CACI International Q4 2025 Earnings Report

CACI International EPS Results

• Actual EPS: $8.40
• Consensus EPS: $6.54
• Beat/Miss: Beat by +$1.86
• One Year Ago EPS: $6.61

CACI International Revenue Results

• Actual Revenue: $2.30 billion
• Expected Revenue: $2.29 billion
• Beat/Miss: Beat by +$15.83 million
• YoY Revenue Growth: +13.00%

CACI International Announcement Details

• Quarter: Q4 2025
• Date: 8/6/2025
• Time: After Market Closes
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 8:00AM ET

CACI International (NYSE:CACI) Inc, through its subsidiaries, engages in the provision of expertise and technology to enterprise and mission customers in support of national security in the intelligence, defense, and federal civilian sectors. The company operates through two segments, Domestic Operations and International Operations. The Domestic Operations segment offers digital solutions by modernizing enterprise and agency-unique applications, enterprise infrastructure, and business processes; C4ISR solutions, including command, control, communications, and computer (C4), as well as intelligence, surveillance, and reconnaissance (ISR) technology and networks; and cyber solutions for cybersecurity, cyberspace, electronic warfare, and signals intelligence operations. This segment also provides space solutions, comprising intelligence fusion, data analytic, and decision support, as well as logistics solutions; engineering services, such as platform integration, modernization and sustainment, system engineering, naval architecture, training and simulation, and logistics engineering; design, implement, protect, and manage secure enterprise IT solutions for federal agencies; and mission support solutions, that include analytic services, as well as scenario-based instruction across the spectrum of intelligence processing, collection, and products. The International Operations segment provides a range of IT services, proprietary data, and software products to the commercial and government customers in the United Kingdom, continental Europe, and internationally. The company was founded in 1962 and is headquartered in Reston, Virginia.

CACI International Q4 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong FY25 results: Underlying revenue grew 16%, EBITDA margin was 11.2%, free cash flow reached $442 M with FCF per share up over 16%, alongside $150 M in share repurchases and a 1.1x book-to-bill ratio.
• Positive Sentiment: Robust FY26 guidance: The company forecasts ~8% revenue growth, mid-11% EBITDA margin and over 60% free cash flow per share growth, consistent with three-year targets.
• Positive Sentiment: Software-driven differentiation: Investments ahead of need in TLS Manpack (SIGINT/EW), counter-UAS systems, enterprise system consolidation and NASA MCAPS are speeding delivery and reducing customer costs.
• Positive Sentiment: Favorable macro tailwinds: Over $150 B in reconciliation funding (including $25 B for Golden Dome and $170 B for border security), a $31 B backlog (3.5 years of revenue) and resilience under potential continuing resolutions.
• Negative Sentiment: Modest DSO headwind: Days sales outstanding increased to 56 days due to legacy Azure billing terms, although standard-term migrations are expected to mitigate this over time.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the CACI International Fourth Quarter Fiscal Year twenty twenty five Earnings Conference Call. Today's call is being recorded. At this time, all lines are in a listen only mode. And later, we will announce the opportunity for questions and instructions will be given at that time.

[Operator]

At this time, I would like to turn the conference call over to George Price, Senior Vice President of Investor Relations for CACI International. Please go ahead, sir.

[George Price, SVP - IR at CACI International]

Thanks, Amy, 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 facts and as such constitute forward looking statements under current law.

[George Price, SVP - IR at CACI International]

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 a substitute for performance measures prepared in accordance with GAAP.

[George Price, SVP - IR at CACI International]

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 Mengucci, President, CEO & Director at CACI International]

John? Thanks, George, and good morning, everyone. Thank you for joining us to discuss our fourth quarter and fiscal year twenty twenty five results as well as our fiscal twenty twenty six guidance. With me this morning is Jeff McLaughlin, our Chief Financial Officer. Slide four, please.

[John Mengucci, President, CEO & Director at CACI International]

Before we begin, I'd like to take a moment to acknowledge the recent passing of our Chairman, Mike Daniels. Mike was an exceptional leader, mentor and friend. His vision, experience and dedication greatly enrich CACI and the broader technology, government and corporate communities. Mike's unique perspective in governance was based on many valuable lessons and experiences throughout his renowned professional career, his critical government advisory roles and his humble life story. He contributed greatly to the growth and success of many organizations, including CACI, where he was a steadfast supporter of our strategy.

[John Mengucci, President, CEO & Director at CACI International]

We extend our deepest condolences to Mike's family and are grateful for his invaluable contributions to our company. Slide five, please. CACI's strong fourth quarter performance closes out another great year and underscores the strength, differentiation and resilience of our business. For the full year fiscal twenty twenty five, we delivered revenue growth of 16% on an underlying basis, EBITDA margin 11.2%, free cash flow of $442,000,000 and free cash flow per share growth of over 16%. We deployed capital to acquire three strategic assets while also repurchasing $150,000,000 of shares.

[John Mengucci, President, CEO & Director at CACI International]

And we won $10,000,000,000 of contract awards, representing a book to bill of 1.1x. As we've discussed many times, we undertook a strategy years ago to become a more focused and differentiated company that was positioned to drive long term growth and shareholder value in any environment. Our exceptional results demonstrate the successful execution of that strategy. Slide six, please. The market trends you're increasingly seeing and hearing about today, speed, efficiency, lethality, software based capabilities, modernization, these are all the result of the rapidly evolving environment around us.

[John Mengucci, President, CEO & Director at CACI International]

Government budgets and procurement actions are adapting to reflect this reality, but we anticipated these changes years ago and invested ahead of need accordingly. We are a leader in the use of software and investing ahead of customer need to develop and deliver high value capabilities faster, more efficiently and with greater flexibility. And we are strategically positioned in enduring and well funded areas that align with our nation's most important national security priorities. That is why CACI is so resilient, so well positioned and already able to deliver in accordance with buying methods the government has only recently started to more formally implement. Among the many examples I could share, here are four.

[John Mengucci, President, CEO & Director at CACI International]

First, the electromagnetic spectrum is a critical domain for national security and modern warfare. CACI today delivers differentiated software defined, commercially developed and commercially sold technology to multiple customers who demand best in class capabilities. Our investments ahead of customer need led to the development of the TLS Manpack, which integrates signals intelligence and electronic warfare collection, processing, exploitation and effects into a single software defined system for the dismounted soldier. It is one of the first successful rapid fielding mid tier acquisitions for the Army because of CACI's ability to rapidly prototype and deliver a cutting edge solution in record time. The recent ceiling increase to $500,000,000 supports the Army's decision to deploy our technology as the primary SIGINT EW system for all brigade combat teams.

