CACI International Inc (CACI) 2026 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the CACI International second quarter fiscal year 2026, earnings conference call. (Operator Instructions) I would like to turn the conference call over to George Price, Senior Vice President of Investor Relations for CACI International. Please Go ahead, sir.

Thanks, Rob, and good morning everyone. I'm George Senior Vice President of Investor Relations for CACI International. Thanks for joining us this morning. We are providing presentation slides, so let's move to slide 2. 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 or actual results to differ materially from anticipated. Those factors are listed at the bottom of last night's press release and are 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 that our presentation will include a 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 go to slide 3 please to open our discussion this morning, here's John Mengucci, President and Chief Executive Officer of CACI International. John.

Thanks, George. Good morning. Thank you for joining us to discuss our second quarter fiscal year 2026 results as well as our updated fiscal 2026 guidance. With me this morning is Jeff MacLauchlan, our Chief Financial Officer.

Slide 4, please I'd like to start the call by reiterating our strategy Why CCI is a company that no longer traditional industry labels, and how we are expanding the limits of national security?

You've heard us say many times the strategy is a place we come from our strategy defines where we are going what we are building and how we are ex executing the discipline and consistency.

We sure seven markets where we possess decades of mission knowledge, so we truly understand what our customers need within these markets we focus on enduring national security priorities with narrow, deep funding streams.

Differentiate ourselves by delivering cyberking technology to address critical needs with the speed, agility, and efficiency customers' demand. We invest ahead of customer need to show them the hours are possible, exactly what the current administration is asking for.

We have been doing this for years the market is coming to where we already are through deliberate actions, informed investments, and flexible and opportunistic capital deployment.

We have expanded our technology portfolio to nearly 60% of total revenue. Over the long-term, we expect technology to continue to increase as a percentage of revenue and support margin expansion.

I will share some additional information about two areas of our technology portfolio later in my remarks. Our results and accomplishments clearly demonstrate that CACI is not the company we work 10 years or even five years ago.

We are continuing to involve that's why you see us competing and winning against a wider range of competitors, including defence crimes and defence tech companies. It's why we are delivering consistent financial performance despite a dynamic and sometimes environment and it's why we are confident we will continue to drive long-term shareholder value.

Slide 5, please.

Speaking of performance, our strong second quarter results are another example of the success of our strategy and execution. We delivered free cash flow of $138 million which was driven by revenue growth of 6%, and he bits on margin of 11.8%.

He won $1.4 billion of awards, represented a book to bill of 0.65 times for the court, 1.4 times for the first half, and 1.3 times on a trailing 12 months. As a result of our strong first half performance, increased visibility, and a continued momentum of the business we are raising our 2026 guidance.

Slide 6, please.

Within technology, we have built a leading position in electronic warfare which alone represents about $2 billion in revenue. We have also established CACI as an industry leader, and a software development and software modernization, part of our enterprise portfolio.

And we recently announced the fantastic acquisition, ACA, which represents the latest step in our technology-driven portfolio evolution, and the execution of our space strategy.

These are all areas of significant and enduring investment by our customers which support long-term growth for CACI. I will spend some time talking about EW and enterprise technology.

Our software defined capabilities, electronic warfare, illustrate how our strategy and technology-driven evolution are driving our performance. It's a critical war fighting domain in an area where we position CE leader by investing ahead of need and delivering differentiated software defined technology.

We have known for years that virtually everything with a power button emits a signal. And today we are seeing the significance of this and conflicts around the globe and how it's impacting our customers' priorities and their budgets.

We have developed and deployed proven technology that allows war fighters to sense, identify, locate, and defeat these signals whether through targeted non-kinetic effects or by tipping and queuing other systems for kinetic ones.

Our software-defined approach provides increased speed, flexibility, lethality, and the ability to adapt as threats evolve. Exactly what's needed on the battlefields abroad and in defense of the homeland.

We want a number of programs of record with the Army and the Navy, rapidly developing, delivering, and fielding our EW technology and based on that success, we see growing demand for their services, including the Air Force.

An important benefit so-defined approach to EW is our ability to quickly adapt to new mission requirements, accelerate delivery of new capabilities and sell commercially to alternative acquisition models such as OTAs.

We have previously highlighted Merlin and RMT, our latest coinS and counterpace systems as two examples of this concept and customers are running positively to these proactive investments.

Deploying a Merlin demo unit to the southern border and placed in the first production order for R&T. We have been saying for years that software would be the enabler of greater agility, efficiency, and lethality and we are proving it by rapidly addressing and expanding set of missions.

This is a repeatable process, these successes are a clear validation of our strategy and differentiation and they position us well for additional opportunities and growth in the coming years.

Slide 7, please

Enterprise Tech technology is another area where CCI is strategically positioned well ahead of market demand. The current administration has made modernization a clear priority to drive efficiency, transparency, and operational improvement

As well as enhanced security we have been focused on this for many years, investing in commercial agile software development methodologies and building differentiated capabilities that are driving measurable results and significant value for our customers.

