals to support the nation’s most critical missions. Join us! www.caci.com.
There are statements made herein which do not address historical facts and, therefore, could be interpreted to be forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. The factors that could cause actual results to differ materially from those anticipated include, but are not limited to, the following: legal, regulatory, and political change as a result of transitioning to a new presidential administration that could result in economic uncertainty; changes in U.S. federal agencies, current agreements with other nations, foreign events, or any other events which may affect the global economy; regional and national economic conditions in the United States and globally; terrorist activities or war; changes in interest rates; currency fluctuations; significant fluctuations in the equity markets; changes in our effective tax rate; failure to achieve contract awards in connection with re-competes for present business and/or competition for new business; the risks and uncertainties associated with client interest in and purchases of new products and/or services; continued funding of U.S. government or other public sector projects, based on a change in spending patterns, implementation of spending cuts (sequestration) under the Budget Control Act of 2011, or any legislation that amends or changes discretionary spending levels under that act; changes in budgetary priorities or in the event of a priority need for funds, such as homeland security; government contract procurement (such as bid protest, small business set asides, loss of work due to organizational conflicts of interest, etc.) and termination risks; the results of government audits and reviews conducted by the Defense Contract Audit Agency, the Defense Contract Management Agency, or other governmental entities with cognizant oversight; individual business decisions of our clients; paradigm shifts in technology; competitive factors such as pricing pressures and/or competition to hire and retain employees (particularly those with security clearances); market speculation regarding our continued independence; material changes in laws or regulations applicable to our businesses, particularly in connection with (i) government contracts for services, (ii) outsourcing of activities that have been performed by the government, and (iii) competition for task orders under Government Wide Acquisition Contracts (GWACs) and/or schedule contracts with the General Services Administration; the ability to successfully integrate the operations of our recent and any future acquisitions; our own ability to achieve the objectives of near term or long range business plans; and other risks described in our Securities and Exchange Commission filings.
CACI-Earnings Release
| Selected Financial Data | ||||||||||||||||||||||||||||
| CACI International Inc | ||||||||||||||||||||||||||||
| Condensed Consolidated Statements of Operations (Unaudited) | ||||||||||||||||||||||||||||
| (Amounts in thousands, except per share amounts) | ||||||||||||||||||||||||||||
| Quarter Ended | Six Months Ended | |||||||||||||||||||||||||||
| 12/31/2017 | 12/31/2016 | % Change | 12/31/2017 | 12/31/2016 | % Change | |||||||||||||||||||||||
| Revenue | $ | 1,087,860 | $ | 1,057,530 | 2.9 | % | $ | 2,173,674 | $ | 2,130,810 | 2.0 | % | ||||||||||||||||
| Costs of revenue | ||||||||||||||||||||||||||||
| Direct costs | 727,160 | 705,321 | 3.1 | % | 1,466,838 | 1,433,542 | 2.3 | % | ||||||||||||||||||||
| Indirect costs and selling expenses | 254,180 | 253,822 | 0.1 | % | 515,424 | 511,160 | 0.8 | % | ||||||||||||||||||||
| Depreciation and amortization | 18,258 | 18,132 | 0.7 | % | 35,846 | 36,195 | -1.0 | % | ||||||||||||||||||||
| Total costs of revenue | 999,598 | 977,275 | 2.3 | % | 2,018,108 | 1,980,897 | 1.9 | % | ||||||||||||||||||||
| Operating income | 88,262 | 80,255 | 10.0 | % | 155,566 | 149,913 | 3.8 | % | ||||||||||||||||||||