[John Mengucci, President, CEO & Director at CACI International]

Additionally, the Army announced plans to enhance our TLS Manpack to field a vehicle mounted option, demonstrating the versatility of our technology. Second, our software defined counter UAS technology is addressing the increased demand for protection against drones. We were recently awarded a contract by the Canadian government to deliver counter UAS vehicle mounted systems, which follows a previous award from Canada for our backpackable Conroe OS systems last year. We're also seeing an increase in demand for our technology in support of U. S.

[John Mengucci, President, CEO & Director at CACI International]

Border protection and is a key component of Golden Dome. Our technology leverages decades of experience and actual mission results delivered by our sensors in operation globally. In addition, the significant reconciliation funding associated with this critical administration priority will enable procurements looking for proven, ready now technology that can defend across the electromagnetic spectrum with no or low collateral defeats. CACI checks every box and more to defeat all levels of potentially threatening UASs. Next, enterprise software modernization is another area where CACI is both well aligned to administration's priorities and where we have demonstrated clear industry leadership.

[John Mengucci, President, CEO & Director at CACI International]

Recently, the Army issued a memo highlighting the imperative for significant system consolidation across the service to enhance security, reduce costs and improve efficiency as well as request enterprise systems to be commercial based with limited enhancement and integrations to other systems as required. Our initial implementation consolidated 50 legacy systems into one modern commercial based enterprise system. Our performance on IpsArmy puts CACI in a strong position to consolidate an additional 40 systems that the Army has identified. And it also positions CACI as the partner of choice for other DoD and intelligence customer community customers as they execute similar modernization and consolidation initiatives. Finally, in fiscal twenty twenty five, we also began executing on our NASA MCAPS program where we are deploying a commercial agile and scale delivery model to standardize and centralize software development across NASA, enhancing efficiency, quality and speed of delivery, a key customer and administration priority.

[John Mengucci, President, CEO & Director at CACI International]

Since November, our NCAP's team has met all key metrics related to system availability and is currently supporting nearly 900 applications and platforms. These examples of how CACI's software based capabilities, commercial tools and processes and investment ahead of customer need are enabling critical national security priorities to be addressed faster and more efficiently to drive reduced customer costs and propel the growth of CACI. In other words, we are extremely well aligned to the environment we see today. We don't need to transform. We're already here.

[John Mengucci, President, CEO & Director at CACI International]

Slide seven, please. Turning to the macro environment. We continue to see healthy customer demand and a strong pipeline of opportunities in our markets. Demand is being driven by today's global geopolitical realities as well as the administration's priorities, including peace through strength, securing our borders and an increasing use of software to enhance efficiency, speed and lethality. As I've discussed, these are all areas where CACI continues to be extremely well positioned.

[John Mengucci, President, CEO & Director at CACI International]

And this positive customer demand is now supported by the reconciliation funding contained in the One Big Beautiful Bill Act, which provides over $150,000,000,000 for defense, of which $25,000,000,000 is to fund Golden Dome and also provides approximately $170,000,000,000 for border security. This is a favorable development for our business, which generates 90% of its revenue from national security customers, solving the toughest challenges of the DoD, the intelligence community and the Department of Homeland Security. Looking forward, we are closely monitoring the government fiscal year twenty twenty six budget process. Should the New Year start with a CR as most years do, we are comfortable operating in that environment and typically do not see a material impact to our business. So it can sometimes influence the quarter to quarter timing of shorter cycle revenue like our software defined technology.

[John Mengucci, President, CEO & Director at CACI International]

But as you know, we are focused on the long term. We continue to see significant opportunities across our large and growing addressable market. Slide eight, please. Looking ahead, our proven strategy, differentiation, execution and resilience set the foundation for CACI to deliver another strong year. With that in mind, in fiscal twenty twenty six, we expect revenue growth of nearly 8% at the midpoint, EBITDA margin in the mid-eleven percent range and free cash flow per share growth of over 60%.

[John Mengucci, President, CEO & Director at CACI International]

Jeff will provide additional details on our guidance shortly. Our 2026 guidance reflects our continued business momentum, our robust pipeline and the constructive macro environment, including passage of the reconciliation funding. It is consistent with the three year financial targets we discussed at our Investor Day last November, which we remain highly confident in achieving. And it is aligned with our objectives of driving long term growth and free cash flow per share and shareholder value. With that, I'll turn the call over to Jeff.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

Thank you, John. Good morning, everyone. Please turn to Slide nine. As John mentioned, we're very pleased with both our fourth quarter and fiscal year twenty twenty five performance. Not only does the continued strong performance underscore the deliberate positioning of the portfolio, it's also very much in line with what we communicated to you throughout the year.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

In the fourth quarter, we generated revenue of $2,300,000,000 representing 13% year over year growth with 5.3% of that being organic. EBITDA margin was 11.5% in the quarter, slightly above our expectations and in line with last year. Fourth quarter adjusted diluted earnings per share of $8.4 were 27% higher than a year ago. Greater operating income, a lower tax provision and a lower share count more than offset higher interest expense. Notably, the effective tax rate in the quarter reflects a $28,000,000 tax benefit resulting from the favorable resolution of an outstanding IRS R and D tax credit audit.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

This results in both a current period benefit for open tax years, but also gives us confidence to reduce our estimated tax liabilities prospectively. I would also note that even without this tax benefit, we exceeded consensus estimates for the quarter. Free cash flow of $139,000,000 for the quarter represents strong profitability and reflects days sales outstanding, or DSO, of fifty six days. As we've mentioned previously, Azure is currently a modest headwind to DSO due to the billing terms and milestones in legacy contracts and is currently impacting our DSO by about four days. We see an opportunity to lessen that impact over time as we migrate new business to our more standard terms.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

Slide 10, please. Turning to full year results. We delivered significant growth in revenue, EBITDA margin and free cash flow, driven by strong customer demand for our differentiated technology and expertise and by the exceptional execution of our team. In fiscal year twenty twenty five, we generated $8,600,000,000 of revenue, representing just under 16% total growth and 10% organic growth, both on an underlying basis. You may recall that when we provided our initial FY 2025 guidance last year, we discussed a number of factors that could drive results toward the upper end of the range.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