That's why we have won the three largest agile software development programs in the federal government a great example is our work with customs and Border Protection.

We're not just modernizing software we are delivering transformational efficiency. Nearly 200% increase in soccer releases over the last five years like for like cost reduction and exceptional software quality.

We are also bringing new AI software capabilities to CBP to help secure our borders, including AI-based object tracking technology that we initially developed for the intelligence community. This cross-pollination of innovation is a direct result of our strategic focus and investment approach.

Slide 8, please

We continue to see constructive macro-environment and good demand signals from our customers, while post shutdown activity is still a bit uneven in the near term. Our strategy has persisted CACI exceptionally well to outperform in this environment.

As 90% of our revenue comes from security customers, and we are seeing reconciliation funds starting to flow to several areas of our business. As a result of our strong performance and continued business momentum.

We are raising our fiscal year 2026 guidance. We now expect free cash flow of at least $725 million Revenue growth of nearly 8% to 10% and EBITDA margin in the 11.7% to 11.8% rate.

Finally, looking at our three year financial targets, we expect to exceed the $1.6 billion free cash flow target even after normal benefit from the changes to R&D capitalization from the one big, beautiful bill. As for our revenue in EBITDA dot margin target.

We are highly confident in our ability to hit the high end, if not exceed them. And I should note that none of our projections include any benefit from our planned acquisition of ARKA. But then I will turn the call over to Jeff.

Thank you, John and good morning, everyone.

Please turn to slide 9.

As John mentioned, we're pleased with our second quarter performance, despite the lengthy government shutdown. Our revenue and award generally reflect the modest shutdown disruption we expected, while our strong margin in cash flow highlight the enduring differentiated elements of our business enabled by our strategy and the directions that we have taken.

In the second quarter, we generated revenue of $2.2 billion representing 5.7% year over year growth, of which 4.5% was organic. Well, we saw some lingering impacts from the shutdown that impacted program timing and delayed some government material purchases in Q2.

Our confidence in raising our fiscal '26 guidance reinforces the broader strength that we're seeing. EBITDA margin of 11.8% in the quarter represents a year over year increase of 70 basis points. This performance was driven primarily by strong program execution, timing of some higher margin software defined technology deliveries an overall mix.

Second quarter adjusted diluted earnings per share of $6.81, 14% higher than a year ago. Greater operating income, along with a lower share count, more than offset higher interest expense and a higher income tax provision.

Finally, free cash flow was $138 million for the quarter, driven by our strong profitability and increased generation from working capital management day sales outstanding or DSO were 57 days.

Slide 10, please.

Our leverage at the end of Q2 is 2.4 times net debt to trailing 12-month EBITDA. We intentionally allowed leverage to drift slightly below our target range in anticipation of the acquisition of ARKA. As we announced in the call a month ago, we expect leverage to increase to 4.3 times once the acquisition closes.

I will remind you though, as I did on that call, that we have a strong track record of successfully and quickly delivering after major acquisitions, which is illustrated by our historical leverage, we provide the appendix. This underscores our consistent financial performance, disciplined approach to capital deployment in our demonstrated access to capital.

In fact, we expect leverage to return to the low three within six quarters of closing ARKA based on the strong cash flow characteristics of the combined business.

The acquisition of ARKA is just the latest example of our flexible and opportunistic capital deployment strategy and the evolution of our technology portfolio, which positions CACI to deliver long-term growth and free cash flow per share and additional shareholder value.

Slide 11, please

We're pleased to be increasing our fiscal '26 guidance across all metrics. We now expect revenue to be between $9.3 billion and $9.5 billion. This represents total growth of 7.8% to 10.1% which includes slightly less than 2 points of growth from acquisitions.

We're increasing our fiscal '26 EBITDA margin to be in the 11.7% to 11.8% range underscoring our strong execution and continued evolving portfolio.

As a result of our higher revenue and even outlook, we are also increasing our FY26 adjusted net income guidance to be between $630 million and $645 million. This yields an attendant increase in adjusted EPS to between $28.25, and $28.92 per share.

Representing growth of 7% to 9% despite last year's unusually low tax rate and finally, we are increasing our free cash flow guidance to at least $725 million.

Consistently saying we see free cash flow per share as the ultimate value creation metric in our FY26 guidance now implies a 65% growth in free cash flow per share.

To assist you with your modelling, I will note that for Q3 revenue we're comfortable with the current consensus estimate, and we expect second half EBITDA margin to be consistent with what we saw in the first half.

As John mentioned, our guidance does not include any assumptions for ARKA. The increase is solely due to the continued strength and momentum of our current portfolio.

Slide 12 please

Turning to forward indicators, all metrics provide good long-term visibility into the strength of our business.

