Q1 2027 CACI International Inc Earnings Call

October 22, 2026

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the CACI International First Quarter Fiscal Year 2027 earnings conference call. Today's call is being recorded. At this time, all lines are in a listen-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 the call, please press star zero and someone will help you. At this time, I would like to turn the conference over to George Price, Senior Vice President of Investor Relations for CACI International. Please go ahead, sir.

Speaker #1: Ladies and gentlemen, thank you for standing by. Welcome to the CACI INTERNATIONAL FIRST QUARTER FISCAL YEAR 2027 EARNINGS CONFERENCE CALL. Today's call is being recorded.

Speaker #1: At this time, all lines are in listen-only mode. Later, we will announce the opportunity for questions, and instructions will be given at that time.

Speaker #1: If you should need any assistance during the call, please press *0 and someone will help you. At this time, I would like to turn the conference over to George Price, Senior Vice President of Investor Relations, for CACI INTERNATIONAL.

Speaker #1: Please go ahead, sir.

George Price: Thanks, Morgan, and good morning, everyone. I am George Price, Senior Vice President of Investor Relations for CACI International. Thank you 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 our 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 out that our presentation will include discussion of non-GAAP financial measures.

Speaker #2: Thanks, Morgan, 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 #2: We are providing presentation slides, so let's move to slide 2. There will be—excuse me—there will be statements in this call that do not address historical fact, and as such, constitute forward-looking statements under current law.

Speaker #2: 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 #2: 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.

Speaker #2: I would also like to point out that our presentation will include 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.

George Price: These should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP. Let's turn to slide 3, please. To open our discussion this morning, here's John Mengucci, President and Chief Executive Officer of CACI International. John.

Speaker #2: Let's turn to slide 3, please. To open our discussion this morning, here's John Mengucci, President and Chief Executive Officer of CACI International.

Speaker #3: John.

John Mengucci: Thanks, George, and good morning, everyone. Thank you for joining us to discuss our first quarter fiscal year 2027 results. With me this morning is Jeff MacLauchlan, our Chief Financial Officer. Slide 4, please. Before turning to our results, I want to remind you that CACI is a technology-first national security company executing a clear and consistent strategy. The key elements of that strategy are, first, focus on enduring national security priorities with narrow, deep funding streams. Second, utilize our deep mission knowledge in the markets we serve to truly understand what our customers need. Third, invest ahead of customer need, informed by that deep mission knowledge. Fourth, deliver software-defined technology to address critical needs with the speed, agility, and efficiency our customers demand. Finally, deploy capital in a flexible and opportunistic manner to create value for our customers and our shareholders.

Speaker #2: Thanks, George, and good morning, everyone. Thank you for joining us to discuss our first quarter fiscal year 27 results. With me this morning is Jeffrey MacLauchlan, our Chief Financial Officer.

Speaker #2: Slide 4, please. Before turning to our results, I want to remind you the CACI is a technology-first national security company executing a clear and consistent strategy.

Speaker #2: The key elements of that strategy are first, focus on enduring national security priorities with narrow, deep funding streams. Second, utilize our deep mission knowledge in the markets we serve to truly understand what our customers need.

Speaker #2: Third, invest ahead of customer need and form by that deep mission knowledge; fourth, deliver software-defined technology to address critical needs with the speed, agility, and efficiency our customers demand; and finally, deploy capital in a flexible and opportunistic manner to create value for our customers and our shareholders.

John Mengucci: This strategy is the driving force behind our strong and consistent results. Slide 5, please. We had an excellent start to fiscal year 2027. Q1 revenue grew 8%, EBITDA margin reached 13.3%, adjusted diluted EPS increased 12%, and we generated $133 million in free cash flow. We also won $4.8 billion in awards, producing a 2 times book to bill for the quarter. We have a large and growing backlog, and our funded backlog grew double digit year over year for the seventh time in the last 8 quarters. Our margin performance stands out. It reflects superior execution and a higher mix of differentiated technology we delivered this quarter. We are raising our revenue and earnings guidance for the year, and Jeff will share additional details shortly. Our results, awards, backlog, and pipeline give us a strong foundation for the fiscal year and support our increased guidance. Slide 6, please.

Speaker #2: This strategy is the driving force behind our strong and consistent results. Slide 5, please. We had an excellent start to fiscal year 27, first quarter revenue grew 8%, EBITDA margin reached 13.3%, adjusted diluted EPS increased 12%, and we generated $133 million in free cash flow.

Speaker #2: We also won $4.8 billion in awards, producing a two-times book-to-bill for the quarter. We have a large and growing backlog, and our funded backlog grew double-digit year over year for the seventh time in the last eight quarters.

Speaker #2: Our margin performance stands out. It reflects superior execution, and a higher mix of differentiated technology we delivered this quarter. We're raising our revenue and earnings guidance for the year, and Jeff will share additional details shortly.

Speaker #2: Our results, awards, backlog, and pipeline give us a strong foundation for the fiscal year and support our increased guidance. Slide 6, please. Let me discuss in more detail some highlights from the quarter and the demand that we're seeing, which are driving our results and positioning us for continued success.

John Mengucci: Let me discuss in more detail some highlights from the quarter and the demand that we are seeing that are driving our results and position us for continued success. I will start with two fantastic awards for technology-enabled operational support that exemplify our enduring commitment to national security. First, our Apollo award, where CACI will enable CENTCOM to carry out critical intelligence and information warfare missions. Our success in winning this new work for CACI stems from our deep mission knowledge, our exceptional business development, and our superior ability to utilize and combat AI in the information domain. The second award is SOF TOPS II, a five-year follow-on contract supporting the Army's Special Operations Command. It reflects the trust we have built through years of work with this customer and extends our role helping special operators plan for and respond to evolving threats using our technology-first approach.

Speaker #2: I'll start with two fantastic awards for technology-enabled operational support that exemplify our enduring commitment to national security. First are Apollo Award, where CACI will enable CENTCOM to carry out critical intelligence and information warfare missions.

Speaker #2: Our success in winning this new work for CACI stems from our deep mission knowledge, our exceptional business development, and our superior ability to utilize and combat AI in the information domain.

Speaker #2: The second award is SoftOps 2, a five-year follow-on contract supporting the Army's Special Operations Command. It reflects the trust we've built through years of work with this customer and extends our role, helping Special Operators plan for and respond to evolving threats using our technology-first approach.

John Mengucci: Our electronic warfare portfolio continues to see strong demand. That is certainly true in the counter-UAS market, a significant and growing opportunity for CACI. Beyond protecting our war fighters, the growing threat to military facilities and critical infrastructure is driving demand for precision non-kinetic counter-UAS capabilities like SkyValor. SkyValor leverages nearly two decades of proven counter-UAS deployments, industry-leading cellular detect and defeat capabilities, and enables detection up to 75 kilometers so operators have more time to make critical decisions. Our prospective counter-UAS customer base is expanding across the US government and internationally. A great example is our $500 million domestic shield award from JIATF 401, which also included an initial funded task order. We are also seeing increased demand for our BEAM man-packable counter-UAS systems from US customers and allies across Europe and the Pacific Theater.

Speaker #2: Our electronic warfare portfolio continues to see strong demand. That is certainly true in the country UAS market, a significant and growing opportunity for CACI.

Speaker #2: Beyond protecting our warfighters, the growing threat to military facilities and critical infrastructure is driving demand for precision, non-kinetic counter-UAS capabilities like SkyVelor. SkyVelor leverages nearly two decades of proven counter-UAS deployments, industry-leading cellular detect and defeat capabilities, and enables detection of up to 75 kilometers, so operators have more time to make critical decisions.

Speaker #2: Our prospective counter-UAS customer base is expanding across U.S. government and internationally. A great example is our 500 million dollar domestic shield award from Giant 401, which also included an initial funded task order.

Speaker #2: We're also seeing an increased demand for our beam manpackable counter-UAS systems from U.S. customers and allies across Europe, and the Pacific Theater. Beam is the most technically capable system of its kind on the market, with over a decade of proven performance and important discriminator for prospective customers.

John Mengucci: BEAM is the most technically capable system of its kind on the market with over a decade of proven performance and important discriminator for prospective customers. In the critical space domain, we are capitalizing on increasing demand as a leading merchant supplier of optical imaging and optical communications payloads. CACI was recently selected by Vantor, a commercial provider of satellite-based intelligence, to supply advanced optical imaging payloads for their Pulse satellite fleet. That work is an example of taking ARKA's exquisite sensor capabilities developed for national security missions and applying them to a more proliferated commercial market, which is exactly what the US national security strategy calls for. ARKA has a number of other sensitive opportunities in the national security space domain that are moving forward and are expected to contribute financially in fiscal year 2027. We are also making progress in optical communications.

Speaker #2: In a critical space domain where capitalizing on increasing demand is the leading merchant supplier of optical imaging and optical communications payloads. CACI was recently selected by Vantor, a commercial provider of satellite-based intelligence, to supply advanced optical imaging payloads for their pulse satellite fleet.

Speaker #2: That work is an example of taking ARCA's exquisite sensor capabilities developed for national security missions and applying them to a more proliferated commercial market, which is exactly what the U.S.

Speaker #2: national security strategy calls for. ARCA has a number of other sensitive opportunities in the national security space domain, that are moving forward and are expected to contribute financially in fiscal year 27.

Speaker #2: We're also making progress in optical communications. We expect to complete SDA Tranche 1 deliveries later this calendar year and begin work on Tranche 2.

John Mengucci: We expect to complete SDA Tranche one deliveries later this calendar year and begin work on Tranche two. CACI was also one of three companies selected to advance to phase III of the Space Force's Enterprise Space Terminal program, where we are developing the next generation optical communication terminal to support critical multi-orbit initiatives like the Space Data Network. Consistent with our merchant supplier strategy, multiple primes bidding on the SDN have selected our EST technology for their solution. We also continue to win and execute other classified optical communications programs, and our successful contribution to the Artemis II mission has helped demonstrate the capability of our technology for future human spaceflight. Finally, demand remains healthy for modernization of mission networks and digital applications. Many critical customer priorities, including AI adoption, border security, and financial accountability, are dependent on modern, secure, integrated networks and applications for success.

Speaker #2: CACI was also one of three companies selected to advance to phase three of the Space Force's enterprise-based terminal program, where we are developing the next-generation optical communication terminal to support critical multi-orbit initiatives like the Space Data Network.

Speaker #2: Consistent with our merchant-supplier strategy, multiple primes bidding on the SDN have selected our EST technology for their solution. We also continue to win and execute other classified optical communications programs, and our successful contribution to the Artemis II mission has helped demonstrate the capability of our technology for future human spaceflight.

Speaker #2: Finally, demand remains healthy for modernization of mission networks and digital applications. Many critical customer priorities, including AI adoption, border security, and financial accountability, are dependent on modern, secure, integrated networks and applications for success.

John Mengucci: CACI is a leader in modernization because we do it differently, differentiating through speed of delivery, use of outcome-based models, and demonstrated success deploying AI-based software. Programs such as BEAGLE, ITAS, and NASA NCAPS are real-world examples of where we are applying AI and agile delivery methods to drive customer modernization faster and more efficiently. Leveraging AI translates into reduced cost for customers and better margins for us, and we consistently see customers reinvest cost savings and additional scope to CACI. Across all areas of our business, our technology-first approach is directly contributing to our financial performance by driving on-contract growth and new business wins from customers who are committed to transforming at the speed of mission. Slide seven, please. In order to meet strong demand we are seeing for our software-defined technology, we are actively investing to scale our production capacity.

