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CACI International (CACI): Company Profile, Stock Price, News, Rankings

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CACI International

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This time, I would like to turn the conference call over to George Senior Vice President, Investor Relations. Please go ahead.

Thanks, Kelvin, and good morning, everyone. I'm George Price, Senior Vice President of Investor Relations for CACI International. Thank you for joining us this morning. We are providing presentation slides, so let's move to slide two. 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. These should not be considered in isolation or as substitute for performance measures prepared in accordance with GAAP.

Let's turn to Slide three, please. To open our discussion this morning, here's John Mengucci, President and Chief Executive Officer of CACI International.

John? Thanks, George. Good morning, everyone. Thank you for joining us to discuss our third quarter fiscal year twenty twenty five results as well as our updated fiscal twenty twenty five guidance. With me this morning is Jeff McLaughlin, our Chief Financial Officer.

Slide four, CACI's third quarter results represent another strong quarter on our way to a great year. We delivered revenue growth of 12%, EBITDA margin 11.7% and free cash flow of $188,000,000 In addition, we won $2,500,000,000 of awards, representing a book to bill of 1.2x for the quarter and 1.5x on a trailing twelve month basis. We've said it's not unreasonable to expect some slower decision making in the current environment, but we continue to see our customers issuing RFPs and making awards. In fact, so far in the fourth quarter, we have won an additional $1,300,000,000 of awards. The business is performing well.

Our strategy, differentiation, resilience and superior execution are borne out by our results. We're in the right places, doing the right things and controlling what we can control. Given our strong execution and healthy pipeline metrics, we are raising our fiscal year twenty twenty five guidance for revenue, adjusted EPS and free cash flow. Jeff will discuss this in more detail shortly. And we remain confident in our ability to achieve our three year financial targets and to continue driving long term growth in free cash flow per share and shareholder value.

Slide five, please. Turning to the macro environment. We continue to see good demand signals from customers in our key focus areas. The world is a dangerous place, and demand is being driven by geopolitical realities as well as a new administration. We see a constructive funding environment with healthy budgets and an upward bias in national security spending and investment.

And our strategy and capabilities are extremely well aligned with the new administration's priorities. As an example, Secretary of Defense, HEXET recently issued a memo emphasizing the criticality of software defined capabilities and mandating the use of the software acquisition pathway to pivot from a hardware centric to a software centric approach. We came to the same conclusion years ago that software would be the enabler of greater speed, agility, efficiency and even lethality. And we developed a strategy and invested ahead of need to position CACI for where we saw the market going. The SECDES directive is a clear validation of our strategy and the software based approach we employ in everything we do.

On the budget front, visibility is beginning to improve. For fiscal twenty twenty five, we have a full year continuing resolution in place that includes increased flexibility for our customers, allowing new starts and greater discretion in allocating funds. While there may be a learning curve for the DoD, given this is the first full year CR for defense, we don't expect any material impact to our business. Additionally, both the House and Senate recently passed separate budget reconciliation bills, which would provide additional funding for defense and border security. While these bills still have to go through the conference process, they represent significant incremental multiyear funding in key areas of our addressable market.

Looking further out, government fiscal year 2026 is still evolving. The President's Budget Request, or PBR, is not expected until next month, but early comments are positive, with the administration showing support for a $1,000,000,000,000 defense budget. Both the reconciliation bills and the PBR comments are strong signals for our business that generates 90% of its revenue from solving the toughest challenges of the DoD, the intelligence community and the Department of Homeland Security. Finally, the Department of Government Efficiency or DOGE continues to conduct their reviews. We've seen minimal impacts thus far, but we continue to stay close to our customers to support whatever they need.

While Doge is not done with its work, we remain confident that our strategy, differentiated software based capabilities and superior program execution are extremely well aligned to the new administration and Doge's objectives, a piece through strength, secure borders, increased efficiency and technology modernization. Slide six, please. With that in mind, I'd like to highlight some of our recent successes on key programs supporting enduring national security priorities. Our proven commercial agile software development capabilities and software defined approach on these programs continue to accelerate speed, agility, efficiency and lethality across the national security space, which is exactly what this administration is asking. First, our TLS Manpack technology is a perfect example of our strategy playing out in the electromagnetic spectrum.