Our second quarter book to bill of 5 times and are trailing 12 month book to bill of 1.3 times reflect good performance in the marketplace, even with the protracted government shutdown and slow rebound in award decisions.

The weighted average duration of our awards in Q2 was over six years. Our back $33 billion increased 3% from a year ago and our funded backlog increased 7% for the same period.

For fiscal year '26, we now expect 5% of our revenue to come from existing programs with 3% coming from recompete and 2% from new business. Progress on these metrics reflects our successful business development and operational performance and yields confidence in our higher expectations for the year.

In terms of pipeline, we have $6 billion of bids under evaluation. Over 70% of which are for new business to CACI. We expect to submit another $20 billion in bids over the next two quarters with over 70% of those being for new business.

In summary, we delivered strong results in the second quarter and continue to demonstrate our differentiated position in the marketplace. We are winning and executing high value enduring work that supports long-term growth, increased free cash flow, and additional shareholder value.

And with that, I'll turn the call back over to John.

Thank you, Jeff. Let's go to slide 13, please.

In closing, I want to emphasize that our continued strong results are not by accident, or rather the direct results of our deliberate strategy and execution we built CACI to be resilient and differentiated.

Delivering strong performance despite the sometimes challenging macrodynamic that's what happens when it's on expanding the limits of national security.

For us, this isn't just a phrase it describes our relentless focus on anticipating Charles's challenges in developing solutions to stay ahead of our customers' needs not just meet that we are truly differentiate CECI is our ability to shape the future rather than simply respond to it.

We don't wait for our fees, we proactively show our customers what's possible to strategic and innovation. This approach allows us to be disciplined in our shot selection, shaping opportunities where we know we can win.

As we look ahead, we remain confident in our ability to execute our strategy and deliver on our financial commitments. The momentum of our business, our healthy pipeline, and our strong first half performance enable us to raise our fiscal 2026 guidance across all metrics.

And with a pending edition of ARKA, we're further enhancing our position, critical space domain, which will drive additional growth in shareholder value.

As there's always, our success is driven by our 26,000 employees who are ever vigilant in expanding the limits of national security to everyone on the CACI team.

I'm extremely proud of what you do every day for our company and our nation and to shareholders, I thank you for your continued support of CACI. For that, Rob, let's open the call for questions.

(Operator Instructions) Gavin Parsons, UBS.

Good morning, guys.

Good morning.

You have maximum one more. Yeah, so in light of recent developments around the world, I wanted to ask higher level what higher US military op tempo means for CACI specifically and you know how that changes the op opportunity set in front of you.

Yeah, thanks terrific opening question. Look, today's op tempo is extremely good for CACI, because it requires much of what traditional companies, frankly, don't traditionally do our customers are demanding mission technology at the speed of mission.

So we can talk about exquisite EW differentiating rogue drones from friendly ones and mitigating risk. I like to say welcome to enemy changes their tactics and their technological footprint welcome to EW. Get 20 kg in and out of a country without any issue, welcome to EW.

We, frankly, do EW better and more strategically and more surgically than anyone. So, what does Zap tempo demand a few things. One would be resilient resiliency, I look at our solutions, their software defined they share a common baseline with a multitude of other sensors.

What that really means is when one sensor anywhere detects a new single all of its, features and how to mitigate that sent across a broad network of already deployed sensors the optrapo demands speed.

We have been really clear that we build enhancements and mitigations almost instantaneously, it demands optionality, so whether you are looking at hand handhelds, backpack, mobile fixed, short-range, long-range solutions.

They all come with a common software baseline and what the what the cost absolutely demands is it has to have some type of optionality, that allows them to acquire a commercially under par 12. So, to us think you op tempo, quick response, build in delivery provide your costs your best tech, provides investors with increased shareholder value.

Commercial terms, commercial investment model, commercial margins, at the end of the day, we're doing a lot of our commercial companies do, and we deliver eBay data as well.

Great, thank you very much. And then, it looks like the pipeline has submitted dead remains a little low, exiting the quoridor, but that, the expected bid number filled up pretty nicely in the quarter. Can you talk a little bit about how you're expecting things to, flow through that and you know what the cadence of conversion might look like as we move through the rest of the year.

Yeah, you're connecting those dots, the same way we do, Gavin. The one of the implications of the protracted shutdown that is a little less obvious, you could see the awards, obviously, but what you can't see is sort of the slower level of activity, it ramping back up, and I think the length of the shutdown with the ending of it leading into the holidays, put some amount of acquisition processes sort of behind the curve we do see that filling back up.

We feel that, getting back on pace, and we, and that's visible, I think in the pipeline when you see what we plan to submit over the next 180 days.

We obviously competitive reasons aren't going to comment on any particular opportunities or make any predictions about win rate or anything like that, but you can look at our historical performance on those metrics that we provide regularly on a consistent basis over a number of years, and you can, draw your own conclusions from that.