Speaker #2: CACI is a leader in modernization because we do it differently. Differentiating through speed of delivery, use of outcome-based models, and demonstrated success deploying AI-based software.

Speaker #2: Programs such as Beagle, ITAS, and NASA NCAPPS are real-world examples of where we are applying AI and agile delivery methods to drive customer modernization faster and more efficiently.

Speaker #2: Leveraging AI translates into reduced costs for customers, and better margins for us. And we consistently see customers reinvest cost savings and additional scope to CACI.

Speaker #2: Across all areas of our business, our technology-first approach is directly contributing to our financial performance by driving on-contract growth and new business wins from customers who are committed to transforming at the speed of mission.

Speaker #2: Slide 7, please. In order to meet strong demand, we're seeing for our subject-defined technology, we are actively investing to scale our production capacity. Our first step was to open our manufacturing center of excellence for defense electronics in Rochester, New York.

John Mengucci: Our first step was to open our manufacturing center of excellence for defense electronics in Rochester, New York. The additional 61,000 square foot facility significantly increases our manufacturing space and expands our capacity to develop, test, assemble, and deliver defense electronics such as TLS Manpack, BEAM, and others. We plan to open additional manufacturing centers of excellence for space and for integrated systems, and we will share more about these initiatives in the coming months. These investments will enable us to deliver advanced technology faster, at greater scale, and more efficiently, supporting continued revenue growth and additional margin expansion. Slide eight, please. Turning to the macro environment, budgets and funding remain healthy in our key areas of focus. With 90% of our revenue coming from national security customers, the priorities we focus on are well-funded and continue to exhibit strong demand signals because they are needs that must be addressed.

Speaker #2: The additional 61,000 square foot facility significantly increases our manufacturing space and expands our capacity to develop, test, assemble, and deliver defense electronics, such as TLS manpack, beam, and others.

Speaker #2: We plan to open additional manufacturing centers of excellence for space and for integrated systems, and we'll share more about these initiatives in the coming months.

Speaker #2: These investments will enable us to deliver advanced technology faster, at greater scale, and more efficiently, supporting continued revenue growth and additional margin expansion. Slide 8, please.

Speaker #2: Turning to the macro environment, budgets and funding remain healthy, and our key areas of focus. With 90% of our revenue coming from national security customers, the priorities we focus on are well-funded, and continue to exhibit strong demand signals because they are needs that must be addressed.

John Mengucci: A continuing resolution, or CR, is currently in place until 11 December. Regardless of how this dynamic plays out, it is an environment we have navigated successfully for many years. As we have demonstrated year in and year out, CRs do not have a material impact on our business given our large backlog, longer duration awards, and the critical capabilities that our customers depend on us to deliver. From an awards perspective, our strong book-to-bill shows some improvement in award activity, though the pace of decision-making is not fully normalized and is still sluggish in some areas. As our customers continue to evolve their relationships with industry through non-traditional procurement methods, our key differentiators of investing ahead of customer need, software-defining capabilities, and outcome-based pricing are all resonating extremely well because they drive increased speed, efficiency, and lethality. Slide nine, please.

Speaker #2: In continuing resolution, or CR, is currently in place until December 11th. Regardless of how this dynamic plays out, it's an environment we've navigated successfully for many years.

Speaker #2: As we demonstrated year in and year out, CRs do not have a material impact on our business, given our large backlog, longer duration awards, and the critical capabilities that our customers depend on us to deliver.

Speaker #2: For an awards perspective, our strong book-to-bill shows some improvement in award activity, though the pace of decision-making is not fully normalized and is still sluggish in some areas.

Speaker #2: As our customers continue to involve their relationships with industry, through non-traditional procurement methods, our key differentiators of investing ahead of customer need, subject-defined capabilities, and outcome-based pricing are all resonating extremely well because they drive increased speed, efficiency, and lethality.

Speaker #2: Slide 9, please. Before turning the call over to Jeff, I wanted to discuss a few other updates. First, we announced we will move to a calendar fiscal year beginning January 1st, 2027.

John Mengucci: Before turning the call over to Jeff, I wanted to discuss a few other updates. First, we announced we will move to a calendar fiscal year beginning 1 January 2027. We believe this reporting cycle will enhance comparability for investors and better align our business with the government's fiscal year. We plan to provide guidance for our new fiscal year when we report December quarter results in February. Second, we plan to host an investor day in early 2027 at our Melbourne, Florida, facilities. At this event, we intend to provide additional information about the new fiscal year, other contemplated reporting changes, discuss our strategy and capabilities, provide an opportunity to meet with the CACI management team, including additional executive leadership we recently announced, and provide new 3-year financial targets. We look forward to sharing more information with you in the near future.

Speaker #2: We believe this reporting cycle will enhance comparability for investors, and better align our business with the government's fiscal year. We plan to provide guidance for our new fiscal year when we report December quarter results in February.

Speaker #2: Second, we plan to host an Investor Day in early 2027 at our Melbourne, Florida facilities. At this event, we intend to provide additional information about the new fiscal year and other contemplated reporting changes, discuss our strategy and capabilities, provide an opportunity to meet with the CACI management team—including the additional executive leadership we recently announced—and provide new three-year financial targets.

Speaker #2: We look forward to sharing more information with you in the near future. With that, I'll turn the call over to Jeff.

John Mengucci: With that, I will turn the call over to Jeff.

Jeff MacLauchlan: Thank you, John. Good morning, everyone. Please turn to slide 10. We are pleased with our Q1 performance, in which we delivered revenue growth in line with our expectations. Revenue was $2.5 billion for Q1, up 8.2% year over year, with organic growth of 2.1%, in line with our previously communicated low single-digit organic growth. EBITDA margin in the quarter was an impressive 13.3%, 160 basis points higher than the prior year's Q1, driven by strong program execution and a more favorable mix of higher margin work. Q1 adjusted diluted earnings per share of $7.66 were 11.8% higher than a year ago, driven by this excellent operational performance. Finally, free cash flow of $133 million for the quarter reflects higher cash outflows typical of Q1 of the year. Slide 11, please.

Speaker #1: Thank you, John. Good morning, everyone. Please turn to slide 10. We're pleased with our first quarter performance, in which we delivered revenue growth in line with our expectations.

Speaker #1: Revenue was $2.5 billion for the first quarter, up 8.2% year over year, with organic growth of 2.1%, in line with our previously communicated low single-digit organic growth.

Speaker #1: EBITDA margin in the quarter was an impressive 13.3%, 160 basis points higher than the prior year's first quarter, driven by strong program execution and a more favorable mix of higher margin work.

Speaker #1: First quarter adjusted diluted earnings per share of $7.66 were 11.8% higher than a year ago, driven by this excellent operational performance. Finally, free cash flow of $133 million for the quarter reflects higher cash outflows typical of the first quarter of the year.

Speaker #1: Slide 11, please. Turning our attention to the balance sheet and capital structure, we continue to make progress reducing our leverage following the ARCA acquisition.

Jeff MacLauchlan: Turning our attention to the balance sheet and capital structure, we continue to make progress reducing our leverage following the ARKA acquisition. Pro forma leverage at the end of Q1 was 3.5x, and we now expect to return to leverage in the low threes in the March quarter of 2027, two quarters earlier than we had initially anticipated. As we have discussed, this is consistent with our track record of successfully deleveraging after major acquisitions. Driven by our profitability and strong free cash flow generation, our moderating leverage is quickly putting us back in a posture of having increased optionality for additional flexible and opportunistic capital deployment. Slide 12, please. Turning to our outlook for fiscal 2027, we are raising guidance for revenue, adjusted net income, and adjusted EPS, and reaffirming guidance for other metrics.

Speaker #1: Proforma leverage at the end of the first quarter was 3.5 times and we now expect to return to leverage in the low 3s in the March quarter of 2027.

Speaker #1: Two quarters earlier than we had initially anticipated. As we have discussed, this is consistent with our track record of successfully deleveraging after major acquisitions.

Speaker #1: Driven by our profitability and strong free cash flow generation, our moderating leverage is quickly putting us back in a posture of having increased optionality for additional flexible and opportunistic capital deployment.

Speaker #1: Slide 12, please. Turning to our outlook for fiscal 27, we're raising guidance for revenue, adjusted net income, and adjusted EPS, and reaffirming guidance for other metrics.

Jeff MacLauchlan: I note that while we made a particularly strong initial guide to begin the year, a strong awards quarter and operational developments have retired additional risk relative to our expected range of outcomes. We are raising fiscal 2027 revenue guidance $50 million to between $10.7 billion and $10.9 billion. Our fiscal 2027 revenue now assumes approximately $450 million of acquired revenue. While ARKA continues to perform in line with our expectations for the full fiscal year, some space program activities are now expected to contribute to revenue beyond the first 12 months after closing the acquisition. We are reaffirming fiscal 2027 guidance for EBITDA margin in the high 12% range. This and higher revenue has a consequent impact to increase adjusted net income by $5 million to between $740 million and $760 million, which translates into increased adjusted diluted earnings per share guidance between $33.18 and $34.08.

Speaker #1: I note that while we made a particularly strong initial guide to begin the year, a strong awards quarter and operational developments have retired additional risk relative to our expected range of outcomes.

Speaker #1: We're raising fiscal 27 revenue guidance $50 million to between 10.7 and 10.9 billion. Our fiscal 27 revenue now assumes approximately $450 million of acquired revenue.

Speaker #1: While ARCA continues to perform in line with our expectations for the full fiscal year, some space program activities are now expected to contribute to revenue beyond the first 12 months after closing the acquisition.

Speaker #1: We are reaffirming fiscal 27 guidance for EBITDA margin in the high 12% range. This and higher revenue has a consequent impact to increase adjusted net income by $5 million to between $740 and $760 million, which translates into increased adjusted diluted earnings per share guidance between 3318 and 3408.

Jeff MacLauchlan: We are reaffirming guidance for free cash flow of at least $900 million. Finally, to assist with your modeling, I would remind you of our prior comments that we expect stronger organic growth and EBITDA margin in the H2 of the fiscal year versus the H1. Though I note the H2 margin ramp is now more gradual given our strong Q1 performance. I would also note our view that Q2 consensus estimates for organic growth and EBITDA margin are reasonable. Slide 13, please. Turning to our forward indicators, we now expect 94% of our revenue to come from existing programs, with 3% coming from recompetes and 3% from new business. This significant increase in existing business content, which was 83% just last quarter, reflects our successful business development and operational performance and provides increased confidence in our updated guidance, as I mentioned earlier.

Speaker #1: And we are reaffirming guidance for free cash flow of at least $900 million. Finally, to assist with your modeling, I'd remind you of our prior comments that we expect stronger organic growth and EBITDA margin in the second half of the fiscal year versus the first half.

Speaker #1: Though I note the second half margin ramp is now more gradual given our strong Q1 performance. I would also note our view that second quarter consensus estimates for organic growth and EBITDA margin are reasonable.