TLS Manpack is a commercially developed software defined system that allows discounted soldiers to conduct signals detection, direction finding and electronic attack while on the move. Manpack's upgradable software and signal sets enable our warfighters to be more capable and more lethal and demand for this technology continues to strengthen. Our program of record sealing was increased this quarter and the number of systems we have delivered has more than doubled and will continue to grow. GLS Manpack was even featured on the cover of the April edition of the Journal of Electromagnetic Dominance. Next, our Navy Spectral program continues to progress well as we enter the next phase of the program.

We are beginning to upgrade existing systems as an interim step to deliver enhanced capability to the fleet faster and enable a more efficient transition to the full SPECTRAL system. SPECTRAL software defined capabilities and upgradable signal sets enhanced with AI to reduce the cognitive burden on the sailor will make our warfighters more capable and more lethal. The continued success of the program is not only a resounding endorsement of our investing ahead of customer need and our software defined approach, but also a great example of the strategic value of the Azure Summit acquisition. Next is one of our seven large network modernization programs, Army CIPR Mod. Here, we are modernizing the U.

Army's secure Internet protocol network, a highly complex network for transmitting classified information around the globe. The software defined network technology we're deploying includes ARCON, which is a CCI commercial technology that was developed ahead of customer need and proved to be a crucial differentiator in winning the program. We recently installed the first ARTCOM gateway, which represents an important program milestone. The Army Supermod program highlights the significant opportunity for additional software defined network modernization across the federal government to increase security and deliver efficiency and is another great example of CECI winning by investing ahead of customer need. Our support of DoD's push for financial accountability and transparency is yet another success story.

Last quarter, we highlighted our work on the Defense Agencies Initiative, or DAI program, where we have developed and deployed commercial software to enable successful financial audits for DoD agencies. This quarter, I'm pleased to report another great milestone. The U. S. Marine Corps recently received their second clean financial audit.

CACI is the only technology company that has helped a service level agency in the DoD achieve a clean financial audit, now for the second year in a row. And we've done the same for many other DoD entities as well. With the software we have implemented for the DAI, CACI has provided the blueprint for DoD agencies to successfully pass audits and provide financial accountability and transparency. And we expect other DoD agencies to follow the Marine Corps' example. Finally, this past February, our Beagle program for DHS Customs and Border Protection saw the highest monthly volume of software releases ever.

This significant increase in release demand was driven by the new administration's border security policy. Our agile software development capabilities are purpose built for exactly this type of rapid changes and requirements. We are on track to deliver well over 1,000 software releases this year with greater than 99% defect free quality. We are taking these same capabilities to NASA where our MCAPS program is increasing velocity and efficiency by consolidating software applications from 11 centers across NASA using the same proven commercial agile software development processes combined with our six decades of mission focus. These examples highlight how CACI's differentiated software based capabilities, commercial processes and exceptional execution are helping our customers address critical and enduring national security priorities and they're helping CACI continue to win, grow and deliver value to our shareholders.

Slide seven, please. In summary, our strategy and business remain resilient as underscored by our continued strong financial performance. It's the reason we are again able to increase our fiscal year '20 '20 '5 guidance and remain confident in achieving our three year financial targets. We remain positive given increasing budgets and bipartisan support to the national security priorities that we focus on. We are executing our strategy and purpose built our business for this environment and that continues to position us well to drive long term growth, increasing free cash flow per share and additional shareholder value.

With that, I'll turn the call over to Jeff.

Thank you, John. Good morning, everyone. Please turn to Slide eight. In the third quarter, we generated revenue of $2,200,000,000 representing 11.8% reported growth, of which 5.6% is organic. As John mentioned, our strategy that differentiates CACI from traditional competitors and our superior execution are evident in our strong results.