Great, thank you all.

Thanks, you bet.

Peter Arment, Baird.

Yeah, good morning, John and Jeff nice results. Hey, John, could you maybe give it, can you give us an update you recently, had a protest that you won, I think it was last Friday. It was a big, award that you won in August. Maybe how should we think about kind of the timing of that and just maybe any color you want to give on the protest. Thanks.

Yeah, sure, so as you mentioned, the, JTMS protest was officially denied last week, so we are in the process of starting to ramp up on the on that program we have already had meetings with our cost during the protest period, you would imagine.

We were ready for to go as soon as this was announced, in [termch] technology program, so that's going to wrap up, over extended period of time. So I think it'd be more of a benefit to growth in '27, '28, but you're clearly given the timing of the of the protest decision, that's going to help us drive our fourth quarter of revenue number, which I know you'll all be, watching.

It's a 10-year $1.6 billion job, it's going to be to [escorba] and that's which is very standard and look, we're extremely pleased, we're going to take, the off the shelf software platform. We're going to use SAP, which is a strong OE am we're going to take fast-paced, solutions.

We're going to use our agile software or our aid solution factory, our agile software development processes and I would expect Peter, the JATMS to consolidate a large number of disparate legacy system systems which fall directly in line with some of the Eos that we've read, and we have a couple other, protests out there still.

We're looking for them to resolve by the end of this month and we'll be sure to advise all of our investors when that happens.

That's a great call. Thanks, John. And just as a quick follow-up, you talked about reconciliation funding starting to flow could you just maybe, and then there's been a lot of activity behind the scenes on Golden Dome. How do you see that kind of impacting as you think about, the second half of this year, but also the set up for '27,

yeah, thanks Peter. Look, we're, we have our eyes on rock rockets, so I mean, and I know there was a lot of talk, is that going to be early in '26, late in '26, is a total of '27.

I think at the end of the day, the answer is yes to all three. For us, we're seeing border security programs being possibly impacted by seeing reconciliation funds starting. I did share something in my prepared remarks about taking some intel, AI-based tech technology that was, quote unquote plus of using accurate reconciliation funds.

You're going to see a lot of that hit in the count country area where obviously we see, already seen indications of that space programs, we've been called on to look at Modern modernizing a lot of the critical space force infrastructure, so we're working on that,

I think it go out around, modern modernization of Department of War Financial System ties directly to that EO. We are seeing a reconciliation funds show up there and then as a sort of relates to golden dome, we are seeing the number of integrams receive additional funding around left of launch, because that provides the ultimate situational awareness when you're looking to protect this nation in a in a golden dome scenario.

So we have included a range of outcomes in our updated guidance, your left goal post, clearly, a smaller amount of funding, the right goal post more funding, but look, at the end of the day, anytime somebody wants to add $150 billion to a market that this company is, doing extremely well in it's a constructive macro vial overall and really just doubles down on the strong demand signals that a company like us, can make great use of. So, thank you for those questions.

Appreciate the call. Thanks, bye.

Colin Canfield, Cantor.

Hey, thank you for the questions maybe starting out with the federal acquisition regulation, you mentioned it before, John, just talk us through kind of where we at in terms of the reform of the far and how we should expect both the magnitude and timing in terms of impact on any kind of called TACA exposure.

Yeah, I mean, I mean we're pretty much in line with the acquisitionary form. There, there's a large number of eels out there and there's a large amount of prints around, driving from costs to fixed price and just probably going to, are we going to completely move from far apart [15 to far apart 12], or we're going to talk elements of [12 into 15].

We're just going to go [12]. I mean, there's a whole bunch of different avenues what I like about what has come out and what's great for this company is that there's a new re recognition in exactly what far part [12] is, right?

I mean, I think you're seeing that tied to OTAs, look, at the end of the day, I think in, items that are not highly specific. But could be borne by our own corporate investments and take to the government in an 80% solution manner and then do some development work, codevelop with the with government funds and our funds that offer that into a long run of production.

I mean, I think that's the ultimate best way we're seeing other long-term cost plus programs, right? Colin those are trying to be moved into some different investment models, which is great.

We don't possess any of those, so we're still doing some cost plus work but make no mistake, this company was intentionally built to have a far-part 12 commercial part of our business in a far apart 15, we're able to provide customers either and or both and it's really driven the $2 billion of electronic warfare that that we have been talking about, so we are, very well poised to support where the government's going.

TSA Pack outstanding example, even RMT, even though it wasn't a specific OTA they had a lot of investment on our part, that then led to a, larger production order. So I think we're probably the 3rd or 4th inning of acquisition reform, but for this company, I believe that our results have shown that we're, well aligned, and we're going to drive even greater growth this week.