Speaker #1: Slide 13, please. Turning to our forward indicators, we now expect 94% of our revenue to come from existing programs, with 3% coming from recompetes, and 3% from new business.

Speaker #1: This significant increase in existing business content, which was 83% just last quarter, reflects our successful business development and operational performance, and provides increased confidence in our updated guidance, as I mentioned earlier.

Jeff MacLauchlan: In fact, this is the highest level of existing business at this point in the year in the last 7 years. Q1 awards were $4.8 billion, representing a healthy mix of new work and strong recompete performance. The weighted average duration of these awards was just under 4.5 years, which reflects the higher mix of sole source extensions we have seen recently, as well as normal variance in award duration. Our long award duration continues to provide good visibility into the strength and cash generation capacity of our business. Billable backlog was $34 billion and funded backlog increased by 15% year-over-year. This represents the seventh time in the last 8 quarters we have delivered double-digit year-over-year growth in funded backlog, underscoring the critical national security priorities we address and the support of our customers.

Speaker #1: In fact, this is the highest level of existing business at this point in the year in the last seven years. First quarter awards were $4.8 billion, representing a healthy mix of new work and strong recompete performance.

Speaker #1: The weighted average duration of these awards was just under four and a half years, which reflects the higher mix of sole-source extensions we've seen recently, as well as normal variance in award duration.

Speaker #1: Our long award duration continues to provide good visibility into the strength and cash generation capacity of our business. Total backlog was $34 billion, and funded backlog increased by 15% year over year.

Speaker #1: This represents the seventh time in the last eight quarters we have delivered double-digit year-over-year growth in funded backlog. Underscoring the critical national security priorities we addressed and the support of our customers.

Jeff MacLauchlan: We continue to see a healthy pipeline of new opportunities with $4.7 billion of bids under evaluation, about 85% of these being for new business. Bids under evaluation also reflect significant level of awards in the quarter. We expect to submit another $14.7 billion in bids over the next 2 quarters, with more than 60% coming from new business. In summary, our Q1 was a great start to the year. Our consistent performance, substantial backlog, and strong market position give us confidence in our increased guidance and our ability to drive growth in free cash flow per share and additional shareholder value. With that, I will turn the call back over to John.

Speaker #1: We continue to see a healthy pipeline of new opportunities, with $4.7 billion of bids under evaluation. About 85% of these are for new business.

Speaker #1: Bids under evaluation also reflect significant level of awards in the quarter. We expect to submit another $14.7 billion in bids over the next two quarters, with more than 60% coming from new business.

Speaker #1: In summary, our first quarter was a great start to the year. Our consistent performance, substantial backlog, and strong market position give us confidence in our increased guidance and our ability to drive growth in free cash flow per share and additional shareholder value.

Speaker #1: And with that, I'll turn the call back over to John.

John Mengucci: Thank you, Jeff. Let's go to slide 14, please. In conclusion, we delivered strong Q1 results and raised our revenue and earnings guidance for the year. Our large and growing backlog, strong customer demand signals, and ability to deliver give us confidence in our outlook. Regardless of CRs, elections, government shutdowns, or other dynamics, we have delivered consistent results. It is worth repeating. CACI has a clear, consistent strategy and our financial results once again demonstrate that our strategy is working. You have heard us say consistently that we view free cash flow per share as the ultimate value creation metric. CACI has a long and consistent track record of generating strong cash flow. This level of cash generation enables us to continue investing ahead of customer need and deploying capital in a flexible and opportunistic manner, both of which then enable us to generate additional cash flow over time.

Speaker #2: Thank you, Jeff. Let's go to slide 14, please. In conclusion, we delivered strong first quarter results, and raised our revenue and earnings guidance for the year.

Speaker #2: Our large and growing backlog, strong customer demand signals, and ability to deliver give us confidence in our outlook. Regardless of CRs, elections, government shutdowns, or other dynamics, we have delivered consistent results, it's worth repeating, CACI has a clear, consistent strategy, and our financial results once again demonstrate that our strategy is working.

Speaker #2: You've heard us say consistently that we view free cash flow per share as the ultimate value creation metric. CACI has a long and consistent track record of generating strong cash flow.

Speaker #2: This level of cash generation enables us to continually invest in ahead of customer need and deploying capital in a flexible and opportunistic manner, both of which then enable us to generate additional cash flow over time.

John Mengucci: You have seen us do exactly that as we deploy new technology capabilities and make strategic acquisitions like Azure Summit and ARKA. These actions allow us to turn the strong demand we see into results for our customers and lasting value for our shareholders. As is always the case, our success is driven by our 27,000 employees who are ever vigilant in expanding the limits of national security. To everyone on the CACI team, I am proud of what you do every day for our company and for our nation, and to our shareholders, I thank you for your continued support of CACI. With that, Morgan, let us open the call for questions.

Speaker #2: You've seen us do exactly that as we've deployed new technology capabilities and made strategic acquisitions like Azure Summit and ARCA. These actions allow us to turn the strong demand we see into results for our customers and lasting value for our shareholders.

Speaker #2: As is always the case, our success is driven by our 27,000 employees who were ever vigilant in expanding the limits of national security. To everyone on the CACI team, I am proud of what you do every day for our company, and for our nation.

Speaker #2: And to our shareholders, I thank you for your continued support of CACI. With that, Morgan, let's open the call for questions.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, press star, then the number 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. Your first question comes from Sheila Kahyaoglu with Jefferies. Your line is open.

Speaker #3: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star, then the number 1 on your telephone keypad to raise your hand and join the queue.

Speaker #3: If you would like to withdraw your question, simply press star 1 again. Your first question comes from Sheila Kayaglu with Jefferies. Your line is open.

Sheila Kahyaoglu: Thanks so much. Good morning, John, Jeff, and George.

Speaker #4: Thanks so much. Good morning, John, Jeff, and George.

John Mengucci: Good morning.

Sheila Kahyaoglu: John, maybe just on your closing remarks. You have consistently been in the right place at the right time in terms of future funding needs. I guess what is the secret, and how do you think about where the growth goes from here? I know you will have a March analyst day or, H1 analyst day where you will talk about that, but how have you been able to outperform your peers here?

Speaker #2: Good morning.

Speaker #4: John, maybe just on your closing remarks—you've consistently been in the right place at the right time in terms of future funding needs. I guess, what's the secret, and how do you think about where the growth goes from here?

Speaker #4: I know you'll have a March analyst day or a first half analyst day where you'll talk about that, but how have you been able to outperform your peers here?

John Mengucci: Yeah, Sheila, thanks, and really appreciate the question. Look, I think simply, first off, it is because we are a very different company than others in our current sector. We have been doing our best to outperform others in the larger spaces as well. It is really down to something that we have shared over the last decade, is just having a clear strategy, intentional leadership, and disciplined execution over many, many years. We have invested ahead of need, and have decades of deep mission knowledge. And we are in areas of enduring need. We like to talk about narrow funding streams, but the way we look at it internally, these are all things that are not the first, the 10th, or the 100th thing that customers are going to want to turn off. We take a lot of purposeful discriminating actions.

Speaker #2: Yeah, Sheila, thanks. And I really appreciate the question. Look, I think simply, first off, it's because we're a very different company than others, and our current sector.

Speaker #2: We've been doing our best to outperform others in the larger spaces as well. And it's really down to something that we've shared over probably the last decade: just having a clear strategy, intentional leadership, and disciplined execution over many, many years.

Speaker #2: We've invested ahead of need and have decades of deep mission knowledge, and we're in areas of enduring need. We like to talk about neural funding streams, but the way we look at it internally, these are all things that are not the first, the tenth, or the hundredth thing that customers are going to want to turn off.

Speaker #2: We take a lot of purposeful discriminating actions. I can tell you internally, that we measure the time between vision or strategy and action in weeks.

John Mengucci: I can tell you internally that we measure the time between vision or strategy and action in weeks. And we have been very honest upfront, very transparent, and very thoughtful around capital deployment that truly builds shareholder value. So a lot of transparency, a lot of results that lead to a lot of credibility, frankly. The other thing that I would mention is something that we do not talk a lot about, but it is very important, is that we truly did recreate this company 10, 12 years back to be a FAR Part 15 and a FAR Part 12, truly commercial company. And we did not get lucky. We actually did study where the market was going to go and where the customer sets were— how the customers were going to be changing how they buy.

Speaker #2: And we've been very honest upfront, very transparent, and very thoughtful around capital deployment to truly build shareholder value. So a lot of transparency, a lot of results, that lead to a lot of credibility, frankly.

Speaker #2: The other thing that I would mention is something that we don't talk a lot about, but it's very important, is that we truly did recreate this company 10, 12 years back to be a far part 15 and a far part 12 truly commercial company.

Speaker #2: And we didn't get lucky. We actually did study where the market was going to go and where the customer sets were, how the customers were going to be changing how they buy.

John Mengucci: I think it is true as today that $0.5 billion of our bookings last year were done through OTAs and CSOs. That is something that we called very right many years back. You do not just turn that thing on overnight. Strategy is a place where we come from, have an outstanding leadership team that actually drives the strategy forward, and a whole slew of PMs and finance leads and the like that are making sure that we frankly deliver excellence. Because customers buy from people that they trust, and customers buy from people who always deliver, and I think our results show that.

Speaker #2: I think it's true, it's today, that half a billion dollars of our bookings last year were done through OTAs and CSOs. That's something that we called very, very right many, many years back.

Speaker #2: And you don't just turn that thing on overnight. So strategy is placed, where we come from, having outstanding leadership team that actually drives the strategy forward, and a whole slew of PMs and finance leads and the like that are making sure that we frankly deliver excellence because customers buy us from people that they trust and customers buy from people who always deliver.

Speaker #2: And I think our results show that.

Sheila Kahyaoglu: No, that is great. Thank you. Maybe just to follow up on that, as we look at the organic growth for Q1 up 2%, Q2 up 7% implies H2 grows low double digits in the face of pretty tough comps. Can you give us some color on what is driving your organic growth visibility and your confidence in the guide there?

Speaker #4: No, that's great. Thank you. Maybe just to follow up on that, as we look at the organic growth for Q1, up 2%, and Q2, up 7%, it implies the second half grows low double digits in the face of pretty tough comps.

Speaker #4: Can you give us some color on what's driving your organic growth visibility and your confidence in the guide there?

John Mengucci: Yeah. It really points ourselves towards how do we get through a back half risk model, and we have been getting that question a lot. I think we navigated our way, not only through the questions, but through the performance last year. Look, risk is something that we work through all the time. It is just the nature of our business. When our revenue starts from a new win, it is really based on timing of the award, the program start date, funding, type of contract, et cetera. This year, it is true, we have a number of late last year and early this year awards that hit their first notch in their growth stride after Q2. I am very much aware that that is the same exact time that the current CR ends. What gives us confidence? We have taken a long look at the growth of our backlog.

Speaker #2: Yeah, I mean, it really points us towards how do we get through a back-half risk model, and we've been getting that question a lot.

Speaker #2: I think we navigate our way not only through the questions, but through the performance last year. But look, risk is something that we work through all the time.

Speaker #2: It's just the nature of our business. When our revenue starts from a new, new win, it's really based on timing the war, the program start date, funding, type of contract, etc.