Third quarter EBITDA margin of 11.7% represents a year over year increase of 40 basis points. Similar to last quarter, EBITDA margin is above our previously stated expectations, primarily due to the timing of certain software defined technology deliveries occurring in the third quarter. Excluding these items, third quarter EBITDA margin would have been in line with our comments last quarter. Adjusted diluted earnings per share of $6.23 were 9% higher than a year ago. Greater operating income and our recent share repurchases more than offset higher interest expense and a higher income tax provision.

Third quarter operating cash flow, excluding our accounts receivable purchase facility, was $2.00 $4,000,000 reflecting strong profitability and effective management of working capital. Days sales outstanding, or DSO, were fifty five days. Free cash flow for the third quarter was $188,000,000 representing strong sequential and year over year increases. Slide nine, please. During the quarter, we announced that we would be initiating an open market repurchase program utilizing our existing share repurchase authority.

Through the end of the quarter, we bought 436,000 shares at an average price of about $344 per share. After completion of these latest repurchases, we have approximately $187,000,000 remaining in our current authorization. Including this latest activity, we have repurchased approximately 15% of our outstanding shares since FY 'twenty one, while also completing 12 acquisitions during the same time period. This track record is a testament to our flexible and opportunistic capital deployment approach. Third quarter net debt to trailing twelve month EBITDA was 2.9x on a pro form a basis, following the acquisitions of Applied Insight and Azure Summit and reflecting the capital used this quarter for the share repurchases.

We remain well positioned to deploy capital in a flexible and opportunistic manner to drive long term growth in free cash flow per share and shareholder value. Slide 10, please. We are pleased to again raise our FY 'twenty five guidance as a result of our strong business performance heading into the fourth quarter. We're raising the low end of our revenue guidance with a new range of $8,550,000,000 to $8,650,000,000 driven by stronger organic growth. This represents total growth of 14.5% to 16% on an underlying basis, which includes about six points of growth from acquisitions.

We continue to expect fiscal twenty twenty five EBITDA margin to be in the low 11% range. And in light of our Q3 margin overperformance that was driven by the acceleration of the software defined technology deliveries from Q4, we now expect Q4 EBITDA margin to also be in the low 11% range. As a result of our higher revenue outlook, combined with a slightly lower effective tax rate and interest expense, we're also raising the low end of our adjusted net income guidance with a new range of five forty three million to $557,000,000 This, along with our reduced share count, yields an attendant increase in adjusted earnings per share to be between $24.24 and $24.87 per share, representing growth of 15% to 18 compared with last year. And finally, as we're always focused on the efficient use of our capital, we're increasing our free cash flow guidance to be at least $465,000,000 driven by a reduction in our CapEx forecast. About half of the CapEx reduction is related to capital efficiencies from using existing Azure capacity with the balance coming from other program efficiencies and the timing of program ramp ups.

As we've said before, we see free cash flow per share as the ultimate value creation metric, and our FY 'twenty five guidance now implies twenty two percent growth in free cash flow per share. Slide 11, please. Turning to forward indicators. Our trailing twelve months book to bill ratio of 1.5x reflects strong performance in the marketplace. Our backlog of $31,000,000,000 increased 10% from a year ago and continues to represent almost four years of annual revenue.

These metrics provide good long term visibility into the strength of our business. Entering the fourth quarter, more than 97% of our FY twenty five revenue is expected to come from existing programs, with about 2% coming from recompetes and less than 1% from new business. Progress on these metrics reflects our strong operational performance and underpins our confidence in our updated expectations for the year. In terms of our pipeline, we have $17,000,000,000 of bids under evaluation, nearly 80% of which are for new business to CACI. The significant sequential increase in bids under evaluation reflects our strong business development performance and the sometimes lumpy timing of RFP issuance, proposal submission and award decisions.

We expect to submit another $10,000,000,000 of bids over the next two quarters with more than 75% of that being for new business. In summary, we continue to deliver successful results in an uncertain environment, underscoring the resilience and durability of our business. We are seeing healthy demand from our customers as we help them address critical national security priorities. And we continue to win and execute high value enduring work that supports long term growth, increasing free cash flow per share and additional shareholder value. And with that, I'll turn the call back over to John.