Our outperformance of these factors, particularly in regard to the faster ramp up of our awards, stronger on contract growth and successfully defending our recompetes, allowed us to finish the year well ahead of our initial expectations. EBITDA margin of 11.2% for the year was in line with our most recent guidance of low 11% range and represents an 80 basis point increase year over year. Fiscal twenty twenty five adjusted diluted earnings per share were $26.48 up 26% from the prior year despite an increase of $54,000,000 in interest expense that was partially offset by lower tax provision. Delivering 26% year over year growth despite this factor underscores our robust operating execution while positioning for future opportunities. Operating cash flow for fiscal twenty twenty five also reflects strong profitability and cash collections, driving free cash flow of $442,000,000 which represents a 16% increase in free cash flow per share.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

I'll note that we did not receive the $40,000,000 tax refund related to prior year tax method changes previously identified as a risk due to a delay associated with the extended negotiations on the IRS audit I mentioned. But I would point out that adjusting for the delayed refund, we delivered free cash flow ahead of our expectations. As is likely clear to you at this point, there are several moving pieces related to our tax position in both fiscal twenty twenty five results and fiscal twenty twenty six guidance. This is a result not only of the successful conclusion of our outstanding audit, but also the passage of the One Big Beautiful Bill Act. I'll note that we have included Slide 16 in the appendix to provide greater specificity about the expense and cash flow impacts in both years to assist in your analysis.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

Slide 11, please. The healthy long term cash flow characteristics of our business, our modest leverage of 2.9x net debt to trailing twelve month EBITDA and our demonstrated access to capital provide us with significant optionality. During the year, not only did we complete three strategic acquisitions, we also opportunistically repurchased $150,000,000 of shares at an average price of $344 We also took an important step in refreshing and diversifying our debt stack with a high yield bond offering we executed during the quarter. CACI closed on a $1,000,000,000 offering of 6.5% senior unsecured notes and a transaction that was substantially oversubscribed, increasing our flexibility and underscoring our ready access to capital. We remain well positioned to continue to deploy capital in a flexible and opportunistic manner to drive long term growth and free cash flow per share and shareholder value.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

Slide 12, please. Now I'll provide some additional details on our fiscal year 'twenty six guidance. We expect revenue between $9,200,000,000 and $9,400,000,000 which represents growth between 6.68.9%. EBITDA margin is expected to be in the mid-eleven percent range, representing a 30 basis point increase at the midpoint. Adjusted net income is expected to be between $6.00 $5,000,000 and $625,000,000 which translates into adjusted diluted earnings per share of between $27.13 and $28.03 We expect free cash flow of at least $710,000,000 which equates to free cash flow per share of $31.84 based on our full year diluted share count assumption of 22,300,000.0 shares.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

This implies free cash flow per share growth of more than 60%. I'd also like to point out that our free cash flow guidance adjusted for the tax related cash benefits I mentioned earlier means that our expected FY 2026 free cash flow conversion is slightly above 100% of the adjusted net income midpoint. This implies accomplishing our goal of returning to a 100% free cash flow conversion rate by the end of our three year targets a year early. As we routinely say, we are focused on full year results rather than any particular quarter since a myriad of factors can skew quarterly trends. But to help you with your modeling, we provided additional details on the slide, including information regarding certain timing trends we expect in FY 2026.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

And finally, I'd point out that our guidance does not contemplate any acquisitions or share repurchases that might occur during the year. Slide 13, please. Turning to our forward indicators. Our prospects continue to be strong. As John mentioned, fiscal year twenty twenty five awards were $10,000,000,000 with a healthy mix of new work and recompetes.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

Our trailing twelve months book to bill ratio of 1.1 times reflects continued differentiation in the marketplace, and our backlog of more than $31,000,000,000 represents about three point five years of annual revenue. The weighted average duration of awards that went into backlog in FY 'twenty five continues to exceed five years. Together, these metrics provide good visibility into the long term strength and cash generation potential of our business. As we enter fiscal year 'twenty six, we expect approximately 84% of our revenue to come from existing programs, 11% from recompetes and 5% from new business. We continue to have a healthy pipeline of new opportunities.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

We have $16,000,000,000 of bids under evaluation, 80% of which are for new business to CACI. And we expect to submit another $11,000,000,000 in bids over the next two quarters, with about 75% of that for new business. In summary, we delivered strong fourth quarter and fiscal year 'twenty five results during an uncertain environment, highlighting the resilience of our business and the effectiveness of our strategy. As we look to fiscal 'twenty six, we expect another year of strong performance. We are winning and executing high value enduring work that supports increased free cash flow per share, long term growth and additional shareholder value.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

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

[John Mengucci, President, CEO & Director at CACI International]

Thank you, Jeff. Let's go to Slide 14, please. In closing, I want to emphasize that our strong performance is the result of intentional purposeful actions taken over many years through the successful implementation of our strategy, is not by accident. A strategy we put in place years ago because we anticipated what we are seeing today. Our customers need to move faster, and we're helping them do just that with software defined technology, investing ahead of needs and six decades of superior performance and mission insights.

[John Mengucci, President, CEO & Director at CACI International]

This is how we built CACI to be resilient. This is how we're able to deliver strong 2025 results, issue robust fiscal twenty twenty six guidance, express confidence in achieving our three year financial targets and continue to drive growth in free cash flow per share and shareholder value. As is always the case, our success is driven by our employees' talent, their innovation and their commitment. To everyone on the CACI team, I am proud of what you do each and every day for our company and for our nation. Thank you.

[John Mengucci, President, CEO & Director at CACI International]

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

[Operator]

Thank you. The floor is now open for questions. Your first call comes from the line of Scott Micas with Melius Research. Your line is now open.

[Scott Mikus, Vice President - Equity Research at Melius Research LLC]

Morning, John and Jeff. Results. Good morning. Morning. Nice guidance.

[Scott Mikus, Vice President - Equity Research at Melius Research LLC]

One of your peers this quarter mentioned they see a $70,000,000,000 pipeline over the next twelve months with about three quarters of that being takeaway work. And when I think of government services companies pursuing takeaway work, it kinda makes me nervous because to unseat the incumbent, you have to have a better solution or bid really aggressively on price. You highlighted a $16,000,000,000 pipeline of submitted bids, and that 80 percent is for new business. But how much of that is new programs launched by your customers versus takeaways from an incumbent?