Speaker #2: This year, it's true, we have a number of late last year and early this year awards. They hit their first notch in their growth stride.

Speaker #2: After the second quarter—and I'm very much aware that that's the exact same time the current CR ends—so what gives us confidence?

Speaker #2: We've taken a long look at the growth of our backlog. I think you should all look at the level of funded backlog growth, the fact that we've got a lot of non-protested recent large award.

John Mengucci: I think you should all look at the level of funded backlog growth. The fact that we have got a lot of non-protested recent large award. We have a customer base that frankly really needs to move forward quickly, and that just happens to align with our current Q3. I guess another quarter will be our newest Q1.

Speaker #2: We have a customer base that frankly really needs to move forward quickly. And that just happens to align with our current Q3. I our newest Q1.

Jeff MacLauchlan: Right.

Speaker #1: Right.

John Mengucci: So we won those jobs, and that is sort of how the revenue profiles stack on top of each other. We have always talked about long-duration awards, right? So what also gives us a lot of confidence, whether the first or second ramp or the third or fourth quarter ramp, is that we stack a number of awards with longer durations over a long period of time. So we see the awards are funded, our funded backlog is there. Our technology deliveries will also be there, and I think everything is greatly aligned. Then on top of that reduces the risk of a high Q2 profile, CRs, shutdowns, budget woes, midterms, anything else you could throw in there. So Jeff, anything you want to add?

Speaker #2: But and so we've won those jobs, and that's sort of how the revenue profiles stack on top of each other. We've always talked about long-duration awards, right?

Speaker #2: So what else this gives us a lot of confidence right at the first or second ramp or the third and fourth quarter ramp is that we've stacked a number of awards with longer durations over long period of time.

Speaker #2: So we see the awards. Our funded backlog is there. Our technology deliveries will also be there. And I think everything is greatly aligned. On top of that, reduces the risk of a high second quarter profile, CRs, shutdowns, budget woes, midterms, anything else you can throw in there.

Speaker #2: So Jeff, anything you want to add?

Jeff MacLauchlan: Well, I think there are two things, Sheila, that are a little bit different about our portfolio from some others. One is that we have a great number of small programs, smaller programs. So we are managing kind of 1,900 or so active pieces of the portfolio and managing that for the year. The other thing that is different, I think, about our portfolio is that we have a great deal of margin variability. And because of that, we have programs with single-digit EBIT margins, and we have programs with EBIT margins in the low 30s. And so managing that mix, and we do manage for the year, which I am sure you are tired of hearing us say, but managing across that mix is a constant challenge as you would imagine.

Speaker #1: Yeah. I think there are two things, Sheila, that are a little bit different about our portfolio from some others. One is that we have a great number of small programs, smaller programs, so we're managing kind of 1,900 or so active pieces of the portfolio and managing that for the year.

Speaker #1: The other thing that's different, I think, about our portfolio is that we have a great deal of margin variability—not volatility, variability. And because of that, we have programs with single-digit EBIT margins, and we have programs with EBIT margins in the low 30s.

Speaker #1: And so, managing that mix—and we do manage for the year, which I'm sure you're tired of hearing us say—but managing across that mix is a constant challenge, as you would imagine.

Jeff MacLauchlan: It is a very different management experience, in my experience, from working in an enterprise that has 15 or 20 large programs.

Speaker #1: It's a very different management experience, in my experience, from working in an enterprise that has 15 or 20 large programs.

John Mengucci: The last thing I am going to add is the metrics that we shared, the fact that we are at the end of the first quarter, we are looking at 94% of our revenue already in-house, and only 3% re-compete left. That is an outstanding position for us to be in. Even better than where we were last year, and you all know how last year turned out. Record revenue, record earnings, record free cash flow. Thanks, Sheila.

Speaker #2: The last thing I'm going to add is the metrics that we've shared the fact that we're at the end of the first quarter, we're looking at 94% of our revenue already announced.

Speaker #2: And only 3, 3% new and 3% recompete left. That's an outstanding position for us to be. And even better than where we were last year, and you all know how last year turned out, record revenue, record earnings, record free cash flow.

Speaker #2: Thanks, Sheila.

Sheila Kahyaoglu: Awesome. Thank you.

Speaker #4: Awesome. Thank you.

Operator: Your next question comes from Gavin Parsons with UBS. Your line is open.

Speaker #3: Your next question. Comes from Gavin Parsons with UBS Financial. Your line is open.

Gavin Parsons: Thank you. Morning.

Speaker #5: Thank you. Morning.

John Mengucci: Morning, Gavin.

Speaker #6: Morning, Gavin.

Jeff MacLauchlan: Morning.

Gavin Parsons: I mean, clearly seeing the investments you have made in technology already reflected in the margins, but I want to ask how you think about payback period, and obviously without asking about any specific programs, but maybe if you could use SkyValor as a frame of reference.

Speaker #5: I mean, clearly seeing the investments you've made in technology already, reflected in the margins. But I want to ask how you think about payback period.

Speaker #5: And obviously, without asking about any specific programs, but maybe if we could use Sky Valor as a frame of reference.

John Mengucci: Yeah, sure. Look, we have invested in a lot of software-based tech over the last decade, and I truly believe that our shareholders have been greatly rewarded, and they will continue to be rewarded for the results. We can talk about counter-UAS, we can talk about ARKA, we can talk about space, talk about OCTs. There is a lot of examples here. But at the end of the day, strategy is a place where we come from. These are not high-risk, invest ahead of customer need operations. We run this company as a full-throated company, and it is why we always talk about we are not going to invest for the next quarter, we are going to invest for the next decade.

Speaker #2: Yeah, sure. Look, we've invested in a lot of software-based technology over the last decade, and I truly believe that our shareholders have been greatly rewarded, and they will continue to be rewarded for the results.

Speaker #2: And we can talk about Conrad Estring and talk about ARKO, talk about SPACE, talk about OCETs. There are a lot of examples here, but at the end of the day, strategy is a place where we come from.

Speaker #2: So these are not high-risk invest ahead of customer need operations. I mean, we run this company as a full-throated company. And it's why we always talk about we're not going to invest for the next quarter.

Speaker #2: We're going to invest for the next decade. So as hard as some of this stuff is that we do, we've never come back to our investors and said, because we had to invest more, these financials are not going to look the way they look.

John Mengucci: As hard as some of this stuff is that we do, we have never come back to our investors and said, "Because we had to invest more, these financials are not going to look the way they look." Okay? We are a consistent free cash flow compounder and a consistent company that is out there buying the right capabilities to go ahead and continue to drive this company forward. Whether it is counter-UAS, where we have been investing for well over a couple of decades. We have invested, and we sort of moved from a fixed site solution to a mobile solution. Things like BEAM are not in high demand because we got lucky. They are in high demand because we are good, and it is good. Whether it is SkyValor giving commanders larger range, we understand how to do all of that because we have 1,400 people formally deployed and a lot of people embedded.

Speaker #2: Okay? We are a consistent free cash flow compounder and a consistent company that's out there buying the right capabilities to continue to drive this company forward.

Speaker #2: So whether it's Counter UAS or what we've been investing for well over a couple of decades, we've invested and we sort of move from a fixed site solution to a mobile solution.

Speaker #2: Things like Beam are not in high demand because we got lucky. They're in high demand because we're good and it's good. So whether it's Sky Valor giving commanders larger range, we understand how to do all of that because we have 1,400 people formerly deployed and a lot of people embedded.

John Mengucci: That kind of operational support gives us just absolute better data than everybody else gets, back to Sheila's earlier question, and allows us to invest in the right manner, in the right levels, in a manner that we are not coming to our shareholders after the quarter is done saying, "I wish we had not invested in all of that because now we cannot make revenue, or we cannot make earnings." We are doing it all.

Speaker #2: And that kind of operational support gives us just absolutely better data than everybody else—back to Sheila's earlier question—and allows us to invest in the right manner, at the right levels, in a way that we're not coming to our shareholders after the quarter's done saying, "I wish we hadn't invested in all that because now we can't make revenue or we can't make earnings."

Speaker #2: We're doing it all.

Gavin Parsons: Got it. Thanks. Thanks for that. And then maybe just a quick clarifier on ARKA to make sure I heard. No change to the expected ARKA revenue for the full fiscal year. It is just timing?

Speaker #5: Got it. Thanks. Thanks for that. And then maybe just a quick clarifier on Arka to make sure I heard no change to the expected Arka revenue for the full fiscal year.

Speaker #5: It's just timing.

John Mengucci: Yeah. Let me talk a little bit about ARKA, because I think it has been probably, at least a year or two forward, it is probably one of the greatest acquisitions that we have done, because it sets us up for so many things. It is a great business. It is performing as expected. They are a leading provider of sensing and sense-making capabilities. I like to say they have been doing large aperture solutions since Moby-Dick was a minnow. They are one of 1.5 companies that do what they do, so it is a very strong barrier to entry. And now, as you heard from the Vantor award, we are now moving to smaller form factors without sacrificing purity, and we are also building those in higher quantities. So specific to your question, yes, the $50 million moves a quarter to the right. But we did not take the full year or their guidance down.

Speaker #2: Yeah. Let me talk a little bit about Arka because I think it's been probably at least year two, four is probably one of the greatest acquisitions that we've done because it sets us up for so many things.

Speaker #2: It's great business. It's performing as expected. They're leading provider of sensing and sense-making capabilities. I like to say they've been doing large aperture solutions since what we did was a minnow.

Speaker #2: They're one of one and a half companies that do what they do. So it's a very strong barrier to entry. And now as you heard from the van tour award, we're now moving to smaller form factors without sacrificing purity and we're also building those in higher quantities.

Speaker #2: So specific to your question, yes, the 50 million dollars moves a quarter to the right, but we didn't take the full year or their guidance down.

John Mengucci: We actually raised full year and shifted theirs. So at the end of the day, this $50 million, different than the $50 million raised guide, this is really about moving it from next 12 months based on a March closure date to the current first fiscal year. So all of this attention is really moving revenue to after 9 March, but before 30 June. So it is not about missed numbers, it is just timing, like the majority of the rest of our business. Jeff, anything else you want to add?

Speaker #2: We actually raised full year and shifted theirs. So at the end of the day, this 50 million dollars different than the 50 million dollar raise guy this is really about moving that from next 12 months based on a March closure date to the current first fiscal year.

Speaker #2: So all of this attention is really moving revenue to after March 9th but before June 30th. So we don't see it's not about missed numbers.

Speaker #2: It's just timing, like the majority of the rest of our business. Jeff, anything else you want to add?

Jeff MacLauchlan: Yeah, no, I think you covered it, but I would say maybe a slightly different way that might land with some people differently. The two $50 million numbers you are hearing are unrelated, completely independent. There is a $50 million growth in the total revenue, and there is $50 million of movement in the ARKA revenue from inorganic to organic based on being after the anniversary date. So they are different 50s.

Speaker #1: Yeah. No, I think you covered it, but I would say maybe slightly different way that Mike land with some people differently. The 250 million dollar numbers you're hearing are unrelated, completely independent.

Speaker #1: There's a 50 million dollar growth in the total revenue and there is 50 million dollars of movement in the Arka revenue from inorganic to organic based on being after the anniversary date.