| Interest expense and other, net | 10,956 | 12,325 | -11.1 | % | 22,203 | 24,814 | -10.5 | % | ||||||||||||||||||||
| Income before income taxes | 77,306 | 67,930 | 13.8 | % | 133,363 | 125,099 | 6.6 | % | ||||||||||||||||||||
| Income taxes | (65,489 | ) | 25,510 | -356.7 | % | (51,478 | ) | 46,016 | -211.9 | % | ||||||||||||||||||
| Net income | $ | 142,795 | $ | 42,420 | 236.6 | % | $ | 184,841 | $ | 79,083 | 133.7 | % | ||||||||||||||||
| Basic earnings per share | $ | 5.80 | $ | 1.74 | 233.4 | % | $ | 7.53 | $ | 3.25 | 131.9 | % | ||||||||||||||||
| Diluted earnings per share | $ | 5.66 | $ | 1.69 | 234.7 | % | $ | 7.33 | $ | 3.16 | 131.6 | % | ||||||||||||||||
| Weighted average shares used in per share computations: | ||||||||||||||||||||||||||||
| Basic | 24,622 | 24,387 | 24,555 | 24,363 | ||||||||||||||||||||||||
| Diluted | 25,211 | 25,069 | 25,228 | 24,998 | ||||||||||||||||||||||||
| Statement of Operations Data (Unaudited) | ||||||||||||||||||||||||||||
| Quarter Ended | Six Months Ended | |||||||||||||||||||||||||||
| 12/31/2017 | 12/31/2016 | % Change | 12/31/2017 | 12/31/2016 | % Change | |||||||||||||||||||||||
| Operating income margin | 8.1 | % | 7.6 | % | 7.2 | % | 7.0 | % | ||||||||||||||||||||
| Tax rate | -84.7 | % | 37.6 | % | -38.6 | % | 36.8 | % | ||||||||||||||||||||
| Net income margin | 13.1 | % | 4.0 | % | 8.5 | % | 3.7 | % | ||||||||||||||||||||
| EBITDA* | $ | 105,389 | $ | 98,793 | 6.7 | % | $ | 189,399 | $ | 187,032 | 1.3 | % | ||||||||||||||||
| EBITDA Margin | 9.7 | % | 9.3 | % | 8.7 | % | 8.8 | % | ||||||||||||||||||||
| Adjusted net income* | $ | 159,084 | $ | 57,777 | 175.3 | % | $ | 217,350 | $ | 109,299 | 98.9 | % | ||||||||||||||||
| Diluted adjusted earnings per share | $ | 6.31 | $ | 2.30 | 173.8 | % | $ | 8.62 | $ | 4.37 | 97.0 | % | ||||||||||||||||
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*See Reconciliation of Net Income to Earnings before Interest, Taxes, Depreciation and Amortization and to Adjusted Net Income on page 11. |
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| Selected Financial Data (Continued) | ||||||||
| CACI International Inc | ||||||||
| Condensed Consolidated Balance Sheets (Unaudited) | ||||||||
| (Amounts in thousands) | ||||||||
| 12/31/2017 | 6/30/2017 | |||||||
| ASSETS: | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 56,328 | $ | 65,539 | ||||
| Accounts receivable, net | 758,141 | 757,341 | ||||||
| Prepaid expenses and other current assets | 73,697 | 57,022 | ||||||
| Total current assets | 888,166 | 879,902 | ||||||
| Goodwill and intangible assets, net | 2,858,366 | 2,812,806 | ||||||
| Property and equipment, net | 101,470 | 91,749 | ||||||
| Other long-term assets | 136,131 | 126,625 | ||||||
| Total assets | $ | 3,984,133 | $ | 3,911,082 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY: | ||||||||
| Current liabilities | ||||||||
| Current portion of long-term debt | $ | 80,947 | $ | 53,965 | ||||
| Accounts payable | 91,056 | 62,874 | ||||||
| Accrued compensation and benefits | 234,999 | 239,741 | ||||||
| Other accrued expenses and current liabilities | 166,359 | 170,164 | ||||||
| Total current liabilities | 573,361 | 526,744 | ||||||
| Long-term debt, net of current portion | 1,070,846 | 1,177,598 | ||||||
| Other long-term liabilities | 353,106 | 413,019 | ||||||
| Total liabilities | 1,997,313 | 2,117,361 | ||||||
| Shareholders' equity | 1,986,820 | 1,793,721 | ||||||
| Total liabilities and shareholders' equity | $ | 3,984,133 | $ | 3,911,082 | ||||
| Selected Financial Data (Continued) | ||||||||||
| CACI International Inc | ||||||||||
| Condensed Consolidated Statements of Cash Flows (Unaudited) | ||||||||||
| (Amounts in thousands) | ||||||||||
| Six Months Ended | ||||||||||
| 12/31/2017 | 12/31/2016 | |||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||
| Net income | $ | 184,841 | $ | 79,083 | ||||||
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Reconciliation of net income to net cash provided by operating activities: |
