Q3 2025 CACI International Inc Earnings Call

Speaker Change: Studies in Newfoundland, thank you for standing by and welcome to the CACI International Fiscal 2025

Speaker Change: Today's call is being recorded. At this time, all lines are in lesson only mode. Later we will announce the opportunity for questions and instructions will be given at that time. If you should need any assistance during this call, please press star zero and someone will help you.

Speaker Change: At this time, I would like to turn the conference call with the George Price Senior Vice President Investor Relations. Please go ahead.

Speaker Change: Thanks Kelvin and good morning everyone. I'm George Price, Senior Vice President of Investor Relations for CACI International. Thank you for joining us this morning.

Speaker Change: We are providing presentation slides, so let's move to slide two.

Speaker Change: There will be statements in this call that do not address historical facts in 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.

Speaker Change: But its factors are listed at the bottom of last night's press release and are described in the company's SEC violence. Our state powerver 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 a discussion of non-GAAP financial measures.

Speaker Change: These should not be considered an isolation or as a substitute for performance measures prepared in accordance with Gap. Let's turn to slide three please. To open our discussion this morning, here's John Mengucci, President and Chief Executive Officer of CSEI International.

John Mengucci: Thanks George, good morning everyone. Thank you for joining us to discuss our third quarter fiscal year 25 results as well as our update of fiscal 25 guidance.

5-4 please

Speaker Change: CCI's third quarter results represent an other strong quarter on our way to a great year.

Speaker Change: We delivered revenue growth of 12%, EBITDA margin 11.7%, the free cash flow over $188 million. In addition, we won $2.5 billion of awards representing a book to bill of 1.2 times for the quarter and 1.5 times on a trailer 12 months basis. [inaudible]

Speaker Change: We said it's not unreasonable to expect some slower decision making in the current environment where we continue to see our customers issuing our fees and making awards. In fact, so far in the fourth quarter, we have won an additional $1.3 billion of awards. [inaudible]

Speaker Change: The business is performing well, our strategy, differentiation, resilience and superior execution are born out by our results. We're in the right places, doing the right things and controlling what we can control. [inaudible]

Speaker Change: Given our strong execution and healthy pipeline metrics, we are raising our fiscal year 25 guidance for revenue, adjusted EPS and pre-cashable.

Speaker Change: Jeff will discuss this in more detail shortly, and we remain confident in our ability to achieve our three-year financial targets and to continue driving long-term growth and free cash flow per share and shareholder value.

Speaker Change: Flight 5, please. Turning to the macro environment, we continue to see good demand signals from customers in our key focus areas. The world is a dangerous place and demand is being driven by geopolitical realities as well as a new administration. [inaudible]

Speaker Change: We see a constructive funding environment with healthy budgets and an upward bias in national security spending and investment. And our strategy and capabilities are extremely well aligned with the new administration's priorities.

Speaker Change: As an example, Secretary of Defense, Hexf, recently issued a memo emphasizing the criticality of stopper-defying capabilities and mandating the use of the software acquisition pathway to pivot from a hardware-centric to a software-centric approach.

Speaker Change: We came to this same conclusion years ago that software would be the enabler of greater speed, agility, efficiency, and evenly felony and we developed a strategy and invested ahead of need to position CACI for where we saw the market going. [inaudible]

Speaker Change: The SECDF's directive is a clear validation of our strategy and the software based approach we employ in everything we do.

Speaker Change: On the budget front, visibility is beginning to improve. For fiscal 25, we have a full year continuing resolution in place that includes increased flexibility for our customers, allowing new starts in greater discretion and allocating funds.

Speaker Change: While there may be a learning curve for the DOD, given this is the first full year CR for defense, you won't expect any material impact to our business.

Speaker Change: Additionally, both the House and Senate recently passed separate budget reconciliation bills, which would provide additional funding for defense and border security. While these bills still have to go through the conference process, it represents significant incremental multi-year funding in key areas of our addressable market.

Speaker Change: Looking further out, government fiscal year 26 is still evolving. The president's budget request or PBR is not expected until the next month, but early comments are positive. The administration is showing support for a $1 trillion defense budget.

Speaker Change: Both the reconciliation bills and the PBR promise are strong signals for our business. It generates 90% of its revenue from solving the toughest challenges of the DOD, the intelligence community, and the Department of Homeland Security. Thank you very much, everybody.

Speaker Change: Finally, the Department of Government Efficiency, your dose continues to conduct the reviews.

Speaker Change: We've seen minimal impact thus far. Will we continue to stay close to our customers to support whatever they need?

Speaker Change: While Dojos is not done with its work, we remain confident that our strategy, differentiated software base capabilities, and superior program execution are extremely well aligned to the new administration and dojos' objectives.

Appeaster Strength,

Secure Borders, Increase Efficiency, and Technology Modernization

Speaker Change: Science, please. With that in mind, I'd like to highlight some of our recent successes on key programs supporting it during national security priorities.

Speaker Change: Approving commercial agile software development capabilities, and software defined approach on these programs. Continue to accelerate speed, agility, efficiency, and leafality across the national security space.

which is exactly what this Administration is asking.

Speaker Change: First, RTLS MAMPAC technology is a perfect example of our strategy playing out in the electromagnetic spectrum.

Speaker Change: TLS may affect is a commercially developed software-defying system that allows dismounted soldiers to conduct single detection, direction-finding, and electronic attack while on the move.

Speaker Change: Manpacked upgradable software and single sets, enable our award fighters to be more capable and more lethal, and demand for this technology continues to strengthen. Our program of record ceiling was increased this quarter, and the number of systems we have delivered has more than doubled, and will continue to grow. Thank you very much.

Speaker Change: GLSM Impact was even featured on the cover of the April edition of the Journal of Electromagnetic Dominance.

Speaker Change: Next, our Navy spectral program continues to progress well as we enter the next phase of the program. We are beginning to upgrade existing systems as interim steps to deliver enhanced capability to the fleet faster and enable a more efficient transition to the full spectral system.

Speaker Change: Spectral software to find capabilities at upgradable signal sets, enhance with AI to reduce the cognitive burden on the sailor. We'll make our work fighters more capable and more lethal.

Speaker Change: The continued success of the program is not only a resounding endorsement of our investing ahead of customer needs and our software defined approach, but also a great example of the strategic value of the Azure Summit acquisition.