Speaker #1: So they're different 50s.

Gavin Parsons: Very clear. Thank you.

Speaker #5: Very clear. Thank you.

John Mengucci: Next time we raise the guide by 51.

Speaker #2: Next time we raise guy by 51.

Jeff MacLauchlan: Yeah.

Speaker #1: Yeah.

Operator: Your next question comes from John Godyn with Citi. Your line is open.

Speaker #3: Your next question comes from John Goddon with City. Your line is open.

John Godyn: Hey, guys. Thanks for taking my question.

Speaker #6: Hey, guys. Thanks for taking my question. I wanted to just hopefully unpack margins a little bit. If I rewind to maybe a year or so ago, there was sort of a conversation about the growth versus margin trade-off and how margins might be topping out.

John Mengucci: Looking forward to it.

John Godyn: I wanted to just hopefully unpack margins a little bit. If I rewind to maybe a year or so ago, there was sort of a conversation about the growth versus margin trade-off, and how margins might be topping out. The margin performance and execution has been great. We also have ARKA in there, so it is kind of hard to unpack that perfectly. Maybe you could just talk about growth versus margins in the core business versus ARKA, and are we at a point where we are finding a new sort of lever to get margins higher?

Speaker #6: The margin performance and execution has been great. We also have Arka in there, so it's kind of hard to unpack that perfectly. But maybe you could just talk about growth versus margins and the core business versus Arka, and are we at a point where we're finding a new sort of lever to get margins higher?

Jeff MacLauchlan: Look, we have said a couple things pretty consistently, and I am going to come back and answer your question more directly. We have said a couple things pretty consistently. One is that we manage the business for free cash flow. We are continually making decisions balancing investment and growth. The other thing that may be clouding this up a little bit is a condition I mentioned earlier, which is the margin variability. What we see as we manage our way through this, particularly in the internal quarters of the year, as we manage across the 1,900 programs that I mentioned earlier.

Speaker #1: Look, we have said a couple of things pretty consistently, and I'm going to come back and answer your question more directly. But we've said a couple of things pretty consistently.

Speaker #1: One is that we manage the business for free cash flow. And so we're continually making decisions balancing investment and growth. The other thing that maybe clouding this up a little bit is a condition I mentioned earlier, which is the margin variability.

Speaker #1: And what we see as we manage our way through this, particularly in the internal quarters of the year, as we manage across the 1,900 programs that I mentioned earlier.

Jeff MacLauchlan: Those conditions are both what they are, and no one should be surprised. We have talked about these in multiple forums for a long time. To get to your more specific question, I think we do continue to see opportunities for continued modest margin improvement, and that is taking into account the two conditions I just mentioned. It is an extremely opportunity-rich environment, and we see plenty of opportunities to invest and plenty of opportunities for growth, which really put us in the posture, I think in some ways, of being able to kind of have our cake and eat it too. I think we do see continued modest margin improvement even while we are maintaining the growth vector.

Speaker #1: So those conditions are both what they are and no one should be surprised. We've talked about these with multiple forums for a long time.

Speaker #1: To get to your more specific question, I think, we do continue to see opportunities for continued modest margin improvement. And that's taking into account the two conditions I just mentioned, but it is an extremely opportunity-rich environment.

Speaker #1: And we see plenty of opportunities to invest and plenty of opportunities for growth, which really put us in the posture, I think in some ways of being able to kind of have our cake and eat it too.

Speaker #1: So I think we do see continued modest margin improvement even while we're maintaining the growth vector.

John Godyn: Okay. That's good to know. If I could just ask a related follow-up on margins this year. In the prepared remarks, you mentioned that margins in the back half would step up, but perhaps less so now that you had good early year margin performance. I just wanted to revisit that. It sounds like the margin improvement engine is firing on all cylinders because you said you have a target-rich backdrop. Is there some conservatism in that view? Could we maybe see even a higher step up in the back half?

Speaker #6: Okay. That's good to know. And if I could just ask kind of a related follow-up on margins this year, in the prepared remarks, you mentioned that margins in the back half would step up, but perhaps less so now that you had good early year margin performance.

Speaker #6: I just wanted to revisit that. It sounds like the margin improvement engine is firing on all cylinders, as you said. You have kind of a target rich backdrop.

Speaker #6: Is there some conservatism in that view? Could we maybe see even a higher step up in the back half?

John Mengucci: Well, that's a loaded question. Look, we continue to do what I've been describing that we do, if it shakes out that way, it's impossible for me at this point to necessarily predict an investment decision that we might make or not make next April. But we've tried to be pretty open with you, sharing the levers and the knobs that we're managing and how we solve for them. I think I probably should leave it at that.

Speaker #1: Well, that's a loaded question. Look, we continue to do what I've been describing that we do. If it shakes out that way, it's impossible for me at this point to necessarily predict an investment decision that we might make or not make next April.

Speaker #1: But we've tried to be pretty open with you sharing the levers and the knobs that we're managing and how we solve for them and I think I probably should leave it at that.

John Godyn: Okay. Fair enough, guys. Thanks a lot.

Speaker #6: Okay. Fair enough, guys. Thanks a lot.

John Mengucci: Thank you.

Speaker #2: Thank you.

Operator: Your next question comes from Scott Mikus with Melius Research. Your line is open.

Speaker #3: Your next question comes from Scott Mikus with Melius Research. Your line is open.

Matt Martellon: Hi. Good morning. This is Matt Martellon for Scott.

Matt Marottolo: Hi. Good morning. This is Matt Marottolo for Scott.

Speaker #5: Hi. Good morning. This is Matt MacLauchlan for Scott.

John Mengucci: Yeah. Morning.

Matt Martellon: We have heard from aerospace companies that memory semiconductors, rare earths are seeing very high levels of inflation and elongated lead times. How are you managing around those constraints? Are there any other pinch points you would call out in the supply chain?

Matt Marottolo: We have heard from aerospace companies that memory semiconductors, rare earths are seeing very high levels of inflation and elongated lead times. How are you managing around those constraints? Are there any other pinch points you would call out in the supply chain?

Speaker #2: Good morning.

Speaker #5: We've heard from Aerospace companies that memory, semiconductors, rare earths are seeing very high levels of inflation in elongated lead times sometimes. How are you managing around those constraints?

Speaker #5: Are there any other pinch points you would call out in the supply chain?

John Mengucci: Yeah. Look, thanks. We are seeing some of that as well, and we are managing it accordingly. That is a key focus, why we brought Chris Monoski in, who is our new EVP of Manufacturing, as we really scale to combat things like that. I can tell you that those types of items are reflected in our guidance. It is really one of the factors that create the low end of our range than our high end of our range. The administration is aware of this as well, and they are making the right kinds of investments, which we fully support. The other thing that we are pretty good at is making certain that we are eyeballing those types of shortages before they present themselves and really work designs around some of those items.

Speaker #2: Yeah. Look, thanks. Yeah, we are seeing some of that as well and we're managing it accordingly. That's a key focus. Why we brought Chris Manoski in, who's our new EVP of manufacturing.

Speaker #2: And as we really scale to combat things like that, I can tell you that those types of items are reflected in our guidance. It's really one of the factors that create the low end of our range and then our high end of our range.

Speaker #2: The administration is aware of this as well and they're making the right kinds of investments, which we fully support. The other thing that we're pretty good at is making certain that we're eyeballing those types of shortages before they present themselves and really work designs around some of those items.

John Mengucci: The last thing from a shareholder margin cash flow point of view is really getting our hands around what are those long lead, high-risk items that we have to invest in. Meaning, do we spend some of our cash flow earlier than we would like, but it actually supports much longer-term growth. So, do we spend $30 million of cash in the second quarter to end up picking up $60 million more over the entire year? The answer is going to be yes. That is why we talk about being a full year company versus a quarterly company. Jeff, anything you want to add?

Speaker #2: The last thing from a shareholder margin cash flow point of view is really getting our hands around what are those long lead high risk items that we have to invest in, meaning do we spend some of our cash flow earlier than we would like, but it actually supports much longer term.

Speaker #2: Growth. So do we spend $30 million of cash in the second quarter to end up picking up $60 million more over the entire year?

Speaker #2: The answer is going to be yes. That's why we talk about being a full year company versus a quarterly company. Jeffrey, anyone add?

Jeff MacLauchlan: Yeah. I would only add, you did not explicitly ask this, but I think it was sort of in the tone of your question. We also have a business model where we have more pricing opportunity frequency. So, the nature of much of what we sell gets repriced each time there is an order. So unlike a large, six or eight-year platform program where the pricing is committed far in advance, we rarely are more than a year or 18 months or so from being able to price the next increment. So that is also, I think, a risk mitigator that may not be fully appreciated compared to some of the others in your question.

Speaker #1: Yeah. I would only add you didn't explicitly ask this, but I think it was sort of in the under in the tone of your question.

Speaker #1: We also have business model where we have more pricing opportunity frequency. So the nature of much of what we sell gets repriced each time there's an order.

Speaker #1: So unlike a large six or eight year platform program where the pricing is committed far in advance, we rarely are more than a year or 18 months or so from being able to price the next increment.

Speaker #1: So that's also I think a risk mitigator that may not be fully appreciated compared to some of the others in your question.

Matt Martellon: Great. Thanks for taking the question, guys. I will stick with one.

Matt Marottolo: Great. Thanks for taking the question, guys. I will stick with one.

Speaker #5: Great, thanks for taking the question, guys. I'll stick with one.

John Mengucci: Thank you.

Speaker #2: Thank you.

Operator: Your next question comes from Peter Arment with Baird. Your line is open.

Speaker #3: Your next question comes from Peter Armond with Baird. Your line is open.

Peter Arment: Hey, thanks. Good morning, John and Jeff. Nice results.

Speaker #4: Hey, thanks. Good morning, John and Jeff. Nice results.

John Mengucci: Morning, Peter. Thanks.

Speaker #2: Good morning, Peter. Thanks.

Jeff MacLauchlan: Thanks, Peter.

Peter Arment: Hey, John. You mentioned OTA kind of contract structures early on in your opening comments. You guys have some, I guess, through TLS Manpack, and maybe ARKA has a little. Could you kind of describe the exposure or, I guess, risks around OTAs? We have seen some other competitors where OTAs are easy to cancel or easier to cancel, and just how you are thinking about the exposure with CACI and the use of those contract structures when you think about your business.

Speaker #1: Thanks, Peter.

Speaker #4: Hey, John. You mentioned OTA kind of contracts structures early on and you're kind of opening comments. When you guys have some, I guess through TLS manpack and maybe ARCA has a little, but could you kind of describe kind of the exposure, I guess, risks around OTAs?

Speaker #4: We've seen some other competitors where OTAs are easy to cancel or easier to cancel and just how you're thinking about the exposure with CCI and the use of those contract structures when you think about your business.

John Mengucci: Yeah, thank you. Yeah, look, you have got to know what you are getting into when you are getting into them. This really ties back to our invest ahead of customer need thesis that we have been on for just short of a decade. The reason why our OTAs and our CSOs are successful is because it starts months and years ahead of when that OTA is actually signed. It is really about understanding the areas that we, as a company, believe we have unique skill sets in, that we have proven we have the unique skill sets in, and the fact that our 1,400 people who are co-located in combat commands tell us that those are dire technology needs that our customer requires. So we are not putting hundreds of millions of dollars down.