Colin and I'd add to John's point, we really are funding our rhythm here on OTAs. We have seen 2.5 times the level of OTA contracting in the last two years that we saw in the previous five years, so, it, it's really a mechanism that we're we and our customers are well aware of and taking advantage of.

Got it. I appreciate that color and then moving over to ARKA, maybe talk through kind of how you think about the scalability of the intelligent like the related intelligence services that you might gain or kind of grow over time thanks to the in bury optics business essentially like beyond just manufacturing work I think back to when you first bought SA Photonics and essentially utilizing the space-based hardware to inform the intelligence business, maybe just talk through kind of how you think about that earnings algorithm and then the scalability of it and where there's any kind of roadblocks that we should think about in terms of like the conflicts and the like.

I'm going to unpack that one colin. Look, let me, I will, let me just start off by saying that I'll share what we can share we are going to hold a lot of discussions around financials and backlog and the like, until we get that across the finish line and we close.

But it suffices to say that it's great for us to be able to share what we see in this in this company and in the business, they are a leading developer and supplier of sense and sense making cap capabilities, make no mistake, they were involved in critical national security mission.

What I liked about it similar to this company, they're at the forefront of technology developments, and they've been there since the Cold War. So these capabilities are not new, how they have to deliver, is not new.

The architectures, the archit delivers into, literally have acquisition plans that go out as far as planning goes to around 2040. They are right in the term growth funding streams for both DOD and classified row space budgets, they're focused on the fastest growing parts of the market. The laser warning systems, our equipment's of record on every platform to which they deliver.

They and they're talking about the Danbury business to your other set of questions, extremely high technical barrier entry. It's an environment of constant capability of upgrades their contract portfolio, combined with their outstanding record of execution, even in fixed price environment vivi's does distinguish them with their costs.

When I looked at this business and we, we've been studying it for quite a long time. The folks at Black Rock continued to invest in this business. Astone, sorry, continued to invest in this business. They continue to understand that the national security world needed an asset like AKRA.

So they didn't hold it for five years, they grew it and they invested in it. What I like about them is they invest ahead of need they innovate in the exe execute with agility. They deliver predictability, given cost and, schedule focus, so they are well set up to the earlier question around acquisition reform.

They are well understanding of costs versus fir firm fixed price, they do have a tremendous backlog that we'll be able to talk about when we get, hopefully as we get to the end of our third quarter, and we shouldn't ignore the sense-making part of their business.

That's a lot of work that they do similar to us, in an agile software development manner, they work on parts of the intelligence data we work on other parts, they do some things that we don't do, we do some similar things.

But you know they have differentiated capabilities they have long duration contracts; they're involved, they're very critical national security programs. Another nothing speaks larger than this company doubling down again in the space market, and this acquisition.

I know it dries out, leverage, up to [43] and such, we have the right buy down mechanism. But at the end of the day, you make bold investments to drive bold growth, and that's what this acquisition is about, and this is why we're very, we're very involved in the space market and driving future growth there. Appreciate the questions.

Thank you.

Seth Seifman, JPMorgan Chase.

Good morning. This is [Rocco on Prace].

Morning, Rocco.

Morning

Day and More on Peter's question. How are you thinking about khaki's addressable market from the reconciliation bill, both for COS in general and Merlin more specific, and how are you thinking about that market growth in the coming years?

Yeah, I knew as soon as I shared that we had a $2 billion slice of revenue in EW will be all looking for growth, news flash are probably not going to share what we see, but it's the reconciliation funding will do a lot in the EW area because as you all know we consider count UASP part of the par EW market.

It's probably worth spending just, twenty seconds on why we answer questions like dislike that, okay if we provide a cyber effect to be a dangerous drone is that cyber or is that counter UAS?

The answer is it's all EW, so that's why we lump this, in one area because we share software baselines we share, talent we share, tech technology solutions, so, the reconciliation dollars, is a tens of billions of dollars to our addressal market, we continually assess that as menu on is called --

No, we're looking at about $300 billion TAM or a nine, roughly $9.4 billion company, so, plenty more room to go grow, and even though that reconciliation funding is driving that. The world of counter UAS is going to completely explode beyond what the re reconciliation funding needs.

We're involved in the in our national market, marketplace. You mentioned Merlin, we've done some outstanding work there, but it suffices to say in the conner UAS area, there's less than about [25]

Organizations that have stood up and actually brought some of my notes there's [8] and within DOD [6] within [DHS]. You've got DOT, the FAA Department of Justice Department of Energy, Department of State, and Department of Elemental be, so there's a lot of folks out there.

The acquisition infrastructure is just getting set, we're actively engaging to expand our, presence, specifically with Jatta 401, DHS and then Golden Dome. So, there's a great fan looking to be done here and we are extremely well positioned.

Great, thanks. And then are there any specific items to call out in the civil business. News over the last year plus has been pretty negative about the demand environment and yet khaki's growing in the mid-teens on average over the period?