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| Depreciation and amortization | 35,846 | 36,195 | ||||||||
| Amortization of deferred financing costs | 2,212 | 2,252 | ||||||||
| Loss on disposal of fixed assets | - | 975 | ||||||||
| Stock-based compensation expense | 12,389 | 10,557 | ||||||||
| Deferred income taxes | (83,212 | ) | 5,081 | |||||||
| Equity in earnings of unconsolidated ventures | - | (103 | ) | |||||||
| Changes in operating assets and liabilities | ||||||||||
| Accounts receivable, net | 7,367 | 71,080 | ||||||||
| Prepaid expenses and other assets | (10,107 | ) | 1,649 | |||||||
| Accounts payable and accrued expenses | 15,190 | (58,873 | ) | |||||||
| Accrued compensation and benefits | (11,126 | ) | (15,339 | ) | ||||||
| Income taxes receivable and payable | (3,796 | ) | (391 | ) | ||||||
| Other liabilities | 6,157 | 3,184 | ||||||||
| Net cash provided by operating activities | 155,761 | 135,350 | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||
| Capital expenditures | (22,013 | ) | (21,826 | ) | ||||||
| Purchases of businesses, net of cash acquired | (45,565 | ) | (5,605 | ) | ||||||
| Proceeds from net working capital refund | - | 13,619 | ||||||||
| Proceeds from equity method investments | - | 4,681 | ||||||||
| Other | (183 | ) | 1,051 | |||||||
| Net cash used in investing activities | (67,761 | ) | (8,080 | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||
| Net payments under credit facilities | (81,983 | ) | (98,491 | ) | ||||||
| Payment of contingent consideration | (3,630 | ) | - | |||||||
| Proceeds from employee stock purchase plans | 2,459 | 2,262 | ||||||||
| Repurchases of common stock | (2,463 | ) | (2,243 | ) | ||||||
| Payment of taxes for equity transactions | (12,656 | ) | (3,632 | ) | ||||||
| Net cash used in financing activities | (98,273 | ) | (102,104 | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 1,062 | (1,598 | ) | |||||||
| Net (decrease) increase in cash and cash equivalents | (9,211 | ) | 23,568 | |||||||
| Cash and cash equivalents, beginning of period | 65,539 | 49,082 | ||||||||
| Cash and cash equivalents, end of period | $ | 56,328 | $ | 72,650 | ||||||
| Selected Financial Data (Continued) | |||||||||||||||||||
| Revenue by Customer Type (Unaudited) | |||||||||||||||||||
| Quarter Ended | |||||||||||||||||||
| (dollars in thousands) | 12/31/2017 | 12/31/2016 |
$ Change |
% Change | |||||||||||||||
| Department of Defense | $ | 720,239 | 66.2 | % | $ | 684,673 | 64.8 | % | $ | 35,566 | 5.2 | % | |||||||
| Federal Civilian Agencies | 296,230 | 27.2 | % | 308,053 | 29.1 | % | (11,823 | ) | -3.8 | % | |||||||||
| Commercial and other | 71,391 | 6.6 | % | 64,804 | 6.1 | % | 6,587 | 10.2 | % | ||||||||||
| Total | $ | 1,087,860 | 100.0 | % | $ | 1,057,530 | 100.0 | % | $ | 30,330 | 2.9 | % | |||||||
| Six Months Ended | |||||||||||||||||||
| (dollars in thousands) | 12/31/2017 | 12/31/2016 |
$ Change |
% Change | |||||||||||||||
| Department of Defense | $ | 1,434,292 | 66.0 | % | $ | 1,376,876 | 64.6 | % | $ | 57,416 | 4.2 | % | |||||||
| Federal Civilian Agencies | 602,766 | 27.7 | % | 621,846 | 29.2 | % | (19,080 | ) | -3.1 | % | |||||||||
| Commercial and other | 136,616 | 6.3 | % | 132,088 | 6.2 | % | 4,528 | 3.4 | % | ||||||||||
| Total | $ | 2,173,674 | 100.0 | % | $ | 2,130,810 | 100.0 | % | $ | 42,864 | 2.0 | % | |||||||
| Revenue by Contract Type (Unaudited) | |||||||||||||||||||
| Quarter Ended | |||||||||||||||||||
| (dollars in thousands) | 12/31/2017 | 12/31/2016 |
$ Change |
% Change |
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| Cost reimbursable | $ | 549,400 | 50.5 | % | $ | 495,080 | 46.8 | % | $ | 54,320 | 11.0 | % | |||||||
| Fixed price | 365,634 | 33.6 | % | 361,141 | 34.2 | % | 4,493 | 1.2 | % | ||||||||||
| Time and materials | 172,826 | 15.9 | % | 201,309 | 19.0 | % | (28,483 | ) | -14.1 | % | |||||||||
| Total | $ | 1,087,860 | 100.0 | % | $ | 1,057,530 | 100.0 | % | $ | 30,330 | 2.9 | % | |||||||