Speaker #2: Yeah. Thank you. Yeah. Look, you've got to know what you're getting into when you're getting into them. And this really ties back to our invest ahead of customer need thesis that we've been on for just sort of a decade.

Speaker #2: The reason why our OTAs and our CSOs are successful is because it starts months and years ahead of when that OTA is actually signed.

Speaker #2: It's really about understanding the areas that we, as a company, believe we have unique skill sets in—that we've proven we have unique skill sets in—and the fact that our 1,400 people who were co-located in commands tell us that those are dire technology needs that our customer requires.

Speaker #2: So we are not putting hundreds of millions of dollars down. We're actually putting hundreds of person years of knowledge into an OTA where we're working with folks on the bleeding edge of the mission on the customer side and places where the customers have nothing today a 50 or 60 percent solution looks awesome.

John Mengucci: We are actually putting hundreds of person years of knowledge into an OTA, where we are working with folks on the bleeding edge of the mission on the customer side. In places where the customers have nothing today, a 50% or 60% solution looks awesome. So we are also not making the mistake of trying to develop the 100% pure solution under an OTA, because that means that there is far more risk on us, and the risk equation between us and customer gets unbalanced. So what makes ours successful, far more times than not, is a willing customer, a common understanding of what the mission needs, software-based tech so that we can make really quick changes during that OTA cycle, and our window between the design development, which is the phase one of the OTA, and production, is most likely industry-leading. That is what drove TLS Manpack.

Speaker #2: So we're also not making the mistake of trying to develop the 100% pure solution under an OTA because that means that there's far more risk on us and the risk equation between us and customer gets unbalanced.

Speaker #2: So what makes us successful far more times than not is a willing customer, a common understanding of what the mission needs, software-based tech so that we can make really quick changes during that OTA cycle, and our window between design and development, which is the phase one of the OTA, and reproduction is most likely industry leading.

Speaker #2: That's what drove TLS manpack. That's what's driven a lot of the other half a billion dollars of different OTAs that we're involved in today.

John Mengucci: That is what has driven a lot of the other half a billion dollars of different OTAs that we are involved in today. Understanding the threat, understanding what the investment needs to be, getting involved in low-risk areas, and then when we get to the production side, building these centers of excellence, so we do not let that customer down, even though we may be building a 60% solution. Then also being able to modify that solution because it is software based.

Speaker #2: So understanding the threat, understanding what the investment needs to be getting involved in low risk areas and then when we get to the production side, building these centers of excellence so we don't let that customer down even though we may be building the 60th percent solution.

Speaker #2: And then, also, being able to modify that solution because it's software-based.

Peter Arment: Got it. Appreciate that color.

Speaker #4: Got it. Appreciate it.

Jeff MacLauchlan: You could add the commercial tools that we apply to those problems as well. The mission familiarity is important, but our partnership with GitLab, and some other commercial entities, lets us react in a way that is a discriminator.

Speaker #1: You could add the commercial tools that we apply to those problems as well. So the mission familiarity is important, but our partnership with GitLab and some other commercial entities lets us react in a way that is a discriminator.

Peter Arment: Got it. I appreciate that color. Just a quick follow-up on ARKA. The Space Force budget, the majority of it is in the base budget. It is only $12 billion tied up in the original $250 billion reconciliation bill. Is that giving you the confidence around that the majority of the Space Force budget is in base and that the booking visibility for ARKA continues to be robust? Just some additional color, just given all the budget dynamics.

Speaker #4: Got it. I appreciate that color. And just a quick follow-up on ARCA. The Space Force budget is the majority of it is in the base budget.

Speaker #4: It's only $12 billion tied up in the original $350 billion reconciliation bill. So, is that giving you confidence that the majority of the Space Force budget is in base, and that the booking visibility for ARCA continues to be robust?

Speaker #4: Just some additional color. Just given all the budget dynamics.

John Mengucci: Yeah, Peter, absolutely right. I would also tell you that ARKA also brings about $2 billion worth of work that is over the next 3 to 5 years, whose future is in space-based payloads that are in the base budget, but they have not been put into our backlog yet, as Jeff MacLauchlan explained. Yeah, it is comforting that it is there. It is comforting that we did the acquisition. When we did it was very intentional and made certain we could get our hands on things that are in the base budget. I would also say on the reconciliation side, as you look at Golden Dome, what ARKA delivers is extremely crucial to that mission, and we all know that the reconciliation funding is not just single-year funding. Some areas, it is 4 to 5 years. Other areas, 2 to 3 years. All of that helps support the ARKA business case.

Speaker #2: Yeah, Peter. Absolutely right. And I'd also tell you that ARCA also brings about $2 billion worth of work that's over the next three to five years whose future is in space-based payloads that are in the base budget, but they haven't been put into our backlog yet as Jeffrey explained.

Speaker #2: So yeah, it's comforting that it's there. It is comforting that we did the acquisition when we did. It was very intentional and make certain we can get our hands on things that are in the base budget.

Speaker #2: I'd also say in reconciliation side, as you look at Golden Dome, what ARCA delivers is extremely crucial to that mission and we all know that the reconciliation funding is not just single year funding.

Speaker #2: Some areas it's four to five, five years out of the year areas, two to three years. All of that helps support the ARCA business case.

Peter Arment: Appreciate it. Thanks, guys.

Jeff MacLauchlan: I would also add in terms of timing, I think we were also pretty opportunistic in terms of the time that we were able to enter the debt market. Times have looked pretty good a year later.

Speaker #4: Appreciate it. Thank you.

Speaker #1: I'd also add, in terms of timing, I think we were pretty opportunistic with the time that we were able to enter the debt market—times that look pretty good a year later.

Peter Arment: Yeah. Thanks again, guys. Appreciate the color.

Speaker #4: Yeah. Yeah. Thanks again, guys. Appreciate the color.

John Mengucci: Yeah. Thanks, Peter.

Speaker #2: Yeah. Thanks, Peter.

Operator: Your next question comes from Toby Sommer with Truist. Your line is open.

Operator: Your next question comes from Tobey Sommer with Truist. Your line is open.

Speaker #3: Your next question comes from Toby Summer with Truist. Your line is open.

John Mengucci: Toby, you there?

John Mengucci: Tobey, you there?

Speaker #2: Toby, are you there?

Tobey Sommer: Yes, I am. I wanted to ask you a medium to long-term project, question about your product portfolio. In 3 or 5 years, of what you have currently, what do you think is going to be generating the most revenue and profit for the firm?

Speaker #5: Yes, I am. I wanted to ask you a medium- to long-term question about your product portfolio. In three to five years, of what you have currently, what do you think is going to be generating the most revenue and profit for the firm?

John Mengucci: Yeah. If I had to open my crystal ball up on an open investor line, which I would probably say it is a good mix between what we do in the EW area, then supported by what we are doing in space. We are just so early. We are in the infancy stage of both of these markets. If you think about EW, we have got things across the entire spectrum that will help the customer drive their mission forward. The fact that they are all software-based means that we can continually make changes. If you look at the potential margins going out, not as a future guide, but the fact things are software based, we are going to the production bench much less times than others are because we are able to provide additional features like the phone you all carry in your jackets.

Speaker #2: Yeah. If I had opened my crystal ball up on an open investor line, I would probably say it's a good mix between what we do in the EW area and then supported by what we're doing in space.

Speaker #2: We're just so early. We're in the infancy stage of both of these markets. If you think about EW, we've got things across the entire spectrum that will help the customer drive their mission forward.

Speaker #2: The fact that they're all software-based means that we can continually make changes so if you look at the potential margins going out, not as a future guide, but the fact things are software-based, we're going to the production bench much less times than others are because we're able to provide additional features like the phone you all carry in your jackets.

John Mengucci: It has the right mix of commerciality to it, both the solutions and how we drive investments. Frankly, that is what is going to continue to drive larger and larger free cash flow as we go forward.

Speaker #2: So it has the right mix of commerciality to it—both the solutions and how we drive investments. And frankly, that's what's going to continue to drive larger and larger free cash flow as we go forward.

Tobey Sommer: I appreciate that, John. Thank you.

Speaker #4: I appreciate that, John. Thank you.

John Mengucci: Yeah, thanks, Toby.

John Mengucci: Yeah, thanks, Tobey.

Speaker #2: Yeah. Thanks, Toby.

Operator: Your next question comes from Colin Canfield with Cantor. Your line is open.

Speaker #3: Your next question comes from Colin Canfield with Canter. Your line is open.

Colin Canfield: Hey, thanks for the question. Maybe if we could talk about cash flow progression. If you could talk about how you think about essentially the combined base space capability portfolio, so ARKA, OCT, and then space-based EW. How do you think about the investment requirements relative to the scale of opportunities? Then, maybe if you could parse that out on how you view the fastest-growing swim lanes between commercial EO providers, like what you have won with the Vantor, space-based situational constellations like what we are seeing with True Anomaly, and then participation in SpaceX's Starshield program. So those three particular programs, and if there is a fourth lane of really fast-growing prime classified work as well. Just how you think about the investment requirement versus those program growth or that program growth.

Speaker #6: Hey, thanks for the question. Maybe we could talk about cash flow progression. If you could talk about how you think about, essentially, the combined space-based capability portfolio.

Speaker #6: So ARCA, OCT, and then space-based EW. How do you think about the investment requirements relative to the scale of opportunities? And then maybe if you could parse that out on how you kind of view the fastest growing swim lanes between commercial EO providers and what you've won with the Vantor?

Speaker #6: Space-based situational constellations like what we're seeing with True Anomaly. And then participation in SpaceX's Starshield program. So those three particular programs and if there's a fourth lane of really fast-growing prime classified work as well.

Speaker #6: Just how you think about kind of the investment requirement versus those program growth or that program growth.

Jeff MacLauchlan: Yeah. John will probably want to add to this, and he will have some insight on some of the specific programs and places that you mentioned. But basically, Colin, I am going to come back to cash flow. We apply the same tools in the context of your question that we do others. If we see an opportunity to invest in a way that grows free cash flow dollars, that is the decision that we make. I would also point out, because we have had a little bit of noise in our free cash flow forecast over the last couple of years.

Speaker #1: Yeah. So John will probably want to add to this and he'll have some insight on some of the specific programs and places that you mentioned.

Speaker #1: But basically, Colin, I mean, the cash I'm going to come back to cash flow. I mean, we apply the same tools in the context of your question that we do others.

Speaker #1: If we see an opportunity to invest in a way that grows free cash flow—dollars—that's the decision that we make. I would also point out, because we've had a little bit of noise in our free cash flow forecast over the last couple of years, I'd also call attention to a slide that we provide from time to time that sort of lays out some of the unusual items that are in free cash flow, so that you can sort of do your analysis and kind of tease out what is recurring free cash flow, I'll call it, versus what are some unusual cash items.

Jeff MacLauchlan: I would also call attention to a slide that we provide from time to time that sort of lays out some of the unusual items that are in free cash flow, so that you can do your analysis and tease out what is recurring free cash flow, I will call it, versus what are some unusual cash items. That chart is in the appendix here. But you will see in there a nice progression in free cash flow as we make those investment decisions and trade-offs that you asked about.