Yeah, those, that's really dominated by our CBP DHS work and the ramp up on NASA NC caps. So it's a little different flavour of that you may see there's really driven by DHS and NASA.

Great, thank you.

Yeah, thanks, [Roco].

Scott Mikus, Melius Research.

Morning, John and Jeff. A quick question with all the acquisitions you've made over the past 14 years, and the announced deal of ARKA tend to find that you're shifting more away from services in your here is more becoming defense electronic suppliers in particular L3 Harris.

But just given that the government is actually taking an ownership stake in all three's missile solutions business, you think that puts Kathy and all these other competitors at a disadvantage when competing for work with the Pentagon, given that the government owns will own a stake in all three hats.

Yeah, so, awesome, look, we see what's going on, and we've read about all of those various engagements, but at the end of the day we're seeing outstanding demand for our technology that we deliver.

We're able to meet that demand, we continue to execute our business well. We continue to invest ahead of need and have access to capital so we need to enhance our delivery capabilities, see what makes us different is that we got in the market at a time where we expected that because of one of the earlier questions, because of the op tempo, and because of the need to not only protect other countries, other nations, and our interests abroad, but also defend our nation that it was to require.

The fact that we would ourselves begin to invest ahead of customer need, so we are one of those companies. We have a, nakes, gigs, whatever code you want to call it that makes us governance services company, but it's been a number of years since you've all asked me what my bench strength is.

It's been a number of years since you asked me what my direct labour numbers were, because we're not that company. So, I enjoy being compared against others who are trying to make changes to adjust okay, those are changes you make because change has been presented.

We built this company purpose-built in this last instantiation of CACI to be in seven markets with strong funding streams that drive shareholder value in year over year growth, regardless of the government shutdown or not, regardless of reconciliation budgets slightly behind plans.

Okay, we're not a quarter to quarter company we're year to year and we're going to be a decade to decade company and we are exactly driving this business and measuring ourselves to make sure we are providing eye-watering tech technology to Department of War and the Intelligence Community.

That's what makes acquisitions like SA Photonics so important and LGS and mastodon and AA and others that it's driving, okay, where this company goes. So, really appreciate that question.

There's a lot of other things that are going on within this market marketplace. We focus on what we can control, and we like to think that we've got an outstandings strategy that moves along with the times.

And I think if you've been a shareholder in this company in the last 10 to 12 years, you have been quite excited, by the way we have a different funding forces and moving this company from delivering people to delivering enter enterprise and mission tech. So thanks for that question.

Okay, and then just a quick question I wanted to follow-up on Merlin. I don't know if I missed this earlier in the call any restrictions or obstacles that would prevent you from selling that internationally?

No, the actual system at itself, no, there's a software load which has different ways to mitigate specific threats, and as you would imagine, like any weapons system, there are software that allows all of us in the defense technology space to be able to, so there are, there will be some software provisos with that, but when it comes to defending this homeland, which is what Merlin was specifically built for, there are no issues of what we can do in the US between finding and providing exquisite non-kinetic effects to remove this entire drone layer threat to the --

Okay, got it. Thanks for taking the questions.

Yeah, thanks so much.

Tobey Sommer, Truist Securities.

Thank you. I'm wondering if you anticipate another strong year of defence spending growth in '27, the President, articulated a relatively large, indication and, wondering what your thoughts are on the matter.

Yeah, Toby, thanks. Look, I did read the government fiscal year '27 tweet of a $1.5 trillion, A little extra color, I believe it's supported by Saks and Haass, but I'm not clear whether I had support of the operators. I think we've got a little bit of time to see this one play out.

And I also think that's pretty, it's, still early, so we'll have to wait and see what comes from the government fiscal year '27, President's budget request, from what I understand, it will be a little bit later this year because you usually tags along when the state of state of the union announcement is so we may see at a few weeks off.

But look, I've often said this company where I don't focus on the budget offline. Either way our $300 billion TAM for a $9.4 billion company then we have plenty of room to grow.

We have, we've shown that when budgets have decreased and when they've increased, I think we're in the right markets, the right cop capabilities and the right customer sets, and at the end of the day in the national security realm at the threats present themselves. I've never seen this nation not invest to protect us either abroad or at home.

Thanks, John. My follow-up would be of the large contract wins that the company has won over the last maybe few or a handful of years how much incremental program Ramp remains in front of the company to help support future growth.

Yeah, that's no small amount. I mean, we, some of the recent contract programs that we have won, we have talked about the fact that the changing profile is such early phases of the program are really focused on designing and developing the balance of the program.

And so that has led to slower ramp ups and in fact, we're still seeing growth in ITAS earlier in this call we talked about the fact we pointed out the growing NASA N caps. Activity, even though those wins were, still a couple of years ago.