Speaker Change: Next is one of our seven large network modernization programs, Army Sipper Mod. Here we are modernized in the US Army Secure Internet Protocol Network, a highly complex network for transmitting classified information around the globe. [inaudible]

Speaker Change: The software-defined network technology we're supplying includes ARCOT, which is a CACI commercial technology that was developed ahead of customer need and proved to be a crucial differentiator in one of the programs.

Speaker Change: We recently installed the first archon Gateway, which represents an important program milestone.

Speaker Change: The Army Supermod program highlights the significant opportunity for additional software to find network modernization across the federal government to increase security and delivery efficiency. And there's another great example of CECI winning by investing ahead of customer need. And there's another great example of CECI winning by investing ahead of customer need.

Speaker Change: Our support of DOD's push for financial accountability and transparency is at another success story. Last quarter we highlighted our work on the Defense Agency's initiative or DAI program where we have developed and deployed commercial software to enable successful financial audits for DOD agencies.

Speaker Change: This quarter I'm pleased to report another great milestone. The US Marine Corps recently received their second clean financial audit.

Speaker Change: CACI is the only technology company that has helped a service level agency in the DOD achieve a clean financial audit now for the second year in a row.

Speaker Change: And we've done the same for many other DoD entities as well.

Speaker Change: With the software we have implemented for the DAI, CACI has provided the blueprint for DOD agencies to successfully pass audits and provide financial accountability and transparency. When we expect other DOD agencies to follow them raincores example.

Speaker Change: Finally, this past February , our Beagle Program for DHS Customs and Border Protection saw the highest monthly volume of software releases ever. This significant increase in release demand was driven by the new administration's border security policy. [inaudible]

Speaker Change: Our agile software development capabilities are purpose-built for exactly this type of rapid changes and requirements.

Speaker Change: We're on track to deliver well over 1,000 software releases this year with greater than 99% defect-free quality.

Speaker Change: We are taking the same capabilities to NASA where our NCAPS program is increasing velocity and efficiency by consolidating software applications from 11 centers across NASA using the same proven commercial, agile software development processes combined with our six decades of mission focus.

Speaker Change: These examples highlight how CACI's differentiated software-based capabilities, commercial processes, and exceptional execution are helping our customers address critical and enduring national security priorities. And they're helping CACI continue to win, grow, and deliver value to our shareholders.

Site 7, please.

Speaker Change: In summary, our strategy and business remain resilient, as underscored by our continued strong financial performance.

Speaker Change: It's the reason we are again able to increase our fiscal year 25 guidance and remain confident in achieving our three-year financial targets.

Speaker Change: We remain positive, given increasing budgets and bipartisan support to the national security priorities that we focus on.

Speaker Change: We are executing our strategy that purpose build our business for this environment, and that continues to position us well to drive long-term growth, increasing free cash flow for share and additional shareholder value. Without alter the call over to Jeff.

Jeff MacLauchlan: Thank you, John . Good morning, everyone. Please turn to slide 8.

Jeff MacLauchlan: In the third quarter, we generated a revenue of $2.2 billion, representing 11.8% reported growth of which 5.6% is organic.

Jeff MacLauchlan: As John mentioned, our strategy that differentiates CACI from traditional competitors and our superior execution are evident in our strong results.

Jeff MacLauchlan: Third Porter Emitton Margin of 11.7%, represents a year-over-year increase of 40 basis points.

Jeff MacLauchlan: Similar to last quarter, EBITDA margin is above our previously stated expectations primarily due to the timing of certain software to find technology deliveries occurring in the third quarter. Excluding these items, third quarter EBITDA margin wouldn't have been in line with our comments last quarter.

Jeff MacLauchlan: Adjusted deluded earnings per share of $6.23 were 9% higher than a year ago. Radar operating income and our recent share repurchases more than offset higher interest expense and a higher income tax provision.

Jeff MacLauchlan: Third-quarter operating cash flow, excluding our accounts receivable purchase facility, was $204 million reflecting strong profitability and effective management of work in capital.

Jeff MacLauchlan: Day Sales Outstanding, or PSO, or 55 Days, Free Cash Flow for the Third Quarter was $188 million representing strong sequential and year-over-year increases.

Slide them in, please.

Jeff MacLauchlan: During the quarter, we announced that we would be initiating an open market repurchase program utilizing our existing share repurchase authority. Through the end of the quarter, we bought 436,000 shares at an average price of about $344 for share. The end of the quarter, the end of the quarter, the end of the quarter,

Jeff MacLauchlan: After completion of these latest repurchases, we have approximately $187 million remaining in our current authorization.

Jeff MacLauchlan: Including this latest activity, we have repurchased approximately 15% of our outstanding shares since FY21, while also completing 12 acquisitions during the same time period.

Jeff MacLauchlan: This track record is a testament to our flexible and opportunistic capital deployment approach.

Jeff MacLauchlan: Third-quarter net depth to trailing 12-month EBITDA was 2.9 times on a pro-forma basis, following the acquisitions of applied insight and Azure Subit, and reflecting the capital used this quarter for the share repurchases.

Jeff MacLauchlan: We remain well positioned to deploy capital in a flexible and opportunistic manner to drive long-term growth in free cash flow per share and shareholder value.

Site 10, please.

Jeff MacLauchlan: We are pleased to again raise our FY25 guidance as a result of our strong business performance heading into the fourth quarter.

Jeff MacLauchlan: We're raising the low end of our revenue guidance, with a new range of $8.55 to $8.65 billion, driven by stronger organic growth.

Jeff MacLauchlan: This represents total growth of 14.5% to 16% on an underlying basis which includes about six points of growth from acquisitions.

Jeff MacLauchlan: We continue to expect fiscal 25 EBITDA margin to be in the low 11% range and in light of our Q3 margin over performance that was driven by the acceleration of the software defined technology deliveries from Q4, we now expect Q4 EBITDA margin to also be in the low 11% range.

Jeff MacLauchlan: As a result of our higher revenue outlook, combined with a slightly lower effective tax rate and interest expense, we're also raising the low end of our adjusted net income guidance, with a new range of $543 million to $557 million.