Speaker #1: And that chart is in the appendix here. But you'll see in there a nice progression in free cash flow as we make those investment decisions and trade-offs that you asked about.

John Mengucci: Yeah, Colin, I was writing as frantically as I could, but on some of the different programs that you mentioned. I will start by answering all of the above is what is going to continue to drive free cash flow. Look, let us talk about Vantor and what ARKA has done in that area. Look, they have found a way to put exquisite results into a smaller payload. Why did Vantor select us? Frankly, without bragging, we were the best solution, right? We went through a competitive evaluation. We had high TRL. We took the family of systems approach, a really strong design, and a history of supporting cutting-edge capabilities in space. So for them, that was a value-added proposition as well as it is for us.

Speaker #2: Yeah, Colin, and I was writing this as frantically as I could, but on some of the different programs that you mentioned, I'll start by answering: "All of the above" is what's going to continue to drive free cash flow.

Speaker #2: But look, let's talk about Vantor and what ARCA has done. In that area. Look, they've found a way to put exquisite results into a smaller payload and why did Vantor select us?

Speaker #2: Frankly, I mean, without bragging, we were the best solution. It went to a competitive evaluation. We had high TRL. We took the family of systems approach a really strong design and history of supporting cutting-edge capabilities in space.

Speaker #2: So for them, that was a value-added proposition, as well as it is for us. So there's a case where we balanced investment, and a lot of that investment happened before we took over ownership because we've got a group of folks in Danbury, Connecticut, who have been doing this for almost seven decades.

John Mengucci: So there is a case where we balanced investment, and a lot of that investment happened before we took over ownership, because we have got a group of folks in Danbury, Connecticut, who have been doing this for almost seven decades. They understand the investments they need to make. They are all very much free cash flowing and cost-conscious. If you look at OCTs, that is going to be another area that is going to continue to grow. We put the right investment dollars into Tranche one. We openly shared we were going to struggle through the producibility side of that. Enter ARKA, that understands how to build in that environment really well. So, from the current CACI work into the new ARKA work, they brought some great helping hands to make sure we could get through Tranche one, and then we have got EST terminals, everything else later.

Speaker #2: They understand the investments they need to make, and they're all very much free cash flow and cost conscious. If you look at OCTs, that's going to be another area that's going to continue to grow.

Speaker #2: We put the right investment dollars in to tranche one we openly shared. We were going to struggle through the producibility side of that. Enter ARCA, that understands how to build in that environment really well.

Speaker #2: So from the current CCI work into the new ARCA work, they brought some great helping hands to make sure we could get through tranche one and then we've got EST terminals and everything else later.

John Mengucci: So, in both of those examples, the ones that I can talk to and talk to on this line. If we look at space-based EOIR as well as OCTs, both of those are really good, strong business cases. As John Mengucci mentioned, as we go forward, we are going to have other areas both in space and in EW, as well as in our digital network tech area. We will have to look at the level of investments we are looking to make, but all with an absolute first eye on generating more free cash flow.

Speaker #2: So in both of those examples, the ones that I can talk to and talk to on this line, if we look at space-based EOIR as well as OCTs, both of those are really good, strong business cases and as Jeff mentioned, as we go forward, we're going to have other areas, both in space and in EW, as well as in our digital network tech area, we'll have to look at the level of investments we're looking to make, but all with an absolute first eye on generating more free cash flow.

Colin Canfield: Got it. As you think about M&A strategy, maybe if you could talk about the balance of cash flow growth versus price that you are seeing out of VC-backed assets versus sponsor-backed assets. Maybe just talk about which buckets of assets are you seeing as more attractive at the moment?

Speaker #6: Got it. And as you think about M&A strategy, maybe you could talk about the balance of cash flow growth versus price that you're seeing out of DC-backed assets versus sponsor-backed assets.

Speaker #6: And maybe just talk about kind of which buckets of assets are you seeing as more attractive at the moment.

Jeff MacLauchlan: Yeah. Colin, it's hard to make a general comment about that. You won't be surprised to learn that every one of those sort of has its own story, the length of the hold, the prospects, the market position. We continue to curate our pipeline pretty carefully. You know that we focus on gaps. We're not buying volume or bulk. We continue to look. There is some price valuation, I'll call it correction or adjustment kind of in the air. We're mindful of that and watching it. Personally, I don't think it's done. But that's certainly part of how we think about and evaluate opportunities. Again, it's very hard to generalize every story. Every opportunity sort of has its own set of facts and circumstances.

Speaker #1: Yeah. Colin, it's hard to make a general comment about that. You won't be surprised to learn that every one of those sort of has its own story.

Speaker #1: The length of the hold, the prospects, the market position. We continue to curate our pipeline pretty carefully. You know that we focus on gaps.

Speaker #1: We're not buying volume or bulk. We continue to look; there is some price valuation—I'll call it correction or adjustment—kind of in the air.

Speaker #1: We're mindful of that and watching it. Personally, I don't think it's done, but that's certainly part of how we think about and evaluate opportunities.

Speaker #1: And again, it's very hard to generalize every story every opportunity sort of has its own set of facts and circumstances.

Colin Canfield: Fair enough. Thank you.

Speaker #6: Fair enough. Thank you.

John Mengucci: Yeah. Thanks, Colin.

Speaker #2: Yeah. Thanks, Colin.

Operator: Your next question comes from Gautam Khanna with TD Cowen. Your line is open.

Speaker #6: Your next question comes from Gautam Khanna with TD Cowen. Your line is open.

Gautam Khanna: Yeah, thanks. Good morning, guys.

Speaker #5: Yeah. Thanks. Good morning, guys.

John Mengucci: Good morning.

Jeff MacLauchlan: Good morning.

Speaker #1: Good morning.

Gautam Khanna: I was wondering if you could maybe just calibrate us on recompetes this year, have any been extended? If you could just talk about the exposure there. Also, given the outstanding bids and the submissions to come, if you could characterize what you expect in terms of bookings in the December quarter, which normally is soft, but it seems like you might be able to do better than what is typical seasonality. If you could just talk about cadence of bookings through the fiscal year as well. Thanks.

Speaker #5: I was wondering if you could maybe just calibrate us on recompete this year. Have any been extended? So if you could just talk about the exposure there.

Speaker #5: And then also, given the outstanding bids and the submissions to come, if you could characterize what you expect in terms of bookings in the December quarter, which normally is soft, but it seems like you might be able to do better than what is typical seasonality.

Speaker #5: If you could just talk about cadence of bookings through the fiscal year as well. Thanks.

Jeff MacLauchlan: Yeah. John will certainly want to add to this, but we have had a number of sole source extensions, which sort of short-circuit or delay, I will say. They do not do away with it, but delay recompete processes. We have seen that on BEAGLE in a number of classified areas. We have seen areas where we have got a year or 2 kind of extensions, which is also, although you did not ask it, is also part of the award duration statistic that you saw. Because obviously you put those in at 1 or 2 years, it lowers the average, but is also a significant risk mitigator beyond the statistic. So those are areas where obviously we have satisfied customers that are in a position that they can justify an extension. We are obviously always happy for that to happen. So the recompetes, you saw a step down in this quarter.

Speaker #1: Yeah. John will certainly want to add to this, but we have had a number of sole-source extensions which sort of short-circuit or delay, I'll say.

Speaker #1: They don't do away with it, but delay recompete processes. We've seen that on Beagle. In a number of classified areas, we've seen areas where we've got a year or two kind of extensions, which is also although you didn't ask it, is also part of the award duration statistic that you saw.

Speaker #1: Because obviously, you put those in at one or two years, it lowers the average, but is also a significant risk mitigator beyond the statistic.

Speaker #1: So those are areas where, obviously, we have satisfied customers that are in a position where they can justify an extension. We're always happy for that to happen.

Speaker #1: So the recompetes, you saw a step down in the in this quarter. Beagle was a big part of that and a couple of other classified things, as I said.

Jeff MacLauchlan: BEAGLE was a big part of that and a couple of other classified things, as I said. There are not any single large, meaningful, significant recompetes. There are a handful of smaller things for the balance of the year. But that 3% of remaining recompete content is probably 6 or 8 smaller programs.

Speaker #1: And there aren't any single large meaningful significant recompetes. There are a handful of smaller things for the balance of the year, but that 3% of remaining recompete content is probably six or eight smaller programs.

John Mengucci: Yeah. On, I think, the other half of your question. Let's see, Jeff talked about the duration of contracts put into our backlog this quarter. Hey, look, I am always happy to take the millions of dollars I have to spend today on a recompete and add all those millions up and go after there and start bidding even more new work. So it is a real positive measure for us. On the booking side, I think in my prepared remarks, I talked about we are very pleased and we start to see some positive signs of the award announcement rate picked up, but it is also still sluggish. So what I, what Jeff, what the rest of the company focuses on is that is why you focus on your backlog and your funded backlog and why program performance is so important.

Speaker #2: Yeah. And I think the other half of your question on the let's see, Jeff talked about the duration of contracts. Put into our backlog this quarter.

Speaker #2: Hey, look, I'm always happy to take the millions of dollars I have to spend today on an ecompete. And add all those millions up and go after there and start bidding even more new work.

Speaker #2: So it's a real positive measure for us. On the booking side, I think it might prepare remarks. I talked about we're very, very pleased and we start to see some positive signs of the award announcement rate picked up.

Speaker #2: But it's also still sluggish. So what I, what Jeff, what the rest of the company focuses on is that's why you focus on your backlog and you're funded backlog and why program performance is so important because when the customers have a discretionary dollar at the end of a fiscal year, and as they have done seven of our last eight quarters, they put that additional funding to be really certain the contracts that we're delivering are funded.

John Mengucci: Because when the customers have a discretionary dollar at the end of a fiscal year, as they have done 7 of our last 8 quarters, they put the additional funding to be really certain the contracts that we are delivering are funded. So will it still be sluggish? Yes, I think it is going to still be sluggish over the next couple of quarters. But we are not winning work in the Q1 to support our financials of the Q2. We actually win work in the Q1 to continue to grow this business over the next 7 to 8 to 9 quarters.

Speaker #2: So, will it still be sluggish? Yes, I think it's going to still be sluggish over the next couple of quarters. But we're not winning work in the first quarter to support our financials for the second quarter.

Speaker #2: We actually win work in the first quarter to continue to grow this business over the next seven to eight to nine quarters. So at the end of the day, we're winning the business at the right rate to continue to grow this business.

John Mengucci: So, at the end of the day, we are winning the business at the right rate to continue to grow this business, and we have also proven the last couple of years with sluggish awards that we continually come back to you all and our shareholders and talk about another full year of fantastic growth and great free cash flow. Thanks, Colin.

Speaker #2: And we've also proven in the last couple of years, which sluggish awards, that we continually come back to you all and our shareholders and talk about another full year of fantastic growth and great free cash flow.

Speaker #2: Thanks, Colin.

Gautam Khanna: Thank you.

Speaker #5: Thank you.

Jeff MacLauchlan: Yeah.

Speaker #1: Yeah.

Operator: Your next question comes from Seth Seifman with J.P. Morgan. Your line is open.

Speaker #6: Your next question comes from Seth Seifman with J.P. Morgan. Your line is open.