So if you think back to the ramp profiles that I talked about in our investor day, I guess over a year ago now there were three or four sort of standard profiles of our longer-term winds have been the profile where we don't really sort of reach our max until we are, a good three or four years into the into the program. So we still, we have wins from the last several years that are still ramping up.

Yeah, Toby, I, I'd also add a perfect example of that would be spectral, right? We've, in our third year, I believe, on Spectral, we have just recently done all the paperwork and testing that that we needed to submit, that would lead to a milestone sea decision, so and that is one that once we receive that allows us to get into a low rate initial production, which then starts to ramp spectral. So just one of many examples.

Exactly right.

Thank you very much, bye.

Jonathan Siegmann, Stifel.

Good morning, John, Jeff, and George. Thanks for taking my question.

Yeah, good morning.

Sure, John.

Hey, so I thought, margins definitely a good news, for the quarter and, the second time that it's really beating your expectations maybe for you Jeff, can you talk a little bit about what the drivers are. We noticed they're indirect costs are three quarter in a row less than 20 revenues, just any one-time thing to consider or how to think about the upside here. Thank you.

Yeah, thanks John. There's a couple of things going on in here we talked a little bit about mix, we continue to see, favourable acceleration in the technology partner which has which clearly has positive margin implications you also notice the indirect cost number.

We're in our, fourth year now of doing something that's pretty hard to do, which is reducing indirect cost as a of running the business, while we're in a strong growth mode organizations have a natural impulse, to grow in direct cost, in times of, accelerating business activity and we have been really hyper-focused on making sure that, we don't do that.

So, an absolute dollar, while there is some occasional increase that's in in in spots that's consistent with what we talk about often. John has a lot to say about investing at a need, and we're certainly not giving any of those things' short shrift.

We're investing where we need to invest, but at the same time resisting the impulse to just sort of let the infrastructure grow as the topline grows, so, both the tech technology revenue component acceleration and the management of the cost structure are both strong drivers of the margin performance that you see.

Thank you. And then maybe if I could flip one more for John, we, recently we've seen some unexpected, displeasure with dividends and buybacks by the government among the contractors, so the majority of the industry prioritizes that and but CACI has only done opportunistic buybacks and prioritized M&A.

So the question is, the Pentagon really is not supportive of large scale consolidation, but how does the Pentagon react to the acquisition that Dale, that's CACI does. Thank you.

Yeah, I mean, I haven't heard, a lot about, Any blocking us to continue to do smart acquisitions that support the national security infrastructure which at the same time then as a product of doing that drive shareholder value.

Look, we've read the EO and we are supporting it. We believe we're in line with it. We have strong execution. We deliver where we're asked to deliver. We continue to invest ahead of need for probably seven years is where we've been on that, on that model, as there's been a lot of talked about to some of the larger players, divest, do we unwind the, current drib we have, today.

I don't see that reaching the unwind piece, should that happen, we're a, we're a buyer of capability and customer relationships that continue to drive us forward in these seven markets and if that were to happen, it were to become much more specific, is that an opportunity for us to look at, pieces of other businesses that may have a better fit here that allows them to form the parts of their business that are strongly far apart 15 and get into more of --, agile commercial model so we can address the better then it, then that would be that would be additional and opportunities for us, but you know I don't see anything that we're doing today that inflict with that EO and we'll continue to watch where that one goes.

Thanks, John.

Thank you.

Thank you.

Mariana Perez Mora, Bank of America.

Thank you so much. Good morning, gentlemen.

Good morning,

So my first question is going to be around the Department of war wanted to hire more technical talent. They have, they telegraphed that in the past, but then through this Avana transformation, memo they put out a couple of weeks ago, also mentioned that they want to hire more technical talents. What that CACI like, do you see any pressure to any like FD type of roles or how you think about that?

Yeah, thanks, Mariana. Yeah, I think it's January 12th was on that one came out, when we look at the Evanna Par program.

I think it's in three different teams and just like award data platform team, the applications for the war data and then financial management team, we look at that as a great opportunity on the financial management team, it is, if I read the language correctly, it has a lot to do with financial, and acquisition, right

Ness systems and it's been this drive to drive a clean FY27 defence working capital Fund and clean FY29, pan agency audit we're really big on, financial modernization. We've got great examples with both the Air Force and the US Marine Corps, and then we're all already testing a major audit, so for us, on that pillar, that one reads well on the more data platform team in the apps we already do that

Across the federal government today on the hiring piece, it's not a risk to us we actually deliver technology in those areas.

We don't provide FTEs, the government services companies that do, but we're not one of them, we're out there delivering outcomes to customers in those in those spaces, and which is why we don't track just pure FTE to deployment.

So this isn't the first time the government's looked to quote unquote, in, insource or bring the that kind of work in house but you know that, that's a good question for them to answer, but it just doesn't fazzo, we don't see any, threat, from the EO.