[John Mengucci, President, CEO & Director at CACI International]

Yes, Scott. Thanks. I'll start on this one. I guess, first of all, I don't look at us here at CCI as being a traditional government services company. And that's why when I hear numbers of $80,000,000,000 or $90,000,000,000 it's nothing that frightens us.

[John Mengucci, President, CEO & Director at CACI International]

It's nothing that we aspire to. Frankly, we've got over a $250,000,000,000 addressable market. We serve seven markets. We're very, very focused, and we retool the entire company around understanding what is a value bid and what is not value, value bid. And the only way we deliver $1,600,000,000 of free cash flow over the next three years is that we're out there bidding things that matter and markets that matter, areas that we can differentiate in, where we're going to drive single high single digit top line growth and achieve mid to higher 11% margins.

[John Mengucci, President, CEO & Director at CACI International]

And as for our pipeline, there is the majority of that would be new work to CACI, and well over half of that is going to be new customer work as well. We are going to talk about the level of recompetes we have. I think this year, I think Jeff shared, we're around 11% of this year's revenue plan at the midpoint, and we're very confident on that. I also would say that the recompete work that we have, because the government is going through a number of personnel reductions and the contracting officer ranks continue to shrink. We're looking at achieving additional follow on option year work where the customer will push rate, competes down another one to two years.

[John Mengucci, President, CEO & Director at CACI International]

So there's an awful lot there, Don, Pat, but I would boil it back to absolute focus. Our pipeline supports the growth rates we have in our FY 'twenty six plan and in our three year 'twenty five through 'twenty seven plan. So nothing in those comments give us pause.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

I would add to that. We've talked to many of you recently about the fact that an important part of our strategy is the idea of bidding less and winning more. We are focused on areas where we can bring differentiated capabilities to a position to provide compelling value. And the size of the pipeline is important in as much as it supports our growth plans, but we're not on a path to sort of bid everything that we can get.

[Scott Mikus, Vice President - Equity Research at Melius Research LLC]

Okay. And then if I could ask a quick one on iTask. There was news the ceiling had been reduced, I think, by about $707, but your book to bill was really good. So just wanna make sure there wasn't any sort of price reduction, no potential impact on margin booking rates or no debook backlog. Just any color on that?

[John Mengucci, President, CEO & Director at CACI International]

Yes, Scott. Thanks. Look, ITAS is a ten year program, and the ceiling was reduced from $5,700,000,000 to $5,000,000,000 It doesn't change a thing for this company. Our work is going to continue on this program. We continue to execute it extremely well.

[John Mengucci, President, CEO & Director at CACI International]

Given the efficiencies that I have spoken about that we've already brought to this program, customers are most likely looking to bank those savings now, and you all should hear that as a positive thing. It's a ceiling reduction from an estimated cost of a ten year program. But on a ten year long program, the Air Force can always program additional ceiling during any of the next eight years of execution as requirements change, which in this world, they inevitably will change. I'd also like folks to recall that when we won the iTask job, we announced it in January 2023, we booked 2,000,000,000 of total contract value. We didn't book 5,700,000,000.0 The remainder of the ceiling, 5,000,000,000 over our projection still allows us for additional 150% growth over the ten year period if it's fully spent.

[John Mengucci, President, CEO & Director at CACI International]

So there's no backlog adjustments. There's no de books. There's no impact to guidance. There's no reduction in revenue. There's no reduction in margin or any of our three year targets.

[John Mengucci, President, CEO & Director at CACI International]

So we have programs and task order cancellations where revenue is impacted from our current work and other moves that Doge has driven, but that still stays at $1,000,000 of reductions of revenue. So taking ceiling down has nothing to do with our growth rates that we have published in our outstanding fiscal year twenty twenty six plan that we're looking forward to achieving.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

Yes. I mean, you've covered it. There is zero impact to anything.

[Operator]

Thank you. Your next question comes from the line of Colin Canfield with Cantor. Your line is now open.

[Colin Canfield, Director at Cantor Fitzgerald]

Hey. Good morning. Thank you for the question. Hey. Good morning.

[Colin Canfield, Director at Cantor Fitzgerald]

The the guidance outlook, it sounds like you're assuming Doctor in terms of the kind of, midpoint of the guide. So if we assume that the senate moves quick like they are and we get a budget in place faster, is it fair to assume that you could hit the top end of that organic growth guidance? And then as you think about next year, what are the sort of milestones and timing of those milestones that you need to see to sign on for increased Investor Day growth targets? Thank you.

[John Mengucci, President, CEO & Director at CACI International]

Okay. Colin, thanks. Let cover the our '26 guidance range. Look, we intentionally put out low end, high end guidance. And as we've discussed many, many times, we have quite a robust process looking at how we would post this current guidance.

[John Mengucci, President, CEO & Director at CACI International]

Look, we strive to not be conservative and not be aggressive. We contemplate a multitude of different scenarios, and we do try to account for many factors that can come up, that's why we have this low end high end. My first part of my answer to you is, I did the calculations last night. We actually have 92% of fiscal year twenty twenty six ahead of us.

[John Mengucci, President, CEO & Director at CACI International]

So and we're already talking about versing through the IS. Look, if funding is slower and uneven and we have a full year CR, that mostly stakes us more towards the lower end. Coming If fiscal year twenty twenty six, CR is shorter and the budget gets passed sooner and funding remains steady, then we could see us towards the higher end. Now a multitude of things can come up and happen, as you all know, who followed us for an extremely long time. But we feel comfortable that we can support the current guidance that we have.

[John Mengucci, President, CEO & Director at CACI International]

At the end of the day, we're going to focus on what we can control, but we're very confident in executing our strategy. We're going to talk about Golden Dome and other things I would imagine. The only thing we don't have covered, frankly, is that the government shuts down for several months. But frankly, when the government shutdown most recently, we had a negligible impact to our overall guide. Jeff, do want to talk about the second part of that?

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

Yes. I'd only comment that, as John described, there's 10 or so factors that go into the upper end of the range, and a quicker budget and faster funding is certainly one of those. And we got a lot of we have a lot of the year ahead of us.

[Colin Canfield, Director at Cantor Fitzgerald]

Got it. And then as we think about the implied margin progression to the Investor Day targets, I think folks are probably assuming 10 to 20 bps a year of expansion onwards to that mid 11%. But obviously, the delta this year is probably more like 30 ish bps. So not to drag up old history, but as we think about kind of the pathway of this company to mid teens margins, how do we think about kind of the long term potential there? And where do you think about the levers between expertise and technology to get to those types of longer term margins?