| Six Months Ended | |||||||||||||||||||
| (dollars in thousands) | 12/31/2017 | 12/31/2016 |
$ Change |
% Change |
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| Cost reimbursable | $ | 1,103,129 | 50.8 | % | $ | 1,029,662 | 48.3 | % | $ | 73,467 | 7.1 | % | |||||||
| Fixed price | 724,380 | 33.3 | % | 704,454 | 33.1 | % | 19,926 | 2.8 | % | ||||||||||
| Time and materials | 346,165 | 15.9 | % | 396,694 | 18.6 | % | (50,529 | ) | -12.7 | % | |||||||||
| Total | $ | 2,173,674 | 100.0 | % | $ | 2,130,810 | 100.0 | % | $ | 42,864 | 2.0 | % | |||||||
| Revenue Received as a Prime versus Subcontractor (Unaudited) | |||||||||||||||||||
| Quarter Ended | |||||||||||||||||||
| (dollars in thousands) | 12/31/2017 | 12/31/2016 |
$ Change |
% Change | |||||||||||||||
| Prime | $ | 1,019,772 | 93.7 | % | $ | 984,642 | 93.1 | % | $ | 35,130 | 3.6 | % | |||||||
| Subcontractor | 68,088 | 6.3 | % | 72,888 | 6.9 | % | (4,800 | ) | -6.6 | % | |||||||||
| Total | $ | 1,087,860 | 100.0 | % | $ | 1,057,530 | 100.0 | % | $ | 30,330 | 2.9 | % | |||||||
| Six Months Ended | |||||||||||||||||||
| (dollars in thousands) | 12/31/2017 | 12/31/2016 |
$ Change |
% Change | |||||||||||||||
| Prime | $ | 2,032,975 | 93.5 | % | $ | 1,981,099 | 93.0 | % | $ | 51,876 | 2.6 | % | |||||||
| Subcontractor | 140,699 | 6.5 | % | 149,711 | 7.0 | % | (9,012 | ) | -6.0 | % | |||||||||
| Total | $ | 2,173,674 | 100.0 | % | $ | 2,130,810 | 100.0 | % | $ | 42,864 | 2.0 | % | |||||||
| Contract Funding Orders Received (Unaudited) | |||||||||||||
| Quarter Ended | |||||||||||||
| (dollars in thousands) | 12/31/2017 | 12/31/2016 |
$ Change |
% Change |
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| Contract Funding Orders | $ | 750,330 | $ | 751,703 | $ | (1,373 | ) | -0.2 | % | ||||
| Six Months Ended | |||||||||||||
| (dollars in thousands) | 12/31/2017 | 12/31/2016 |
$ Change |
% Change | |||||||||
| Contract Funding Orders | $ | 2,222,703 | $ | 1,914,594 | $ | 308,109 | 16.1 | % | |||||
Selected Financial Data (Continued)
Reconciliation of Net Income to Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), and Adjusted Net Income
(Unaudited)
The Company views Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Diluted Adjusted Earnings Per Share, all of which are defined as non-GAAP measures, as important indicators of performance, consistent with the manner in which management measures and forecasts the Company’s performance. Adjusted EBITDA is a commonly used non-GAAP measure when comparing our results with those of other companies. We define Adjusted EBITDA as GAAP net income plus net interest expense, income taxes, depreciation and amortization, and earnout adjustments. We consider Adjusted EBITDA to be a useful metric for management and investors to evaluate and compare the ongoing operating performance of our business on a consistent basis across reporting periods, as it eliminates the effect of non-cash items such as depreciation of tangible assets, amortization of intangible assets primarily recognized in business combinations, as well as the effect of earnout gains and losses, which we do not believe are indicative of our core operating performance. Adjusted EBITDA margin is adjusted EBITDA divided by revenue. We define Adjusted Net Income as GAAP net income plus stock-based compensation expense, depreciation and amortization, amortization of financing costs, and earnout adjustments, net of related tax effects. We believe Adjusted Net Income is an important measure of long-term value and is used by investors to measure our performance. This measure in particular assists readers in further understanding our results and trends from period-to-period by removing certain non-cash items that do not impact the cash flow performance of our business. Adjusted EBITDA and Adjusted Net Income as defined by us may not be computed in the same manner as similarly titled measures used by other companies. These non-GAAP measures should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||