Thank you, Jeff. Let's go to Slide 12, please. In summary, we delivered double digit revenue growth, increased profitability, strong cash flow and solid awards. Our performance positions us to again raise our fiscal year twenty twenty five guidance, underscores our continued confidence in achieving our three year financial targets. Additionally, we opportunistically repurchased $150,000,000 of CACI shares to further enhance shareholder value.

We continue to navigate a challenging and uncertain macro environment, thanks to the successful execution of our strategy, a strategy where we utilize commercial structure development processes in everything we do, we invest ahead of customer need, we provide differentiated expertise in technology. This strategy enables CACI to continue delivering increased speed, agility, efficiency and lethality. And we see proof point after proof point that this is exceptionally well aligned to the administration's priorities. As is always the case, our success is driven by our employees' talent through innovation and their commitment. To everyone on the CACI team, I'm proud of what you do each and every day for our company and for our nation.

Thank you. And to our shareholders, I want to thank you for your continued support of CACI. With that, Calvin, let's open the call up for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. As we enter the Q and A session, we ask that you please limit your input to one question and one follow-up. Your first question comes from the line of Scott Nicholas of Melius Research. Please go ahead.

Very nice numbers. Quick question on contract growth. Just wondering how that trended since the change in administration. You're finding any changes in customer behavior or they may be not spending to the ceiling on some of their contracts or some of the task orders from IDIQs coming out more slowly than you would have anticipated?

Yes, Scott. Thanks. So if I look at our own contract growth, that's just one element of how we grow this business and how we have grown it through fiscal year twenty twenty five. We haven't seen any slowdown on our on contract growth measures. We just talked about where our book to bill was in the third quarter.

So really haven't seen a material slowdown in awards. And I think what else is telling as we look forward is the level of RFPs that we're responding to the fact that bids to be awarded and bids that we're going to be submitting is up until I think about 2,000,000,000 or $3,000,000,000 from the last period really gives us the confidence that we're going to continue to see awards and funding that will drive future growth.

Okay. And then I know that you're not guiding to FY 2026 now, but I was just curious how much revenue is already in that backlog? And are there any sort of major recompetes that we should be aware of over the next, say, twelve to eighteen months?

Yes, Scott. There's not one program that's more than 5% of our revenue. It's sort of a moderate recompete year as we look forward to 2026. Yes, I most likely won't be sharing 2026 guidance, the fact that we're still working through where we're going in fiscal year 2026. But yes, it's actually building up very, very well.

Yes. I would only add that while John alludes to the fact, obviously, that we're doing our detailed FY 'twenty six planning right now, the positioning of the portfolio, the pipeline that we see and the pace and rhythm of the business is very much aligned with our three year targets from last fall. So while we're not going to give you any details today on FY 'twenty six, the medium term horizon is very much consistent with what we saw then and see now.

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

Hi, good morning. This is Josh Korn on for David. Nice results. I to ask sort of an industry question about the, the DOD memo, about insourcing, or updating acquisition from for tech. You know, I I guess you mentioned you haven't seen any any, you know, major negative impacts from those, but just positively or negatively, that could play out?

Is that more of a short term impact or longer term impact when those policies are put into practice? Thanks.

Yes, Josh. Thanks. Let me parse into a couple of pieces. Let's talk about the EOs first. Look, there's a lot of executive orders and memos.

They're being released, and we are assessing all of them. A lot of the EOs related to our industries are really focused on greater spending efficiency for the U. S. Government, especially in national security space. There is a focus on streamlining decision making so that we can get better capabilities to the warfighter faster and more efficiently, which clearly myself and I'm certain others in the industry strongly support.

But how we relate to us, these concepts are really central to the strategy we've outlined for a number of years, which is why we embarked on a software defined capabilities path. Because it's really in line with where the world is going. So look, the details are going to be important. It's going to depend on how they're implemented. But we do continue to engage at the appropriate level, Josh, and we see it as a net positive for CACI over time.