Thank you so much. And one more time to assess potential risks and it, I think you have done through the prepared remarks and the question, a really good job explaining why you're well positioned to commercial terms, fixed price, OTA, but on the other side, do you see any risk for any of your existing early stage programs to get cancelled or stop work order or anything kind of like a stop and realign, redesign in order to have that contract or that program be more commercial in terms of like 80% type of capability, but also being able to be like higher volumes ramp up faster or even cheaper, like, do you see that risk in any early stage programs.

Yeah, no, I mean, I don't see any risk. In fact, I like the opportunity, of what the government has taken a look at --we, one example, yes, two examples. One would be customs and Border Patrol, our legal program, and one might Bets man pack.

If you look at Beagle, we approached the cost and asked them why you're buying 400 FTEs when you should be paying a fixed rate for every new upgrade to every app that you have so we were ahead of government thinking

On that and we're tremendously creative, acquisition folks at DHS within customs and border to actually put that program in place and that's driven to other customers, NASA and caps, TranscomJ TMS.

They're not buying people, they're actually putting task orders in place to actually deliver our outcomes on the TLS may unpack one, but that was a job that was owned by a major defence contractor, and we went and we approached the army with a concept of, let's put an OTA in place.

Let's do some development work, and then let's take our 80% solution and see where you where you can go with that, so, those are both examples of not the government coming to us and asking us to change what we're currently doing.

We actually approached them or we were in concert with them on TLS am ama. So the OTA model does work. You have to be willing to invest in, invest upfront. You have to have mission knowledge, and you have to have something that the government absolutely needs and wants, and that different

He just, every day, including Sundays, the one thing we need to understand about OTAs that we're going to see as the government moves more towards that you're going to see smaller initial awards for the development work.

But it's going to lead to a faster, larger production value of awards. So when I think about, and I wouldn't call it risk Mariano\a, but when I think about how we look at businesses like cars, we're used to, nailing down multibillion dollar awards in the pure technology areas.

Where costs going to do for part 12, the initial awards are going to be $10 million to $5 million or $7 million. Much sooner than that, we'll see that actual source production award come out that's what you saw with TLSAack, a $1 million, initial $500 million production contract.

Yeah, the size will not correlate with the strategic significance. Thanks, Mariana.

Thank you so much for the call.

Yeah, you bet

John Godyn, Citigroup.

Morning, John.

Thanks for fitting me in here, I wanted to ask, about margin, the margin performance has been very strong, of course there's been some mix in there you know this isn't about sort of new multiyear guidance, and obviously ARKA kind of will change the margin outcome, but it's bigger picture wanted to dialogue about where margins could go.

If we look at recent incremental margins, they would suggest it could go a lot higher. What are some of the puts and takes as we think about margins from here you've done a tremendous job the last few years getting margins higher. I'm just curious of that trend can continue.

Yeah, John, I think you've heard us, may have heard us talk about this before, but this is really for us, maybe somewhat not intuitively a free cash flow question.

The decisions that we make, our North Star is free cash flow. So if we have an opportunity to invest in a way that accelerates the top-line and maintains margin will generally select that over expanding the margin because we're generating free cash flow.

So really about dollars in free cash flow generation and we're in the happy position of seeing a pretty opportunity rich environment, in plenty of opportunities to invest, and I think as we're starting to see the fruits of the accelerating technology con along with the management of the cost structure that I talked about a few questions ago.

I think we actually have plenty of opportunities to invest and maintain or modestly expand the margin, but more importantly, and then more excitingly, have opportunities to further accelerate our free cash flow generation.

Perfect, that gives me a great sense, appreciate it.

You bet thanks John.

Sheila Kahyaoglu, Jefferies.

Good morning guys, and great quarter and expand upon John's last question. As we think about margins, stuff you just gave a bunch of, long-term thoughts, that's super helpful, maybe a little bit more on the long-term, like, do you think?

This margin range for CACI and how much further can it go and then maybe short-term you mentioned some disruption to material purchases due to the shutdown, how do we think about that mix factoring into the second half margin.

The material purchases are not, I mean they're a fact obviously there, we saw them and it was a not as big an issue as the mix in terms of waiting, you will see some growth. We do expect to see some growth in the material content year over half over half, but it won't significantly impact. It's considered in our guidance. It won't significantly impact the margin expectations that we've communicated to you. It happens to your question.

Yeah, perfect, thank you so much.

You bet.

And that concludes our question-and-answer session. I will now turn the call back over to John Mengucci for some final closing remarks.

All right, well, thanks, Rob, and thank you for your help on today's call. We want to thank everyone who dialled in or listened to the webcast for their participation. We know that many of you will have follow-up questions.

Jeff and George Price and Jim Sullivan are available after today's call. Please stay healthy and all my best to you and your families. This concludes our call.

Thank you and have a great day. This concludes today's conference call. Thank you for your participation. You may now disconnect.