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

Yes. Let's unpack that a little. There's two or three questions I heard in there. The first one is I'd refer you to the guidance slide in the deck where we talk about the progression in the year. Over time, over the last several years, several of our more impactful customers and programs have fallen into a rhythm that gives us slightly attenuated margins in the first half of the year, and then they move up through the year.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

You'll notice, though, that the revenue is a little bit more evenly distributed, meaning, of course, then that you have lower margins in the first half, higher in the second. So we see in our current view of the year a very similar distribution to that. And you see a similar distribution in cash flow as well, where it's very back end loaded. We have a disproportionate amount of our outflows in the early part of the year, compensation expense, prepaid expenses associated with certain programs, a number of things that just sort of structurally give us heavier second half cash flow. So I think did I cover your whole question? Did I miss anything?

[Colin Canfield, Director at Cantor Fitzgerald]

I think that's fair. We're probably going to wait till later in the year to follow-up on kind of the algorithm on longer term mid teens potential. But appreciate the color as always. And thank you for taking the question.

[John Mengucci, President, CEO & Director at CACI International]

Thanks, Colin. Thanks.

[Operator]

You. Your next question comes from the line of Gavin Parsons with UBS. Your line is now open.

[Gavin Parsons, Director - Aerospace & Defense Equity Research at UBS Group]

Thanks guys. Good morning.

[John Mengucci, President, CEO & Director at CACI International]

Good morning. Good morning.

[Gavin Parsons, Director - Aerospace & Defense Equity Research at UBS Group]

John, I think you mentioned maybe fewer contracting officers. I was hoping you could just talk a bit more about the award environment and if things are generally still moving more slowly than usual.

[John Mengucci, President, CEO & Director at CACI International]

Yes. Gavin, thanks. Look, we have talked a lot about this the last couple of quarters. My comment was really around the fact that we've seen some modest impacts, but nothing major. We have talked about some award decisions that are taking a little bit longer.

[John Mengucci, President, CEO & Director at CACI International]

Jeff mentioned that things that you should take one to two days are taking three to four days around slower invoice payment and processing. But I'd also couch that with remember that awards are lumpy in any environment. We're not a business that I'd like to say we don't live hand to mouth. We don't have to book an award by a certain date to batch flip 200 people to meet next quarter's revenue numbers. We know how to operate in this environment, and we've seen it in the past.

[John Mengucci, President, CEO & Director at CACI International]

But as I mentioned earlier, I think as the procurement bandwidth gets a little tighter, we believe that could result in a few other outcomes, one being that the current work we have gets extended. So there's folks out there with an $80,000,000,000 pipeline that are looking for our work to come up on recompete soon. I think the odds of that are more in us holding on to that work longer. And then second, what we have what I talked about in my prepared remarks around systems consolidation, you can look at that as also being code for contract consolidation as well, right? If we're able to take 40 systems offline in the United States Army, one, at the enterprise level, that's going to save them hundreds of millions of dollars two, it brings additional work in scope here, which would mean less contracts to keep those 40 or so systems up.

[John Mengucci, President, CEO & Director at CACI International]

So all in all, we're very much prepared for fiscal year twenty twenty six. And should those that workforce continue to shrink, I believe that we have that covered within our current guidance.

[Gavin Parsons, Director - Aerospace & Defense Equity Research at UBS Group]

Okay. Appreciate the color. And obviously, you pointed out it's lumpy, but given you had two quarters now of a record pipeline, any thoughts on what you could do for a book to bill for the year?

[John Mengucci, President, CEO & Director at CACI International]

Well, we always strive to finish the year at something greater than one. I like what history tells us. And I'll actually sort of tag back to one of the earlier questions. We are very judicious before we talk to a customer one or two or three years before they're looking to get a system online as to whether we're going to bid that job or not. Do we have a differentiated solution?

[John Mengucci, President, CEO & Director at CACI International]

And then do we have the right business model, which is going to involve period investments and then the types of margins that we would expect for doing that type of work. I honestly believe that we're in the right place. And we put so much time left of the RFP coming out that we have a pretty good idea as to how this work will unfold. So I hate to be predictive, but my expectation of our entire team here is that we continue to grow backlog. And especially as Jeff's comments mentioned, 11% growth of funded backlog is really, really crucial for us to achieve in our '26 plan.

[Gavin Parsons, Director - Aerospace & Defense Equity Research at UBS Group]

Thanks. Thank

[Operator]

you. Your next question comes from the line of Peter Arment with Baird. Your line is now open.

[Peter Arment, Senior Research Analyst at Robert W. Baird & Co]

Yes, thanks. Good morning, John, Jeff, George. Nice results. Hey, John, you've always talked to us about investing ahead of needs. Can you maybe give us a little update on what's going on in space optical terminals? And there's just been so much talk around Golden Dome and other areas with FDA, and you guys have been investing there a lot. Maybe if you could just give us an update there. Thanks.

[John Mengucci, President, CEO & Director at CACI International]

Yes. Thanks, Peter. Look, we're having great success with technology.

[John Mengucci, President, CEO & Director at CACI International]

As you mentioned, there's a lot of strong demand from across government. Our technology is the most mature. Are through the design and the producibility items, we've had to work through a supply chain and manufacturing issues that led to slower production that we would have anticipated. But it's not an underlying technology issue. We know we have best in class terminals.

[John Mengucci, President, CEO & Director at CACI International]

We know we are U. S.-designed, developed and manufactured. We have a full U. S. Bill of material.

[John Mengucci, President, CEO & Director at CACI International]

So there's a lot of positive things there. We've also announced that we're on Tranche zero, one and two. We have a lot of terminals that are on Tranche three. But part of our overall Photonics model is to really grow beyond that as well. You may have read that we were selected as one of the few vendors to move on to Phase two for the enterprise space terminal.

[John Mengucci, President, CEO & Director at CACI International]

This is an addressable market for up to three vendors where the customer is looking to spend about 200,000,300 million dollars per year, which also, to your reference, does not include any of the projected increase to United States Space Force and the constellations that they'll have to launch due to the Golden Dome initiative. So I like what we're doing there. I like what we're doing at the LEO layer. And then we've got a lot of programs we're looking at beyond LEO as we work as we continue to work with the Space Force. So I like where we are today.

