Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Bill Loomis – Stifel Nicolaus
Bill Loomis – Stifel Nicolaus
On the gross margin I know you had higher ODC’s but you’ve had them for a while. Why does the gross margin hit an all time low in the quarter, yet your direct labor was up 14% so almost as high as your total revenue growth. What’s the component that’s going on with gross margin and where do we see that going over the next year?
Tom Mutryn
Two components of gross margin obviously are direct labor margins and ODC margins. In the quarter we continued to see strong ODC performance so everything else being equal that’s going to depress gross margins as ODC’s grow. That is one of the major drivers of the gross margin, it was down year over year and that was the major attributing factor to it.
The other factor that’s occurring is within direct labor and within ODC’s there is a variety of components. At any point in time CACI has over 2,000 task orders. Not all direct labor is created equal, not all ODC’s are created equal. As certain projects grow, certain projects contract we’ll see mixes within the direct labor margin category or the ODC margin category as well. A lot of moving piecing going on simultaneously and the net result is always moving pieces is the gross margin that we reported.
Operator
Your next question comes from Michael Lewis – BB&T Capital Markets
Michael Lewis – BB&T Capital Markets
I was wondering can we get a status on the ETOS recompete do you have any new information there?
Paul Cofoni
That recompete is due in March.
Bill Fairl
We’re currently thinking March.
Paul Cofoni
We’re feeling very confident we have been there a very long time. We’ve won successive recompetes. Our performance is strong and the client relationship is outstanding. We’re confident.
Michael Lewis – BB&T Capital Markets
Was that two previous recompetes that you won on that or three?
Bill Fairl
That relationship goes back many, many years, 20, 25 years in various contract forms before the client actually moved up to Fort Monmouth out here in Vint Hill Farms Virginia. There’s been a whole series of recompetes. Our success comes not from low price bids but instead from a really solid client relationship and best value deliveries over a whole series of recompete wins.
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