You asked something specifically around how the government may be looking to buy based on some of those EOs. I'll just focus on the software pathway, one, because I think that's really well aligned to where we have been. We've talking about this for years. It really is a pivot from a long term program hardware focus to a software defined approach, and that's right in line with Agile software development. Literally today, we can overlay all the current metrics of the programs we've won the last six to eight years as it pertains to Agile and show our customers today how we can align that to this new EO.

So you also asked about Doge. I think that they're still going through their reviews, tremendous impact so far. We do continue to support customers and Doge as questions are asked in every ways they need. But I have pretty strong confidence in the strategy of what we do, that we're really well aligned to those Doge objectives. And I guess from a roll up, again, we've got seven contracts that we're aware of, including one that was already over when Doge singled that out.

Potential annual revenue, 3,000,000. But for just about $2,000,000 of that 3,000,000 we don't have any formal contractual notification. So a $1,000,000 impact from where Doge is at now really is a testament to the strategy we have. And we're going to keep talking about that over and over again because the strategy is such that it doesn't mean we're going to be Doge immune. I think to a great extent, we've positioned this business long before these concepts have come out, which is why we're so strongly supportive of them.

Great. Thank you. Very helpful. I'll stick to one.

Your next question comes from the line of Colin Canfield of Cantor. Please go ahead.

Maybe talk to the budget, Kate, it's contemplated in your Investor Day targets. Not not necessarily the top line DOD budgets, or or getting into FY twenty six guidance by any stretch, but but maybe just how you think about kind of the outlay mechanics and and where expertise and technology are kind of more sensitized to typically, think of expertise as more o and m and technology is more r and d. But any color there would be super helpful.

Okay. Tom, thanks. Look. Government fiscal year '25 full year CR allows for new starts, gives agencies more discretion and flexibility to be able to lose their funds. So that's a net positive, provides really good visibility and really good certainty.

National security spending, another thing you've heard me say a lot, remains bipartisan.

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

Look, our strategy has always been to strongly align around key national security priorities and invest ahead of me. And that's why we've been bringing differentiated expertise and tech, which does position us extremely well. So if we look at the FY 2026 budget and we look at all the numbers we have now as Jeff and I and the rest of the company look forward to doing '26 and beyond planning, I just wanted to share a little bit about how we see our long range plan because there's a lot of questions on budget and timing. So here's how I look at it. Book to bill fiscal year '20 '20 '5 Q1 through Q3, strong and supportive awards.

We've already booked $1,300,000,000 awards in Q4, with a large volume of to be awarded remains. We've got a number of large awards over the last two fiscal years that contribute to out year growth as they continue to unpack. Jeff shared that during our Investor Day in the fall around how expertise and technology programs unpack. Haven't begun to see the unpacking of Spectral yet as well as several other programs.

at least four to six quarters of clarity on where growth is going to come from. On the funding side, a favorable government fiscal year '20 '5 CR, allowance for new starts, funding flexibility. And then you talked about future budgets. Reconciliation bills, up to $150,000,000,000 of defense spending, up to $200,000,000,000 of DHS, represents twothree of the business that CACI executes year over year. We're seeing signals to support a $1,000,000,000,000 government fiscal year '20 '20 '6 budget.

And we have a portfolio that's really much aligned with Peace Through Strength, China, INDOPACOM, protecting the homeland. So when we look at those mileposts that we use to measure how our strategy is stacking up, and we're looking at where this customer set is going, whether it's Doge, whether it's GSA scrub list, whatever those are, those are quantitative measures that we need to support our three year plan. So high single digit revenue growth, mid-eleven percent margins, dollars 1,600,000,000.0 of free cash flow, the use of which is not contemplated in the revenue and margin growth rates. We have things to navigate without a doubt. But where we are, folks, is not by accident.

It's by aligning a strategy ahead of customer needs that makes up with the customer at the right time, and it's the right time.

Got it. And then and then maybe on the supplemental, is there a way to think about kind of how fast you think those monies can get started, and whether that supplemental is is balanced more towards what I call as an O and M style cadence or more of an R and D style cadence on the outlays?