[John Mengucci, President, CEO & Director at CACI International]

I would clearly wish that we are producing more terminals in volume, but we are moving up that curve well. And the investments that we're making in that part of our business are on track. We are now investing less and we are delivering more.

[Peter Arment, Senior Research Analyst at Robert W. Baird & Co]

Appreciate that color. And then just as a quick follow on. We see some changes with some of the government wide IP acquisition contracts transitioning to individual agencies from to the GSA. Just any impact the way to you guys? I know that you're certainly more on the higher end of things in IT, and maybe that doesn't impact you, but just any color there would be helpful.

[John Mengucci, President, CEO & Director at CACI International]

Yes. Peter, if you look at our larger IT programs, things that are bringing network modernization and better efficiencies, what would transfer to GSA are more on the catalog pricing on IT services. But major defense department and intelligence community IT programs are going to stay exactly where those are. We're already delivering great efficiencies there.

[John Mengucci, President, CEO & Director at CACI International]

So there's a lot of language and there's a lot of nuance reports. At the end of the day, our large enterprise IT programs are here to stay. And we spent a lot of time looking at different variations of that across the DoD and our intel community. And we are delivering at a very high op tempo. We are delivering savings to customers in the United States Army, in United States Air Force and other areas.

[John Mengucci, President, CEO & Director at CACI International]

So I don't see any impact. It's small to no impact to some of that press around IT going to GSA. Thanks, Peter.

[Operator]

Thank you. Your next question comes from the line of Seth Seifman with JPMorgan. Your line is now open.

[Seth Seifman, Executive Director at JP Morgan]

Thanks very much and good morning.

[John Mengucci, President, CEO & Director at CACI International]

Good morning, Seth.

[Seth Seifman, Executive Director at JP Morgan]

Good morning. First wanted to ask just about the cadence of revenue and growth through the year. It looks like the organic growth will start out kind of low and then move to above the midpoint in the second half of the year. Are there particular items that you're looking at that will accelerate the organic growth in the second half?

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

No. I think you're connecting the dots, Seth, the right way. We continue to have accelerating growth on the major programs that we've been talking about, both technology and expertise. But Focus Fox, Beagle, ITAS are all continuing to ramp, and you'll see that as in the condition that you identify and as Azure and Applied Insight anniversary here in the first half of the year also.

[Seth Seifman, Executive Director at JP Morgan]

Okay. Okay. Excellent. And then maybe, John, you talked a little bit earlier about work with the Army and C2. The NGC2 initiative that's underway, do you see that as providing any specific opportunities for the companies or any risks?

[John Mengucci, President, CEO & Director at CACI International]

Yes. So if you're talking about the next generation C2 program, we have a number of programs across the United States Army. We work on command and control. We're still looking through what type of strategy we want there. It's going to be highly competitive.

[John Mengucci, President, CEO & Director at CACI International]

So I'm probably not going to share too much as to what our plans are there, but we expect it just like everybody else across the Army looking to do things faster, better, cheaper and drive reuse. We are fully supportive of what the Army is doing there, and I'm sure we'll have more to share as we move forward. Thanks for the question.

[Operator]

Thank you. Your next question comes from the line of David Strauss with Barclays. Your line is now open.

[David Strauss, MD, Equity Research - Aerospace & Defense at Barclays]

Thanks. Good morning. Good morning.

[David Strauss, MD, Equity Research - Aerospace & Defense at Barclays]

John, the 20% or so of your business that's FedSev, can you just remind us your exposure there and what you're seeing in terms of the budget outlook?

[John Mengucci, President, CEO & Director at CACI International]

Yes. Thanks. So how we look at our business is we look at it from DoD, Intel and DHS, and that's about 90 So the residual in the federal civilian area is 6%, with a full 1% coming from our NASA and CAHPS program. And you all heard during my prepared remarks, team is doing an outstanding job. We're off to a very strong start.

[John Mengucci, President, CEO & Director at CACI International]

That leaves about 5% of our overall revenue within the federal civilian space, and that is very specific and very tight to the flagpole work. There are background investigations. There's work we do with the Department of Justice and the like. So it really doesn't leave us a lot to have to watch in the entire federal civilian space. That was an intentional strategic change that we embarked on in 2019 to really get our portfolio more driven towards defense and intel and slightly away from federal civilian.

[John Mengucci, President, CEO & Director at CACI International]

There's nothing wrong with the federal civilian work. But when we sat down and looked over the last thirty to forty years of budgets, the Defense Department and folks who are engaged in national security, their budgets are unblemished by bipartisan support. And I can't say the same in the federal civilian area. I think you've seen a lot of the cost efficiency, those GSA actions really hitting the federal civilian area hard. But as the CEO of a publicly traded company who moved away from that market a number of years back, really doesn't have any impact.

[John Mengucci, President, CEO & Director at CACI International]

So it doesn't really keep us up at night, the kind of changes that happening in that part of our business.

[David Strauss, MD, Equity Research - Aerospace & Defense at Barclays]

Okay. That's great color. And in terms of the cash flow outlook, when does the tax benefit that you're calling out, the $40,000,000 when do you expect that to hit in the year? And then the Section 174 benefit, does that stay with you beyond fiscal twenty twenty six? It

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

does. Let me start first with the $40,000,000 tax benefit refund. You ought to think about that in the second half of the year, I think probably our third quarter, but it could be the fourth, but certainly the second half. Administratively, at this point, the issues are resolved. This is just now sort of working its way through the bureaucracy.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

But that takes a little bit of time, and there are a couple of wickets for a refund of that size, as you would imagine. For the second part of your question related to Section 174, there is a continuing benefit. We identified $50,000,000 this year. It's a similar amount next year, and then it starts to drop off a little bit. It's about $200,000,000 a little over $200,000,000 in total.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

Many of you will be aware of the fact that there are a couple of options on ways to treat this. For us, relative to the effect it has on the deductibility of other expenses, in particular interest, this was the more advantageous way for us to treat it. But it's very much an artifact of each company's sort of personal tax situation. So others might very reasonably reach a conclusion that it makes sense to take it all at once. For us, looking across the whole tax strategy, it made sense to do it the way we're doing it.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

But you ought to think about $50,000,000 this year, which we've put in the guide, and it's essentially the same amount next year, and then it starts to step down a little bit over the next ensuing three or so years.