Jeff MacLauchlan: This, along with our reduced share count, yields an attendant increase in adjusted earnings per share, to be between 24.24 and 24.87 per share, representing growth of 15 to 18% compared to last year.

Jeff MacLauchlan: And finally, as we're always focused on the efficient use of our capital, we're increasing our free cash flow guidance to be at least $465 million.

driven by a reduction in our CAPEX forecast.

Jeff MacLauchlan: About half of the CapEx reduction is related to capital efficiencies from using existing Azure capacity.

Jeff MacLauchlan: with the balance coming from other program efficiencies and the timing of program ramp-ups. As we've said before, we see free cashflow per share as the ultimate value creation metric, and our FY25 guidance now implies 22% growth in free cashflow per share.

Slide 11, please.

Jeff MacLauchlan: Turning to forward indicators are trailing 12 months book to bill ratio of one and a half times.

Jeff MacLauchlan: Reflect Strong Performance in the Marketplace. Our backlog of $31 billion increased 10% from a year ago and continues to represent almost four years of annual revenue. These metrics provide good long-term visibility into the strength of our business. [inaudible]

Jeff MacLauchlan: Entering the fourth quarter, more than 97% of our FY25 revenue is expected to come from existing programs, with about 2% coming from recon beads and less than 1% from new business.

Jeff MacLauchlan: Progress on these metrics reflects our strong operational performance and underpins our confidence in our updated expectations for the year.

Jeff MacLauchlan: In terms of our pipeline, we have $17 billion of bids under evaluation, nearly 80% of which are for new business to CACI.

Jeff MacLauchlan: The significant sequential increase in bids under evaluation reflects our strong business development performance and the sometimes lumpy timing of RFP issuance, proposal submission and award decisions.

Jeff MacLauchlan: We expect to submit another $10 billion of goods over the next two quarters with more than 75% of that being for new business.

Jeff MacLauchlan: In summary, we continue to deliver successful results in an uncertain environment, underscoring the resilience and durability of our business.

Jeff MacLauchlan: We are seeing healthy demand from our customers as we help them address printable national security priorities.

Jeff MacLauchlan: And we continue to win and execute high value and dirty work that supports long term growth, increasing free cash flow per share and additional shareholder value. And with that, I'll turn the call back over to John .

Thank you Jeff, let's go to slide 12 please.

Speaker Change: In summary, we deliver double-digit revenue growth, increased profitability, strong cash flow, and followed awards.

Speaker Change: Our performance positions us to again raise our fiscal year 25 guidance, and our scores are continued confidence in achieving our three year financial targets.

Speaker Change: Additionally, we opportunistically repurchased 150 million dollars of CACI shares to further enhance shareholder value.

Speaker Change: We continue to navigate a challenging and uncertain macro-environment thanks to the success and electrocution of our strategy.

Speaker Change: Strategy where we utilize commercial software development processes and everything we do. We invest ahead of customer need. We provide differentiated expertise in technology.

Speaker Change: The strategy enables CACI to continue delivering increased speeds, agility, efficiency and lethality.

Speaker Change: And we see proofpoint after proofpoint, that this is exceptionally well aligned to the administration's priorities.

Speaker Change: As is always the case, our success is driven by our employees' talent through innovation and their commitment.

Speaker Change: To everyone on the CACI team, I'm proud of what you do each and every day for a company and for our nation.

Thank you.

Speaker Change: And to our shareholders, I want to thank you for your continued support of CACI. But that tell them let's open the call up for questions.

Thank you. Thank you.

Thank you.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session. As we answer the Q&A session, we ask you to please limit your input to one question and one follow-up.

Speaker Change: And at this time, I would like to remind everyone to ask a question. Please press the star button followed by the number one on your telephone keypad. If you would like to withdraw this question, you should press star one again. One moment please for your first question.

Thank you. Thank you. Thank you.

Speaker Change: Your first question comes from the line of Scott Mikus of Melius Research. Please go ahead.

Speaker Change: Good morning Scott. Good morning Scott. Good morning. Nice very nice numbers. Quick question on on contract growth.

Speaker Change: Just wondering how that trended since the change in administration, you're finding any changes in customer behavior are they maybe not spending to the ceiling on some of their contracts, or some of the task orders from IDIQs coming out more slowly than you would have anticipated.

Speaker Change: Yes, Scott, thanks. So, if I look at our contract growth, you know, that's just one element of...

Speaker Change: of how we grow this business and how we have grown it through fiscal year 2025.

Speaker Change: We haven't seen any slowdown on our own contractual measures, we just talked about what our book to bill was in the third or quarter, so we haven't seen a material slowdown in awards.

and I think what else is? [inaudible]

Speaker Change: Talent as we look forward is the level of RFPs that we're responding to defected [inaudible]

Speaker Change: Bits to be awarded and visit, we're going to be submitting his repertoire, I think of a two or three billion dollars.

Speaker Change: from the last last period, really gives us the confidence that we're going to continue to see awards and funding that will drive future official growth.

Speaker Change: Okay, and then I know that you're not guiding to FY26 now, but I was just curious, how much revenue is already in that backlog, and are there any sort of major recompense that we should be aware of over the next 12 to 18 months?

Speaker Change: Yes, Scott, there's not one program that's, you know, more than 5% of our avenue. It's sort of a moderate re-compete year as we look forward to 26.

Speaker Change: Yeah, most likely we won't be sharing 26 items, the fact that we're still working through, where we're going in fiscal year 2026.

But it's actually building up.

Jeff MacLauchlan: Very, very well. And Jeff A. Nell, you want to add? Yeah, I would only add that Walton alludes to the fact obviously that we're doing our detailed FY26 planning right now. The positioning of the portfolio. The portfolio.

Jeff MacLauchlan: The pipeline that we see and the pace and rhythm of the business is very much aligned with our three-year targets for last fall. So, while we're not going to give you any details today on FY26.

Jeff MacLauchlan: The medium term horizon is very much consistent with what we saw then and see now.

Thanks, Scott.

Speaker Change: Your next question comes from the line of David Strauss of Barclays. Please go ahead.

Speaker Change: Hi, good morning, this is Josh Korn on for David. Nice results.

Speaker Change: I wanted to ask sort of an industry question about the DOD memo about insourcing or updating acquisition for TACC, you know, I guess

Speaker Change: You mentioned you haven't seen any major negative impacts from those, but just positively or negatively, how that could play out is that more of a short term impact or longer term impact when those policies are put into practice. Thanks.