Not sure we have that visibility. I mean, we have a fair amount of work that's funded with O and M, but it will be across both areas, I'm sure. We'll get more details.

Your next question comes from the line of Tobey Sommer of Truist Securities. Please go ahead.

Thank you. You mentioned the $1,000,000,000,000 DoD budget and border security. Are there specific areas of incremental funding that represent sort of the biggest and best opportunities for the firm going forward that you could highlight for us?

of us have the details behind the 150,000,000 and the 200,000,000 but I can share a little bit about where we've positioned within those areas. Electronic warfare is going to continue to be an issue that as recently as last week, there were senior government officials talking about how woefully underinvested we have been in electronic warfare. You probably can't talk about things like Golden Dome, and I'd like to just say airborne based defense in The U. S. Without believing that's going to cost additional funding.

I think you've got commanders out there. We're all focused sort of in the EUCOM area, but we have to build up into PACOM. For the China fight, Taiwan defense. We've got a lot of bad actors still in CENTCOM today. So I think you're going to see a lot of capabilities so that we can build out what those commanders need.

So there's a large number of areas on the defense side. On the DHS side protecting borders, that's going to be everything from customers and border agents. I shared a lot of fantastic news and support that we have given to that agency thus far under our legal contract. I truly believe that something that's going to hit defense of the homeland as well as border security is going to be how do we track and find drones that are bringing a lot of nefarious things not only across the border but are also used by folks south of the border to traffic individuals. So I think that's another area.

So and then last, I'd tell you that on the DoD IT side and network modernization side, doge is some of their very initial comments where once the savings pieces are done, where do we have to place more investments versus cuts? And I'd tell you, we are well aligned as a publicly traded company, as a 60 some year old company, to bring our expertise and our technology to both network modernization and the number of the improvements that the government would like to make in enterprise IT. Thanks, Joe.

hoping you could update us on the development and ramp of production for in your optical communications business

the leverage in that units as you start to ramp production?

Look, we are coming up upon making certain that we'll be delivering at least 6x greater than our FY 'twenty four OCT delivery volume during 2025. I'll first start off that SDA acquisitions, they're really large and very complicated programs. But in

both in optical terminals as well as space, scrap and bus design, look, we're all pushing the edges of technology at every turn. But it's extremely relevant and time sensitive to the future of space dominance. So we have delivered 25 OCTs that are operating in space, which includes 10 SDA TronGero tracking OCTs. Those have already been used to approve out space to face, space to ground and space to air connections. We are right in the middle of production now.

We're looking at deliveries by the end of this month, by the May and by the June. By the time I am very confident that we will hit our goal for FA Photonics and our OGS Photonics business of delivering six times, if not more, the number of deliveries we made last year. So well on our way. We've solved an awful lot of very difficult production problems. But you would expect that because no one's ever put heavy wound fiber in optical terminal and pushed information through it.

So really pleased with where we're at. We'll start to see some of the investments in that area start to come down as we get through 2025 and go into 2026, which is directly in line with what we told folks when we did the SA Photonics acquisition. We have investments through 2025 that we would be giving or we would be getting we would be delivering terminals and more volume by the end of twenty twenty five. When we get into FY '20 frame, we'll be able to talk about what the backlog looks like and how we're going to achieve more deliveries. Thanks for the question, Tobey.

Your next question comes from the line of Sheila Kahyaoglu of Jefferies. Please go ahead.

Good morning, guys, and thank you for the time.

I appreciate the doge comment. So maybe one big picture question, and it's clear that CACI's portfolio is positioned well with only $1,000,000 impact. Another competitor yesterday made some comments about the perils of just, know, divesting government employees and how that potentially could impact contracts or the pipeline conversion. John, how are you thinking about that? And how are you working with the government to maybe better educate them on the process?

Jeff, I'll start, and I'll ask Jeff to actually go ahead, Jeff.

CACI International (CACI) Q3 2025 Earnings Call Transcript

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