[Operator]

Thank you. Your next question comes from the line of Jonathan Siegman with Stifel. Your line is now open.

[Jonathan Siegmann, MD - Aerospace & Defense at Stifel Institutional]

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

[John Mengucci, President, CEO & Director at CACI International]

Yes. Good morning, John. You bet. Bet. Good morning.

[Jonathan Siegmann, MD - Aerospace & Defense at Stifel Institutional]

So it's been a few months since the DOD's directive on software acquisition, which you highlighted really as a positive development during your last call. And now the Army consolidation demonstrates a specific action at one military branch, which you're clear today on as an opportunity for the company. So just wondering, is this potentially benefiting this year? Because the question we get a lot is just how meaningful is these changes that are occurring at the government and how and the timing of these things? And do you anticipate similar types of consolidation in other military branches? Thank you.

[John Mengucci, President, CEO & Director at CACI International]

Yes. John, thanks. Look, every time I hear the word software, it puts a smile on my face, frankly. Look, threats are changing continuously. And there's a lot of things that platform hardware can absolutely do.

[John Mengucci, President, CEO & Director at CACI International]

But we've been focused for a number of years, almost a decade now, on what software can do. And whether it's enterprise systems or its mission systems, software has been very, very crucial to the growth model of this company. So I'm very much supportive of anything that the Army and other services do around software, software modernization and the like. Even our network business is all software defined. How do you bring devices on and off of networks?

[John Mengucci, President, CEO & Director at CACI International]

How do you collapse networks so they can handle unclass classified and TS and secret and topkeeper data? That's all going be driven by software. We don't put new fiber in the ground. We actually find more creative ways to push protective bits and bytes over those strands of fiber over space. So I think the drive will be to consolidate software in a more rapid manner.

[John Mengucci, President, CEO & Director at CACI International]

But I'd also tell you the other side, because there have been some announcements out there around consolidating contracts to be able to get enterprise level agreements and the like. I think there was some of that ink out in the press earlier this week. The purpose of those type of agreements are really to consolidate contracts to get volume discounts. So licensed products. We're not so much on the license side, John.

[John Mengucci, President, CEO & Director at CACI International]

We actually believe that we should be developing software to support the mission, not have the mission conform to the software that I'm actually trying to deliver. So anywhere where the government is looking to do more with less on the enterprise side, on the mission side, I think the government should continue to look for more software solutions. They are faster, they are better, they are cheaper and they're also able to be modified and changed much more quickly and lethally as the threats change.

[Jonathan Siegmann, MD - Aerospace & Defense at Stifel Institutional]

You. Good luck for the New Year.

[John Mengucci, President, CEO & Director at CACI International]

Thanks, Thank

[Operator]

you. You. Your next question comes from the line of Tobey Sommer with Truist. Your line is now open.

[Tobey Sommer, Managing Director at Truist Securities]

Thanks. I wanted to get your perspective on your pipeline and backlog from a through a prism in in which maybe you could characterize how much of it is new work to the market as opposed to new work to CACI only? And, also, the extent to which it your initiative to kinda move towards outcome based pricing where you're sort of spearheading something is represented within both of those buckets? Thank you.

[John Mengucci, President, CEO & Director at CACI International]

Yes, Tobey, thanks. I'll try to provide some color at a macro level, and I hate to guess on an open line call, but I'll least give you some level of guidance. Look, new work or somebody else's work, right? That's come up a couple of times here. If CCI is bidding it, it is work that maybe someone else has that we believe we can do faster, better and cheaper.

[John Mengucci, President, CEO & Director at CACI International]

And we've worked with that customer ahead of time while somebody else is supporting that customer to make sure that we're setting the table in a much more cost effective manner and we're delivering much better solutions to that customer than they may be that may be being delivered to them today. Look, as we look at things as Conduent AS building out, we look at Golden Golden Dome, we look at other things, that percentage of new, new work is going to continue to decline. Do we track that internally? No. Because to us, we're either bringing new solutions to a customer or we're bringing new solutions to our customer that's better than what they're currently struggling through today.

[John Mengucci, President, CEO & Director at CACI International]

So there's plenty of examples in the Agile software development area, whereas customers take work they're doing with others and they want to modernize that and they want to move to an Agile software development model, yes, that's going to be work taken from others, but it's a brand new experience for our customer. And those are both getting equal funding. So we're all about taking software and actually moving our customers forward, whether it's contractually brand new work that the customer thought of or it's concepts that we've worked them through by investing ahead of customer need. Because every time we see a customer who's buying the old way, we get to walk in there and show them the art of the possible. So the fact that comes out as new work to us, it's the same.

[John Mengucci, President, CEO & Director at CACI International]

Having said that, today, it's probably, Toby, sixty-forty, seventy-thirty around new, new work and then the 30%, 40% is on the old style takeaway work. But I think those terms, the fact that we're not a traditional government services company, we don't talk about direct labor and takeaways from others, This market has completely changed. If the market hasn't, we sure as hell have because we're out there looking at ways that were closer to the mission side. Jeff?

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

And that actually dovetails nicely into the second part of your question about outcome based because generally, in the opportunities that John's referring to, we have an opportunity to work with a customer to design a successor program that fills a particular need in a different way, which lets us work through increasing the amount of outcome based content and focusing less on their traditional contracts, as John described them. So those things actually kind of go together pretty nicely in our view.

[John Mengucci, President, CEO & Director at CACI International]

Thank you.

[Operator]

Your next question comes from the line of Louie DiPalma with William Blair.

[Louie Dipalma, Research Analyst - Industrials at William Blair]

John, you discussed how the army plans to deploy a a mounted variant of of TLS Manpack as opposed to the current dismounted version that's being fielded to the brigade. Is the mounted development and rollout included in the recent $400,000,000 contract modification that you announced? And should we be on the lookout for another upsizing beyond the current $500,000,000 contract? And related to this, how many vehicles is Manpack applicable for?

[John Mengucci, President, CEO & Director at CACI International]

Okay. Let me let me unpack that. Easy answer first. It is not part of the $500,000,000 TLS Manpack program today. Just as the Canadians took delivery of a handheld solution last year as it pertains to counter UAS and now they're looking at a mobile variant.

[John Mengucci, President, CEO & Director at CACI International]

The Army is doing that same as you look across EW SIGINT space. So this is based on a lot of the CACI commercial companies that we have and that we've repurchased over the past number of years. It's software defined capabilities that needed to be there to grow as The U. S. Military requirements evolve.