[Analyst] (J.P. Morgan): Hi, good morning. This is Rocco on for Seth.

Rocco Barbero: Hi, good morning. This is Rocco on for Seth.

Speaker #7: Hi. Good morning. This is Raquel Anforseth.

John Mengucci: Hey, Rocco.

Speaker #1: Hey, Raquel.

[Analyst] (J.P. Morgan): Looking at the contract mix type, fixed price work has increased to the low to mid-30s as a percentage of revenue over the last few quarters. How much of that was driven by ARKA versus the overall government push towards fixed price work, and where should we think about that percentage going in the future?

Rocco Barbero: Looking at the contract mix type, fixed price work has increased to the low to mid-30s as a percentage of revenue over the last few quarters. How much of that was driven by ARKA versus the overall government push towards fixed price work, and where should we think about that percentage going in the future?

Speaker #7: I'm looking at the contract mix type. Fixed price work has increased the load limit 30s as a percentage of revenue over the last few quarters.

Speaker #7: How much of that was driven by ARCA versus the overall government push towards fixed price work? And where should we think about that percentage going in the future?

John Mengucci: Well, look, it is far beyond ARKA. I do not remember what the actual metric was between first or second quarter. I am sure Jeff is going to add to this. But I am just sort of focused on fixed price and look, we are very comfortable with it. They are improving margins where a technical risk is understood. I think I might have shared last couple of quarters that we have had some good deep discussions inside this company around if we are going to be asked to bend the laws of physics, we probably will not take that fixed price. But if it is software-based and we understand what it is we are out there delivering, there is no reason why we should not. We got a great track record of strong performance over time. Our customers are increasingly asking us that for the task orders under different fixed price arrangements.

Speaker #2: Yeah. Look, it's far beyond ARCA. I don't remember what the actual metric was between first or second quarter. I'm sure Jeff's going to add to this.

Speaker #2: But I'm just sort of focused on fixed price and look, we're very comfortable with it. They are improving margins. We're a technical risk is understood.

Speaker #2: I think I might have shared the last couple of quarters that we've had some good, deep discussions inside this company around, if we're going to be asked to bend the laws of physics, we probably won't take that fixed price.

Speaker #2: But if it's software-based and we understand what it is we're out there delivering, there's no reason why we shouldn't. We've got a great track record of strong performance over time.

Speaker #2: And we're our customers are increasingly asking us that for the task orders under different fixed price arrangements, whatever money we're saving them, they come back to us with additional work.

John Mengucci: Whatever money we are saving them, they come back to us with additional work. We are very disciplined in the kind of fixed price work that we take, and it absolutely has contributed to margins far beyond the book of business that ARKA brings.

Speaker #2: So we're very disciplined in the kind of fixed price work that we take. And it absolutely has contributed to margins far beyond the book of business that ARCA brings.

Jeff MacLauchlan: Yeah, and maybe a little more specifically, if you look at that increase from 27% to 33%, about half of that 6 points is attributable to the inclusion of ARKA. The other half of it, you ought to think about in the latter category John mentioned, where we just have sort of native organic increased fixed price activity.

Speaker #1: Yeah. And maybe a little more specifically, if you look at that increase from '27% to '33%, about half of those of that six points is attributable to the inclusion of ARCA.

Speaker #1: So the other half of it, you ought to think about in the latter category, John mentioned, where we just have sort of native organic increased fixed price activity.

[Analyst] (J.P. Morgan): Right. That makes sense. Then last quarter, CACI announced the hiring of several different tech hardware executives. How have they integrated into the firm as a whole, and how should we think about these individuals helping to drive growth in technology?

Rocco Barbero: Right. That makes sense. Then last quarter, CACI announced the hiring of several different tech hardware executives. How have they integrated into the firm as a whole, and how should we think about these individuals helping to drive growth in technology?

Speaker #7: Right. That makes sense. And then last quarter, CACI announced the hiring of several defensive tech hardware executives. How have they kind of integrated into the firm as a whole, and how should we think about these individuals kind of helping to drive growth in technology?

John Mengucci: Yeah. Dave, Chris, and Tom. I will start with Tom. Tom is a prior CACI alumni. He is running our electronic warfare business, doing an outstanding job, bringing a lot of great new creative ideas to us and things that are going to continually grow that business area. Dave has come in as our COO. Done a fantastic job. Really focused on cross-company initiatives, everything from being able to drive better, more predictable producibility between engineering, design, and production. As well as Dave has got a lot of experience in the space realm. And he has been running different size businesses. Latest business, about $700 billion, which is only a few or $3 billion to $4 billion short of our company. So I like what he has been able to bring.

Speaker #2: Yeah. So Dave, Chris, and Tom—I'll start with Tom. Tom's a prior CCI alumni. He's running our electronic warfare business, doing an outstanding job, creating a lot of great new creative ideas for us and things that are going to continually grow that business area.

Speaker #2: Dave has come in as our COO. Done a fantastic job. Really, really focused on cross-company initiatives, everything from being able to drive better more predictable producibility between engineering, design, and production.

Speaker #2: As well as Dave's got a lot of experience in the space realm. And he's been running different size businesses, latest business, about seven, seven billion dollars, which is only a few or four, three or four billion dollars short of our company.

Speaker #2: So I like what he's been able to bring and then Chris clearly Chris has got all of the all of our focus as well as all of our support to really building out these centers of excellence.

John Mengucci: Chris, clearly, Chris has got all of our focus as well as all of our support to really building out these centers of excellence. And this is another example of investing ahead of need. We know what our next few years look like. We talked about giving you a new three-year guide. I do not think that is going to disappoint anybody out there. But for us to be able to achieve that continued growth, we need to make certain that we put a longer-term look at how we are doing the production items within this company. So Chris is going to bring a lot of expertise there.

Speaker #2: And this is another example of investing ahead of need. Okay? We know what our next few years will look like. We talked about giving you a new three-year guide.

Speaker #2: I don't think that's going to disappoint anybody out there. But for us to be able to achieve that continued growth, we needed to make certain that we take a longer-term look at how we're handling production items within this company.

Speaker #2: So Chris is going to bring a lot of expertise there. The fact that we are a growing company and we're a different kind of company and one that's very well respected and a very different part of the market, that makes it easier and easier for us to find world-class talent that is more than happy to come here to continue what it is we built and to push us even further.

John Mengucci: The fact that we are a growing company, and we are a different kind of company, and one that is very well respected in a very different part of the market, that makes it easier and easier for us to find world-class talent that is more than happy to come here to continue what it is we built and to push us even further. So, appreciate the question.

Speaker #2: So I appreciate the question.

[Analyst] (J.P. Morgan): Great. Thank you.

Rocco Barbero: Great. Thank you.

Jeff MacLauchlan: Yep.

John Mengucci: Yep.

Speaker #7: Great. Thank you.

Speaker #2: Yep.

Operator: Our last question comes from David Strauss with Wells Fargo. Your line is open.

Speaker #6: Our last question comes from David Strauss with Wells Fargo. Your line is open.

Josh Korn: Hi, good morning. This is Josh Korn on for David.

Speaker #8: Hi. Good morning. This is Josh Cornon for David. Just wanted to just wanted to follow up on the organic growth outlook. You had a strong bookings quarter, almost 5 billion in awards.

John Mengucci: Hey, Josh. Good morning.

Josh Korn: Hi. Just wanted to follow up on the organic growth outlook. You had a strong bookings quarter, almost $5 billion in awards. I guess, how should we think about the way those bookings in the quarter convert to revenue this year and beyond? If there is any specific programs you would want to highlight driving growth now in the next couple quarters. Thanks.

Speaker #8: I guess, how should we think about the way those bookings in the quarter convert to revenue this year and beyond? And then, if there's any specific programs you would want to highlight driving growth now and in the next couple of quarters.

Speaker #8: Thanks.

Jeff MacLauchlan: It is really, Josh, pretty broad-based across the portfolio. I would not call out any one specific program. A couple of the bigger awards that we talked about, you will notice are five-year programs, and we will see those ramp up in sort of the normal way. There will be a little bit of contribution this year. It is really pretty broad-based. Really, there is no part of the portfolio where, happily, we are seeing any kind of contraction. The business is hitting on all cylinders.

Speaker #1: Yeah. It's really Josh, pretty broad-based across the portfolio. I wouldn't call out any one specific program. A couple of the bigger awards that we talked about, you'll notice our five-year programs and we will see those ramp up in sort of the normal way and there'll be a little bit of contribution this year.

Speaker #1: But it's really pretty broad-based. Really, there is no part of the portfolio where, happily, we're seeing any kind of contraction. I mean, the business is hitting on all cylinders.

John Mengucci: Yeah, Josh, I would also add a little bit about the Apollo win because it really is a unique. It is the latest example of using technology-first solutions for us to win more and more work. As Jeff mentioned, that is going to drive a lot of top-line growth over the next couple of years before that levels off. It is a five-year program. We are really using bleeding-edge AI to analyze and create inputs in the area of information warfare, something we cannot dig into on this kind of a call, but just recognize it is usually important and really, really hard. We sort of have a habit of doing hard. It is expected to be in its higher ramp in Q3. Back to the very first questions, it is one of those drivers for us to go drive growth.

Speaker #2: Yeah. And Josh, I'd also add a little bit about the Apollo wind because it really is a unique it's the latest example of using technology-first solutions for us to win more and more work.

Speaker #2: And as Jeff mentioned, that's going to drive a lot of top-line growth over the next couple of years. Before that, the level's off. It's a five-year program.

Speaker #2: We're really using bleeding edge AI to analyze and create input scenario of information warfare, something we can't dig into on this kind of a call, but just recognize it's hugely important and really, really hard.

Speaker #2: We sort of have a habit of doing hard. But it's expected to be in its higher ramp in Q3. So back to the very first questions, it's one of those drivers for us to go drive growth and then we've got things like JHTMS and other programs out there that are going to continue to make sure we're set up for another really successful year.

John Mengucci: Then we have things like JTMS and other programs out there that are going to continue to make sure we are set up for another really successful year.

Josh Korn: Okay, thanks. I will stick to one.

Speaker #8: Okay. Thanks. I'll stick to one.

Jeff MacLauchlan: Thank you.

John Mengucci: Thanks.

Speaker #1: Thank you.

Speaker #2: Thanks.

Operator: That concludes our Q&A session. I would now turn the conference back over to John Mengucci for any closing remarks.

Speaker #6: That concludes our Q&A session. I would now turn the conference back over to John Mingucci for any closing remarks.

John Mengucci: Well, thanks, Morgan, and thank you for your help on today's call. 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, and Jeff MacLauchlan, George Price, and Lisa Parkinson are available after today's call. Please stay healthy. All my best to you and your families. This concludes our call. Thank you and have a great day.

Speaker #2: Well, thanks, Morgan. And thank you for your help on today’s call. We’d like to thank everyone who dialed in or listened to the webcast for their participation.

Speaker #2: We know that many of you will have follow-up questions, and Jeff MacLauchlan, George Price, and Lisa Parkinson are available after today's call. Please stay healthy.

Speaker #2: All my best to you and your families. This concludes our call. Thank you and have a great day.

Operator: This concludes today's call. Thank you for attending. You may now disconnect and have a wonderful rest of your day.