Speaker Change: Yeah, Josh, thanks. Let me parse into a couple of couple of pieces. Let's talk about the EOS first. Look, there's a lot of executive orders and memos. They're being released and we are assessing all of them. [inaudible]

Speaker Change: A lot of the eos related to our industries are really focused on greater spending efficiency for the US government, especially in national security space.

There is a focus on remind decision making. [inaudible]

Speaker Change: So that we can get better capabilities that are warfighter faster and more efficiently, which clearly myself and I have certain others in the industry strongly support.

Speaker Change: But how we relate to these concepts are really central. [inaudible]

Speaker Change: To the strategy, we've outlined for a number of years which is why we embarked on a software-defined capability path because it's really in line where the world is going. So look, the details are going to be important. It's going to depend on how they're implemented. It's going to be implemented.

But we do continue to engage at the appropriate level.

Speaker Change: Josh, and we see it as a net positive for CACI over time. But you have to be specifically—

Speaker Change: Around how the government may be looking to buy based on some of those EOS. I'll just focus on the software pathway. One, because I think that's really well aligned to where we have been talking about this for years. It really is a pivot from a long-term program, hard work focus. I'll just focus on this.

Speaker Change: to a software-defined approach, and that's right in line with Agile's software development. Literally today we can overlay all the current metrics of the programs we've won the last six to eight years as it pertains to Agile.

Speaker Change: and show our customers today how we can align that to this new EO. Let's see, you also asked about George.

You know, I think that they're...

Speaker Change: They're still going through their reviews. Demandment impacts so far.

Speaker Change: We do continue support customers and those as questions are asked in every way they need but I have pretty strong confidence in the strategy of what we do that we're really well aligned to those those objectives. Thank you.

Speaker Change: and I guess from the roll-up, again we've got seven contracts that we're aware of.

Speaker Change: Including one that was already over when Doge's single that out. Potential annual revenue, $3 million.

Speaker Change: But for just about two million of that three, we don't have any formal contractual notification. So a $1,000,000,000 impact from where it doges that now really is a testament to the strategy we have.

Speaker Change: And we're going to keep talking about that over and over again because the strategy is such that doesn't mean we're going to be Doja Mune, I think to a great extent, we've positioned this business long before these concepts have come out, which is why we're so strongly supportive of them.

Thanks Josh.

Great, thank you very much, I'll stick to one. [inaudible]

Okay, thank you.

Speaker Change: Your next question comes from the line of Colin Canfield of Canter. Please go ahead.

A good morning. You want a dollar from through the clutch? [inaudible]

Speaker Change: I'm going to maybe talk to the budget Kate, it's contemplated in your investor-day target. That doesn't necessarily the top line. Do you need budgets or getting into FY26?

Speaker Change: guidance planning stretch, but maybe just how you think about kind of the outweigh mechanics and where expertise and technology are kind of more sensitized to typically we think of expertise is more O&M and technologies more R&D but any color that would be super helpful.

Speaker Change: C.R., Lousyren Newstars, G.S. H.S., More Discussion, Inflex, Flexibility, Filter Loser Funds, so that's a net positive, provides really good visibility and really good certainty.

Speaker Change: Security spending. Another thing to say a lot remains by partisan.

Speaker Change: And look, we're going to focus on the things that we can control. We're going to run the business and drive long-term growth and shareholder value. And on that front, we're doing very, very well. You talked about technology and expertise.

Speaker Change: Look, our strategy has always been to strongly align around key national security priorities and invest ahead of fate.

Speaker Change: and that's why we've been bringing differentiated expertise and tech, which does position us extremely well. So if we look at the FY 26 budget and we look at all the numbers we have now...

Speaker Change: as Jeff and I and the rest of the company look forward to doing 26 and beyond planning. I just want to share a little bit about how we see our long range plan, because there's a lot of questions about budget and timing. So here's a live look at it. Hope to bill. Thank you.

Fisker, 25, Q1 through Q3, Swung in support of awards.

Speaker Change: You've already booked 1.3 billion hours awards in Q4, with a large vine where Tobey awarded remains.

Speaker Change: We've got a number of large awards over the last two fiscal years. They contribute to our year of growth as they continue to unpack. I'm sure that during our investor day in the fall around how expertise and technology programs unpack, we haven't begun to see the unpacking of the spectral yet as well as some of several other programs.

Speaker Change: We've got an enviable backlog with at least four to six quarters of clarity on where growth is going to come from.

Speaker Change: On the funding side, a favorable government fiscal year 25CR, allowance for a new start, funding flex, flexibility.

And then you talked about future budgets.

Reconciliation Bales, [inaudible]

Speaker Change: Up to 150 billion dollars of defense spending, up to 200 billion dollars a DHS represents two thirds of the business that CACI executes your over here.

Speaker Change: We're seeing signals to support a $1 trillion government fiscal year 26 budget, and we have a portfolio that is really much aligned with peace and strength, China, Indo-Pay Com, protecting the whole land. So, when we look at those milestones,

Speaker Change: That we use to measure how our strategy is backing up and we're looking at where this customer sets going, whether it's George, whether it's G-F-G-S-A scrub list, whatever those are.

Those are quantitative measures that we need. [inaudible]

Speaker Change: to support our three-year plan. So high single-digit revenue growth, mid-11% margins, $1.6 billion of free cash flow, the use of which is not contemplated in the revenue and margin growth rates. We have things to navigate without a doubt, but where we are, folks, is not by accident, is by aligning a strategy ahead of customer needs. This is the end of our three-year plan. This is the end of our three-year plan. This is the end of our three-year plan.

Speaker Change: that makes up with the customer at the right time, and it's the right time.

Speaker Change: Gautam, and then maybe on the supplemental, is there a way to think about kind of how fast you think those monies can get started? Whether that supplemental is balanced more towards what I call as an O&M style cadence or more of an R&D style cadence?

on On The Outweighs. Thanks.

Speaker Change: Yeah, I think if we look at the picture, we have that visibility. I mean, we have a fair amount of work that's funded with O&M, but it'll be across both areas, I'm sure. We'll get more details.

Thank you, Paul. Thanks.