[John Mengucci, President, CEO & Director at CACI International]

So it's a $500,000,000 program. It actually started from a $1,000,000 OTA, and I'll relate back to Toby's question. If you really want to talk about quick reaction, performance based, that OTA was $1,000,000 OTA. With the inside of a year, We put the prototype in place, took it out to the field, worked with the users, made all the software modifications and then began delivering that. So it is the TLS Manpack program is a stand alone program.

[John Mengucci, President, CEO & Director at CACI International]

It is there purely to deliver Manpack solutions. Now the fact that we talk about that we're software based, this is a perfect real life example of why solutions that are software based can be moved to other areas. There are current providers today looking at how do they provide SIGINT and EW at the platform level. So think tanks, Apaches, think every other mobile asset that a customer has. We've been doing ride along, invest ahead of customer need to show if I can put this software on a smaller form factor, I could probably put it in a rack mounted version or a single chassis version and have that sit inside of an Apache, sit inside of a tank, sit inside of any other movie vehicle there.

[John Mengucci, President, CEO & Director at CACI International]

And I have to tell you, the minute that some of our early deliveries make it out to the field, everybody gets to the dismounted position by riding on something which is mounted, okay? So it's a pretty simple step and repeat to where we're going. That would be new work. So yes, we'll all be on the lookout for something that may come along in 2026, maybe it's it's in the next budget cycle. But that is definitely a drive to the United States Army today, and I would be remiss if I didn't say that it's other services who are looking at the same type of step in rate, Pete.

[Operator]

You. Operator,

[John Mengucci, President, CEO & Director at CACI International]

I think we have time for one more All

[Operator]

right. Great. Your final question comes from Mariana Paresmora with Bank of America. Your line is now open.

[John Mengucci, President, CEO & Director at CACI International]

Good morning, Mariana.

[Mariana Pérez Mora, Director at Bank of America Merrill Lynch]

Thanks for squeezing me in. Good morning. So my question is going to be about, and I know it's probably too early, but your fiscal twenty seven outlook that you gave for like nine months ago. If I look at EBITDA margin, you are at the mid 11% a year earlier.

[Mariana Pérez Mora, Director at Bank of America Merrill Lynch]

You do have some tax benefits both from, like, section 174, but also from these, like, new ongoing benefit that you're gonna have from, like, the taxes. And the revenue growth is quite in line or even, like, exceeding your expectations. If I do that math, free cash flow should be like, the cumulative free cash flow for the three years should be more like 1.8 versus the 1.6, break level that you gave us not so long ago. How are you thinking about that?

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

Yeah. I'll I'll start, and John, John may wanna put a put a finishing flourish on this. But first of all, I'd, point out that we gave three year targets. We didn't give, FY '27 specifically. It's a three year number.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

And you correctly note that there are several positive developments that we weren't aware of when we developed the three year targets. We are specifically not undertaking to update them. We're happy to talk about it. But you mentioned several points that are positive developments since we developed them, and you would reasonably expect them to improve for things like the Section 174. So we said that we're increasingly confident in our ability to deliver on the three year targets, and you're seeing some of that performance now.

[Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer at CACI International]

And I would not I would encourage you to not infer from that that there's some slowing in 'twenty seven. We feel increasingly good about the targets and expect to deliver them.

[John Mengucci, President, CEO & Director at CACI International]

Hey, look, I'll also add. I think it's absolutely refreshing that on this call in 2025, we're talking about generating over a three year period $1,600,000,000 of free cash flow, if not greater, with high single digit top line growth and driving our margins to where they are today, if not higher. That has been the absolute focus of the leadership team in this company for a number of years, is to make sure that we're getting involved in markets that matter, not only to our nation but to our shareholders. And I could not be happier that we're sort of talking this 1.6, really 1.8, or is it two, is it 2.2? I put those three year targets out there as a marker to make absolutely certain that as we continue to explain the fact that the government services company, the CACI was for the first fifty years is not the kind of services company we are for the next fifty years.

[John Mengucci, President, CEO & Director at CACI International]

In fact, we talk about us. We can use mission tech. We can talk about defense tech, wherever you want to go with that. But all of that drives better solutions for this nation. And at the same time, because we invest ahead of customer need and the contracting vehicles are changing, OTAs, CSOs, FFP, that we believe and we are well positioned to do much more bottom line generating work that gives us just outstanding free cash flow.

[John Mengucci, President, CEO & Director at CACI International]

And the optionality that comes with delivering more free cash flow as we return capital to our shareholders, and we also return it to our customers in ways of investing ahead of customer needs. So really appreciate that question.

[Operator]

Thank you. And one final question coming from the line of Sheila with Jefferies. Your line is now open.

Like a federal business. We are one of the top three offensive cyber provider.

[John Mengucci, President, CEO & Director at CACI International]

Yeah. Operator, I I I think we're ready to

[George Price, SVP - IR at CACI International]

I don't hear anyone. I think we're ready to end the call.

[Operator]

Yes, that's the final question. So yes, I would like to turn the call back over to Mr. Mengucci. Please go ahead.

[John Mengucci, President, CEO & Director at CACI International]

Thanks, Amy, 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. We know that many of you will have follow-up questions. Jeff McLaughlin, George Price and Jim Sullivan are available after today's call. Stay healthy, and all my best to you and your families.

[John Mengucci, President, CEO & Director at CACI International]

This concludes our call. Thank you, and have a great day.

[Operator]

Thank you. That does conclude today's conference call. You may now disconnect.

Participants

Executives

• George Price, SVP - IR
• John Mengucci, President, CEO & Director
• Jeffrey MacLauchlan, Executive VP, CFO, & Treasurer

Analysts

• Scott Mikus, Vice President - Equity Research at Melius Research LLC
• Colin Canfield, Director at Cantor Fitzgerald
• Gavin Parsons, Director - Aerospace & Defense Equity Research at UBS Group
• Peter Arment, Senior Research Analyst at Robert W. Baird & Co
• Seth Seifman, Executive Director at JP Morgan
• David Strauss, MD, Equity Research - Aerospace & Defense at Barclays
• Jonathan Siegmann, MD - Aerospace & Defense at Stifel Institutional
• Tobey Sommer, Managing Director at Truist Securities
• Louie Dipalma, Research Analyst - Industrials at William Blair
• Mariana Pérez Mora, Director at Bank of America Merrill Lynch