| (dollars in thousands) | 12/31/2017 | 12/31/2016 | % Change | 12/31/2017 | 12/31/2016 | % Change | |||||||||||||||||
| Net income | $ | 142,795 | $ | 42,420 | 236.6 | % | $ | 184,841 | $ | 79,083 | 133.7 | % | |||||||||||
| Plus: | |||||||||||||||||||||||
| Income taxes | (65,489 | ) | 25,510 | -356.7 | % | (51,478 | ) | 46,016 | -211.9 | % | |||||||||||||
| Interest expense, net | 10,956 | 12,325 | -11.1 | % | 22,203 | 24,918 | -10.9 | % | |||||||||||||||
| Depreciation and amortization | 18,258 | 18,132 | 0.7 | % | 35,846 | 36,195 | -1.0 | % | |||||||||||||||
| Earnout adjustments | (1,131 | ) | 406 | -378.6 | % | (2,013 | ) | 820 | -345.5 | % | |||||||||||||
| Adjusted EBITDA | $ | 105,389 | $ | 98,793 | 6.7 | % | $ | 189,399 | $ | 187,032 | 1.3 | % | |||||||||||
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||
| (dollars in thousands) | 12/31/2017 | 12/31/2016 | % Change | 12/31/2017 | 12/31/2016 | % Change | |||||||||||||||||
| Revenue, as reported | $ | 1,087,860 | $ | 1,057,530 | 2.9 | % | $ | 2,173,674 | $ | 2,130,810 | 2.0 | % | |||||||||||
| Adjusted EBITDA | $ | 105,389 | $ | 98,793 | 6.7 | % | $ | 189,399 | $ | 187,032 | 1.3 | % | |||||||||||
| Adjusted EBITDA margin | 9.7 | % | 9.3 | % | 8.7 | % | 8.8 | % | |||||||||||||||
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||
| (dollars in thousands) | 12/31/2017 | 12/31/2016 | % Change | 12/31/2017 | 12/31/2016 | % Change | |||||||||||||||||
| Net income | $ | 142,795 | $ | 42,420 | 236.6 | % | $ | 184,841 | $ | 79,083 | 133.7 | % | |||||||||||
| Plus: | |||||||||||||||||||||||
| Stock-based compensation | 6,038 | 5,660 | 6.7 | % | 12,389 | 10,557 | 17.4 | % | |||||||||||||||
| Depreciation and amortization | 18,258 | 18,132 | 0.7 | % | 35,846 | 36,195 | -1.0 | % | |||||||||||||||
| Amortization of financing costs | 1,104 | 1,124 | -1.8 | % | 2,212 | 2,252 | -1.8 | % | |||||||||||||||
| Earnout adjustments | (1,131 | ) | 406 | -378.6 | % | (2,013 | ) | 820 | -345.5 | % | |||||||||||||
| Less: | |||||||||||||||||||||||
| Related tax effect | (7,980 | ) | (9,965 | ) | -19.9 | % | (15,925 | ) | (19,608 | ) | -18.8 | % | |||||||||||
| Adjusted net income | $ | 159,084 | $ | 57,777 | 175.3 | % | $ | 217,350 | $ | 109,299 | 98.9 | % | |||||||||||
Selected Financial Data (Continued)
Reconciliation of Net Income Excluding the Impact of Tax Reform
(Unaudited)
The Company views Net Income excluding the impact of Tax Reform, a non-GAAP measure, as an important indicator of performance, consistent with the manner in which management measures and forecasts the Company’s performance. Net Income excluding the impact of Tax Reform is defined as GAAP Net Income adjusted to exclude the impact of Tax Reform. We believe this is an important calculation to show company performance without the benefits of Tax Reform. Management is incented to perform via metrics without the impact of Tax Reform. This non-GAAP measure should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.
| Three Months | Six Months | |||||||||||||||||||
| (Amounts in thousands, except per share amounts) | 12/31/2017 | 12/31/2017 | ||||||||||||||||||
| Net | Diluted | Net | Diluted | |||||||||||||||||
| Income | EPS | Income | EPS | |||||||||||||||||
| Net Income, as reported | $ | 142,795 | $ | 5.66 | $ | 184,841 | $ | 7.33 | ||||||||||||
| Tax reform benefit from lower tax rate and other items | (7,100 | ) | (0.28 | ) | (7,100 | ) | (0.28 | ) | ||||||||||||
| Net Income before remeasurement and transition | ||||||||||||||||||||
| tax reform adjustments | $ | 135,695 | $ | 5.38 | $ | 177,741 | $ | 7.05 | ||||||||||||
| Remeasurement of deferred tax liabilities | (94,831 | ) | (3.76 | ) | (94,831 | ) | (3.76 | ) | ||||||||||||
| Transition tax on foreign earnings | 9,676 | 0.38 | 9,676 | 0.38 | ||||||||||||||||
| Net income, excluding impact of tax reform | $ | 50,540 | $ | 2.00 | $ | 92,586 | $ | 3.67 | ||||||||||||