Speaker Change: The next question comes from the line of Tobey Sommer, of true insecurities. Please go ahead.

Thank you.

Speaker Change: Thank you. You mentioned the $1 trillion, you know, DOD budget.

Board of Security, other specific. [inaudible]

Speaker Change: Funding that represents sort of the biggest and best opportunities for the firm going forward that you could highlight for.

Speaker Change: Again, so we honestly a lot of us have the details behind the 150 and the 200 but I can share a little bit about where we've positioned within those areas.

Electronic Warfare is going to continue to be an issue.

Speaker Change: that as recently as last week, there were senior government officials talking about that how how woefully under invested we have been in electronic warfare.

Speaker Change: You probably can't talk about things like Golden Dome and I'd like to just say, you know, they're more of a base defense.

Speaker Change: for the China Fight Taiwan Defense. We've got a lot of bad actors still in some kind of today, so I think you're going to see a lot of people's abilities.

So that we can build out what those command commanders need. [inaudible]

Speaker Change: So there's a large number of areas on the defense side, on the DATHS side protecting borders. That's going to be everything from customs and border agents. I shared a lot of fantastic news and support that we have given to that agency for our people, people contract.

Speaker Change: I truly believe that something that's going to hit the sense of the whole land as well as border's jury is going to be, how do we? . . . . . . . .

Speaker Change: Trap and fine drones that are bringing a lot of nefarious things not only across the border but are also used by folks out of the border to traffic individuals. So I think that's another area.

Speaker Change: So, and then last, I tell you that on the D-O-D-O-D-I-T side and upper modernization side, dojos, some of their very initial comments, where once the savings pieces are done, you know, where do we have to place more investments versus cuts, and I tell you, we are well aligned.

Speaker Change: as a publicly traded company, as a 60-some-year-old company, to bring our expertise and our technology to both network modernization and the number of the improvements that the government would like to make in enterprise IT. Thanks, Tony.

Speaker Change: Thank you for my follow up. I was hoping you could update us on the development and ramp of production for in your optical communications business. Thank you very much.

Speaker Change: and maybe remind us of the leverage in that unit as you start to ramp production. Thanks.

Thank you.

Speaker Change: Yeah, thanks. Look, we are coming up upon making certain that we'll be delivering.

Speaker Change: At least six times greater than our FY 24 OCT, delivery bought by and during 2020-25.

Speaker Change: I'll first start off that SDA acquisitions to really large and very complicated programs, but in a lot of areas, both in optical terminals as well as space, craft, and bus design. We're all pushing the edges of technology in every term.

Speaker Change: But it's extremely relevant and time-sensitive to the future space dominance.

Speaker Change: So we have delivered 25 OCTs that are operating in space.

Speaker Change: which includes ten S.D.H. Ron Gerald, Tracking OCEATs. Those have already been used to approve all space-to-face, space-to-ground and space-to-air connections.

Speaker Change: We are right in the middle of production now. We're looking at deliveries by the end of this month.

Speaker Change: by the end of May and by the end of June . But I am very confident that we will hit our goal.

Speaker Change: for FAA Photonics and an LGS Photonics business of delivering six times, if not more, the number of deliveries should be last year. So, well on our way, we've solved an awful lot of

Difficult Production Problems

Speaker Change: But you would expect that because no one's ever put TV wild fiverr in optical terminal and pushed information through it. So, really please wear wear wear at. We'll start to see some of the investments in areas start to come down as we get to 25 and go into 26.

Speaker Change: Through 25, we would be giving, we would be getting, we would be delivering terminals in more volume by the end of 25. When we get north for our 26, time frame we'll be able to talk about what the backlog looks like and how we're going to achieve in more deliveries. Thank you very much.

Thanks for the question, Toby.

Thank you.

Speaker Change: Her next question comes from the line of Sheila Kahyaoglu of Jeffrey's. Please go ahead.

Good morning, guys. And thank you for the time. Um, um,

Speaker Change: Boarding. I appreciate the Doge comments, so maybe one big picture question and it's clear that.

CACF Facilio's position well with only 1 million impact. [inaudible]

Speaker Change: Another competitor yesterday made some comments about the perils of just-

Speaker Change: Devesting Government employees and how that potentially could impact contracts or the pipeline conversion. John , how are you thinking about that and how are you working with the government to maybe better educate them on the process. Thank you very much.

Speaker Change: Yeah, so Jeff, I thought it was starting, and I'll ask Jeff to actually come back to me. Yeah, so you know, we have been saying for some time, Sheila, that

Speaker Change: We sort of anecdotally are seeing some slight slowdowns in the sort of administrative pace of the business. So things like invoice approval, things like funding mods.

Speaker Change: The kind of day-to-day business of the business, things that used to take you know two or three days or you know are taking four or five days [inaudible]

Speaker Change: We're still feeling and seeing a little bit of that distraction, but it's been, you know, only mildly disruptive and relatively short-lived.

Speaker Change: and I think that's what really translates into us seeing really net, net, relatively little disruption to the business.

Speaker Change: Things are a little bit slower than they are in more normal times, but it's been very manageable disruption from our view.

Speaker Change: Sheila, I've had something else that too, maybe at an even larger level, I'll pertain to this company, maybe why we're different.

Speaker Change: We built resilience into our strategy. You all have heard me come up with this term lumpy, you know, for at least the 12 years I have been here in the four years I've been in this industry. I don't think there's ever been a customer who's award exactly on the day that they believe they were going to deliver. And now that's not a slight of our customer.

Speaker Change: But what it is is for us to have built this portfolio and strategy going forward. [inaudible]

Speaker Change: We had to make sure that we're more resilient than a, you know, end of the quarter, book to bill number because we're living hand to miles between awards and then revenue growth. So we're sitting here, we've got a quarter left, we've got maybe 1% now that we're in the fourth quarter. We're at the boards, we have to win to hit. .

The End of Year Revenue, so that's one marker. The End of Year Revenue,

The second broker is that...

Speaker Change: We've talked a lot about, you know, that April 20th looks the same as March 30th to me. And that's why we shared the $1.3 billion awards, which is something we haven't done in the past. But really to try to show that this strategy and how we grow.

Speaker Change: can expand and contract based on when the majority of these awards are let out. So that $1.3 billion could have easily been March 29th if we were in different times.

Speaker Change: and instead you didn't come out until middle of April . So I do feel that a lot of government employees are under an awful lot of stress and that is going to just naturally the human element. But I don't know if I have to advise or coach.

Dozier: Dosed or coached the government as to how they put awards out there. They've been pretty much in our portfolio, been pretty much on track. [inaudible]

Speaker Change: As well as issuing RFPs in areas that are really, really struggling because of layoffs and so on. I like where we are today but to your point we got a long way to go.

Speaker Change: And maybe if I could just ask one on program specifics with Spectral, can you maybe just give us an update on Azure and how the integration process is going on. You discuss some capability in that sense, but if you could provide an update there in the next milestone. [inaudible]

Speaker Change: Yeah, sure. Look, the integration is going very, very well. The folks from Azure Summit are very much contributing to Spectral.

Timeline, we're about six months.

in Tabina, Aggration.

Speaker Change: I cannot be more pleased they have brought incredible talent, technology, and integration capabilities.

Speaker Change: You know, we're a highly inquisitive company and you'll always say what a phenomenal group of folks, you know, whoever it is that we're bringing in. They have been proven it from day from day one. Thank you very much.

Speaker Change: and they've helped us collectively better address the challenges that we're going to be able to see in the Indo-Payton area.

Speaker Change: and they're proven to the mission could not be better. From a program side, it'll based on that we've aligned both programs under a blended leadership team.

Speaker Change: We can provide the best concept to our customers on getting capability to the field quickly. We are moving even faster and developing and deploying that generation support signals. What makes the combination to meet Sheila a real win is the win for our US Navy customer. [inaudible]

Speaker Change: is the fact that both companies have a similar view to open architecture, Angela Soft, Software Development, and we know how to be flexible and deliver a world-class system, so we're accelerating to use the open systems now.

We've got the IncF program, Inspector running side by side, yet staggered.

Speaker Change: We're going to bring plug-in play capabilities and what's most important in a non proprietary, non-licensed model.

which was to us as far as superior.

Speaker Change: to a licensing model where updates are based on the vendor's business case.

Speaker Change: Sheila, I would also add you will have noted I'm sure that our free cash flow increase for the year.

Speaker Change: is related to, as we get through the details of the integration, being able to optimize the capacity utilization of the Azure facilities that we've actually been able to reduce some of our spectral production capex vent plants.

Speaker Change: Your next question comes from the line of Gavin Parsons with UBS. Please go ahead.

Hey, thanks for the good.

4K, Mary,

Speaker Change: John , just wanted to follow through on what you're just talking about on the slowdown. Is there a common theme? I mean, is that the department level, the contracting officer level, is there turnover at your customer? Is there any common theme in that slowdown?

Speaker Change: Yeah, I mean, I guess one is, we're not seeing a material slowdown, I think we're seeing in some of the normal.

Speaker Change: Actions that have happened during other times, Gavin. I mean, I do believe that if you lay the human element on what worked, what the government is asking, contracting officers, you know, funny orders have not slowed down. If you look at our funded backlog, that portion is very, very strong.

Speaker Change: But if you look at the awards side, I do believe that people are going to one make sure they have the funds.

Speaker Change: Even though we're in a more open CR, it's still a year that we have a CR going on.

Speaker Change: I also believe that they're making sure that all eyes are dotted all tees are crossed. I don't think any acquisition official can have a flip up. And I won't have an opinion on that. That's their role. Our job is to put many proposals out there and their job is to select us.

Speaker Change: So I just don't see a pronounced slowdown and that's what's been driving really strong year-long to bills for us.

Speaker Change: Yeah, and I'd add, Gavin, if you think about my earlier comments about the sort of day to day business of the business, it's not isolated in any particular.

Speaker Change: Customer Set or any particular activity. It's more of just a general, you know, things take it there too longer than they used to.

Please see the complete disclaimer at https://sites.google.com

Speaker Change: I guess if you have executive orders every other day, you probably want to double-cross your team.

and Double Dot Europe.

I think there's some of that going around. Now, before we begin.

Speaker Change: Okay, now it's helpful. The $17 billion pipeline, I think that's a record. Is there a mathematical way to extrapolate that to a book to bill? Because you guys have done it better than a 1.2 book to bill on a smaller pipeline in the past or is that not a great comparison.

Speaker Change: Yeah, I think that's probably going to be a hard thing to do. There's a lot of variability in there across customer sets, across timing and periods of performance.

Speaker Change: Other than the fact that I would just reiterate that it's a positive development relative to the broader environmental view that we have of sort of our near and medium term prospects.

Speaker Change: Yeah, Gavin also looked at, you know, your question is, there's something we can learn from being news versus re-compete and oddly enough.

Speaker Change: Both of them are pretty much on the same timeline, the same percentage of jobs do award on time as some deliver lay. On contract growth clearly is much more predictable. We already have all the means. We have the contractual language in place.

Speaker Change: The customer's timeline is really just funny, intentional, funny, and putting that on contract.

Speaker Change: There's nothing there that we like to call it lumpy because we eat.

Speaker Change: Don't have a better forecasted metric, frankly, as scholarly things get awarded. What is important, though, is, as I shared earlier, is that...

Speaker Change: We're not living hand to mouth, we don't need to win a 200 million dollar job before we put 30 it to meet the end of the year revenue numbers and that's really a function of a multi-year strength teaching move for CCI.

Thanks, Gavin.

Speaker Change: Your next question comes from the line of Chan Anglebrecht of Fair. Please go ahead.

Chan Engelbrecht: Good morning, John , Jeff and George, from Gressel, another very positive result. Thank you very much. I think

Chan Engelbrecht: So I think we've talked about the topic today, but it might be a bit more specific question.

Speaker Change: Just started the ongoing GSR review and as it relates to cost savings initiative and we know that CACI is obviously going to exclude it from the top 10 list of contractors that's been making the headlines in sort of late February but are you?

Speaker Change: Informally, sort of part of that process with the GSA in terms of that review and can you just share anything that you've learned, I guess over the past two months, as part of that review what they're looking at, and then just obviously contrast that with your strong positioning that you're seeing on your contract.

Speaker Change: Yeah, thank you. So, we're not top 10 lists, everybody out there knows that, we don't consult, we do, we deliver outcomes.

Speaker Change: We have not been contacted, so I don't know the details of what they're all looking for. But as we said before, we have about 80 GSA programs.

Speaker Change: We've taken a stab at what codes they could be potentially pulling together.

Speaker Change: We have about a half a dozen of those in total across the entire eight half billion dollar portfolio.

Speaker Change: It adds to about $158 million total contract value, and you can hear total contract value

Speaker Change: As I shared earlier prior to this call, two of those programs are in extremely mission critical areas and very highly aligned and have full customer support on those.

Speaker Change: You know, I think the other question also in this, and I like to share a little a little bit, is there's a lot of discussions on cost savings ideas with GSA's, we've seen a lot of reports, you know, we haven't been in those meetings.

Speaker Change: But I think it's fair to say that frankly, we have been having those customer meetings over the last eight years.

Speaker Change: It really began when we began bringing commercial as a separate development to the federal government.

Speaker Change: Utilizing Devs.cobs, in already beginning, without those without GSA contract scrubs, moving customers from purchasing labor hours to developing digital app link.

Speaker Change: Applications. This is a strategy we've been explaining for a quite a long time. It is one of the material differentiators in the market, and simply stated the value proposition has always been between CACI and our customers, that by moving to a commercial-like model,

Speaker Change: Customers are going to inherently spend less to receive better outcomes that they can fully control without costly labor hour contracts.

Speaker Change: and the customer could then use those savings from their appropriate budgets and go by even even even more. So and at the end of the day, I think a customer who owns the software, which is critical national security, is more important than one that has bought multiple licenses.

Speaker Change: So, to me, we'll have a lot of talk about moving the federal government to a new place, and maybe one way to do that is to go through all these GSA contracts. I don't know, I'm not going to bother in that.

But from what we understand, we understand.

Speaker Change: All the discussions around how do you save the government costs? We believe we've been having those discussions. The most recent one was Renata, where it drove a multi-billion dollar award to consolidate 11 centers. So, this is not new news for us. It is a clear differentiator. Thank you very much.

Speaker Change: I don't know where the outcome of GSA contracts and NAICS and NICS and Elemental PX codes are going to be, but I'm rather confident that what we're doing is on the right side of right.

Speaker Change: And we've had a lot of these discussions, and it's why we open any other discussions, any other customers out there about how to get more from us.

Speaker Change: Thank you, John . Thanks for the detail there. Just a quick follow-up. Just within Conor Unmanned, it seems like you are in position and that's going to be a focus area under this administration.

Speaker Change: So could you just talk about CACI's positioning within the Conor Unman market today, and then just some potential neutral opportunities we've seen about the Army, CIC, 2.0 contract. I think that's about a billion dollars of funding through 27.

Speaker Change: and there's some counter-and-man systems in there. There's some EW systems, I think there's 250 that they're looking for. Is that anything that sort of that you're aligned with? Or could you just talk about the counter-and-mountain market for CSR?

Speaker Change: Yeah, I'll start with a strong fact that you've got over 5,000 EW Kanye West systems deployed all over the world today. We've got a lot to bring to the table. It's proven.

His deploys in cooperation, including both sensors and Conor E.S. Cape, Cape, Cape Abilities.

They are both coming from current program records.

Speaker Change: And everything we deliver has confirmed kills and are in fear.

Speaker Change: So they're not in a range, they're not in an exercise, they're not in a power point fight. They're actually out there driving confirmed kills for combat commanders.

If we look at two areas going going forward.

Speaker Change: Golden Dome will have some layer, I would imagine of air defense to it.

Speaker Change: We've been in the same meeting as everybody else has been. They're looking for sensors, effectors and command and control. We could talk about currently deployed systems as some companies are already talked about. There's a lot of capabilities out this has always been about netting them together in a more cost efficient manner and we believe that we have the right kind of solutions. The solutions.

Speaker Change: that combat not only the simple drones you can see are passed by but everything, everything from a level one to a level five class drone. So I think we'll see more specifics around Golden Dome. I think we'll see some discussions.

Speaker Change: from the event commands from North Com and the light around how they plan to defend the US in a broader manner. And then we can also talk about the authorizations are already out there for base commanders. Thank you very much.

Speaker Change: Press to be able to string some counter-resistence along the southern border to at least get a jump star on providing better border protection. So thanks very much for those questions.

Thank you.

Thank you very much.

Bye.

Speaker Change: Next question comes from the line of Seth Seifman of J.P. Morgan. Please go ahead.

Hey, um, thanks very much and good morning [inaudible]

Morning, Seth. Good morning, Seth.

Speaker Change: So first question I wanted to ask and apologize I might be betraying my lack of technical expertise when I asked this question, but when you talk about the software memo and ways that the government is buying software and I think that that memo has come up a lot in the trade press.

Speaker Change: What do you think about how you're going to market and how it changes your relationship?

if it does at all with hardware providers. .

Speaker Change: Does it create more opportunities for partnerships? It doesn't mean you have to spend less time thinking about what you're going to do with hardware providers because software will be more as a center, or is it just not really relevant?

Speaker Change: Yes, that's so let me take in two different pieces. So there's there's large hardware and then there's it's a component hardware similar to what

Speaker Change: The Azure Swift Play product does, right? You got to have memory and processing power to put this off, or on it to look in the EW County OAS world.

Speaker Change: But no, I don't think it fractures anything. I think it's built some great relationships, right? I think in the optical communications terminal area, right? A lot of that is soft software-based.

There's some hardware in there.

Speaker Change: But the N.V. World Mercer supplier to a lot of fantastic companies that are doing the actual larger platform based work and they do it extremely well. We've got a current large scale hardware providers on our spectral team.

Speaker Change: The Surferships for the United States Navy, and they work a lot of the top sight work. So I don't think it's...

Speaker Change: It's not a one versus the other, but I do strongly believe as we've been stating that-

Speaker Change: We don't get to make that vote, right? The enemy gets to vote as well, and the vote the enemy's making is quick changes on their TTPs their their tactics. Thanks.

and their procedures, which...

Speaker Change: Just because of nature of hardware and software, you can call it physical and digital. Whatever those terms are, but the the the software side can be modified quickly. [inaudible]

and provided new updates global.

Speaker Change: and a very cost-efficient and very secure manner. So, it's not that we all enjoy the pick one or over the other. We just believe because we're in the electronic world, where you meet the enemy's first. It's just that software is the only thing out there that can change. So, software is going to be there to change. [inaudible]

Speaker Change: And we need software engineers 3, 4, 5, 6,000 of them that are trained in being able to move the customer towards an edgel model.

Speaker Change: Then, you know, then that works. So at times, we're going to be delivering software solutions over hardware ones.

Speaker Change: And our times are going to be delivering software that are in concert with, right? No great software system can live out there alone without writing on somebody's platform. If you're looking at DOD or some of the national intel areas. So I think it's very, um...

Speaker Change: It's a very supportive ecosystem there, but customers are going to continue to pick software over the earlier one, 9 out of 10, and times were actually convinced.

Speaker Change: Great, that's very helpful. Just as a follow up, just a little more more detailed question in terms of the difference this quarter between between gross and net bookings. If you can address kind of what that difference was, obviously a little bit of a sensitive environment out there with regard to, you know, changes in bookings.

Speaker Change: Yeah, so we had a good science program and in early January without using the full expected amount of the ceiling value that we had earlier anticipated.

Speaker Change: It was actually before the inauguration so unrelated to kind of the current activities but it's a program that ended sort of naturally. Bye.

Speaker Change: and it happens from time to time. This quarter is a little bit larger than usual, but that's the that's the soul story.

Speaker Change: Okay, sure, good. Thanks. Thanks very much. Thanks, Sammy Q. Thank you.

Mariana Perez-Morales: Your next question comes from the line of Mariana Perez-Moral, Bank of America. Please go ahead.

So my question is about M-Money.

on this more uncertain environment.

Um...

How

Speaker Change: Strongest Pipeline of Opportunities. Number one, are these like target companies willing to sell or they want to wait until they have a little bit of more clarity or where things are going?

and the second one is...

Speaker Change: A so-for and agility become more apparent for sound players that were now focusing on that over the last couple of years. Have you seen an increase appetite for beaters on those targets?

Mariana Perez-Morales: Sure. Maria, I'm the first one around an M&A. Look, it's an important use of capital, but it's not the only one and everybody else knows that we make those decisions by valuing the dynamics at any given time.

Mariana Perez-Morales: Look, we always are continuing to pursue our preemptive emanate strategy and strategy to continue to touch a number of those on our next up list.

Mariana Perez-Morales: By I think that to admit the valuations and expectations are not favorable on the sellers and so action ability.

Mariana Perez-Morales: Many of our target analysts is going to be low. It's why we're very focused on flexible and upward

Mariana Perez-Morales: to Mystic, I think, will be there for some time, Chef. Yeah, John's just right. I won't recover a lot at the same ground, but I've talked for...

about the fact that we maintain a list. [inaudible]

and we stay in regular contact. Thank you.

Mariana Perez-Morales: with a great number of people and a great number of places and situations and it's certainly true that when you go through a period like we're in now where valuations are a little unclear. Thank you.

and Kyle Bowens.

Mariana Perez-Morales: Obviously, sellers are, you know, disinclined to act in the absence of some other, some other reason. And so generally you see what we're just what we see and are expected to see, which is a slightly lower level of activity and interest in transacting. The other side of that is, you know, when things start to clarify. Bye.

You know, sometimes that volume will, will pick up. [inaudible]

Mariana Perez-Morales: So we remain sort of attentive and poised to take advantage of things as they present themselves and both we and sellers have more clarity on what things are worth and where you know where priority is maybe manifesting themselves in action. [inaudible]

Mariana Perez-Morales: and on the second item around software agility and its importance and you know who we see in some of those Jeffer markets.

Mariana Perez-Morales: I think when you look at a customer, we've had eight years of experience on this now.

Mariana Perez-Morales: If a customer is going to move to a new world.

of

Moving into Agile where they can...

Mariana Perez-Morales: Spiral and continue to create new requirements and see capability deliver out to that field. And their hands are highly off of the actual software development. They're more on the actual order of requirements. . . .

That's a new world and that requires...

Mariana Perez-Morales: Customers don't want to push that button, but they've always been afraid to push. [inaudible]

Mariana Perez-Morales: And when they push it, they want to do it with people who don't say they can do it.

Mariana Perez-Morales: But they prove that you can do it. And the beauty of agile software development over the last eight years, we have almost a decade of metrics that show how quickly we can release these.

Mariana Perez-Morales: and also how can we prevent new errors from getting into the system because of changes by 20 new capabilities in? That's not an easy thing. People talk about angel software development like it's a phrase.

Fahoe Ikon, System S

Mariana Perez-Morales: Millions and millions of dollars of CACI's investments. It's millions and millions of dollars of training software engineering folks.

Mariana Perez-Morales: to make certain that they can not only deliver, but they can also talk to the customers about how they would move them down there. So, are there other folks submitting bids in these areas? Yes. Do we like our last eight-year win rate? Yes.

So, I think there's-

Mariana Perez-Morales: Large market out there for us to continue to grow in these types of programs. Every market always has competitors coming into it.

Mariana Perez-Morales: Probably 35,000 competitors delivered to DOD today, so I'm not sure that adding six or seven more really make that different.

Mariana Perez-Morales: because I think the issue is around, how can we get our customers more lethal and get upgrades to them and a more faster, a faster, some manner?

Thank you.

Operator, I think that's all the time we have.

Speaker Change: There are no further questions at this time. With that, I will turn the call back to John Mengucci for final closing remarks.

John Mengucci: Okay, well, thanks, Calvin, and thank you for all of your help on today's call. Before we go, I did want to just recognize Rob Spingarn, who covered this company, many of us within the sector for a number of decades.

John Mengucci: A fantastic analyst, always fair. We may not have always agreed, but he always had the investor view in mine. I just want to wish his family well.

John Mengucci: We would like to thank everyone who dialed in or listened to the webcast for their participation. We know that many of you will have follow-up questions. So, John McLaughlin, George Price, Jim Sullivan, are going to be available at today's call. Please stay healthy on my best of you and your families. Operators concludes our call. Everyone, thank you and have a great day.

Thank you.

John Mengucci: It is in gentlemen, this is the conference call. We thank you for participating and as a speech to please connect your lines.