ladies and gentlemen thank you for standing by welcome to the caci international fourth quarter fiscal year 2025 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 if you need any assistance during this call please press star zero, and someone will assist you. 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.

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. 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 any part of as part of any transcript of this call i would also like to point out that our presentation will include discussion of non-gap financial measures these should not be considered in isolation or as a substitute for performance measures prepared in accordance with gap let's turn to slide three please to open our discussion this morning here's john minucci president and chief executive officer of caci international john thanks george and good Good morning, everyone.

Thank you for joining us to discuss our fourth quarter and fiscal year 25 results, as well as our fiscal 26 guidance. With me this morning is Jeff McLaughlin, our chief financial officer. Slide four, please. 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 enriched 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. 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 of fiscal 25, we delivered revenue growth of 16% on an underlying basis, EBITDA margin 11.2%, free cash flow of $442 million, and free cash flow per share growth of over 16%. We deployed capital to acquire three strategic assets while also repurchasing $150 million of shares. And we won $10 billion of contract awards, representing a book-to-bill of 1.1 times. 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. 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. 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. 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 MANPAC, which integrates singles 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 million supports the Army's decision to deploy our technology as the primary SIGINT EW system for all Brigade Combat Teams. Additionally, the Army announced plans to enhance our TLS MANPAC 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 counter-UAS systems last year. We're also seeing an increase in demand for our technology in support of U.S. border protection, and it's 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. CECI checks every box and more to defeat all levels of potentially threatening UASs. Next, enterprise software modernization is another area where CECI is both well-aligned to administration's priorities and where we have demonstrated clear industry leadership. 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 IPS Army implementation consolidated 50 legacy systems into one modern commercial-based enterprise system. Our performance on IPS Army put 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 25 we also began executing our NASA MCAPS program where we are deploying a commercial agile scale delivery model to standardize and decentralized software development across NASA, enhancing efficiency, quality, and speed of delivery, a key customer and administration priority. Since November, our NCAPS 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 cost 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 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. And this positive customer demand is now supported by the reconciliation funding contained in the one big beautiful bill act which provides over 150 billion for defense of which 25 billion is to fund golden dome and also provides approximately 170 billion for border security this is a favorable development for our business which generates 90 percent 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 26 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 a shorter cycle revenue like our software defined technology but as you know we are focused on the long term we continue to see significant opportunities across our large 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 26, we expect revenue growth of nearly 8% at the midpoint, EBITDA margin in the mid-11% range, and free cash flow per share growth of over 60%. Jeff will provide additional details on our guidance shortly our 26 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.

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 25 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. In the fourth quarter, we generated revenue of $2.3 billion, 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 $8.40 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 million tax benefit resulting from the favorable resolution of an outstanding IRS R&D tax credit audit. 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 million for the quarter represents strong profitability and reflects day sales outstanding, or DSO, of 56 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 slide 10 please turning to full year results we delivered significant growth in revenue even down 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 25 we generated 8.6 billion dollars 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 fy25 guidance last year we discussed a number of factors that could drive results toward the upper end of the range Our outperformance of these factors, particularly in regard to the faster ramp-up of our awards, stronger on-contract growth, and successfully defending our re-competes, 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 25 adjusted diluted earnings per share were 26.48 up 26 percent from the prior year despite an increase of 54 million dollars in interest expense that was partially offset by lower tax provision delivering 26 percent year-over-year growth despite this factor underscores our robust operating execution while positioning for future opportunities operating cash flow for fiscal 25 also reflects strong profitability and cash collections driving free cash flow of 442 million dollars which represents a 16 percent increase in free cash flow per share I'll note that we did not receive the 40 million dollar 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 25 results and fiscal 26 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. Slide 11, please. The healthy long-term cash flow characteristics of our business, our modest leverage of 2.9 times net debt to trailing 12-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 million 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 billion offering of 6 and 3.8% 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 in free cash flow per share and shareholder value. Slide 12, please. Now I'll provide some additional details on our fiscal year 26 guidance. We expect revenue between $9.2 billion and $9.4 billion, which represents growth between 6.6% and 8.9%. EBITDA margin is expected to be in the mid-11% range, representing a 30 basis point increase at the midpoint. Adjusted net income is expected to be between 605 million dollars and 625 million which translates into adjusted diluted earnings per share of between 2713 and 2803 we expect free cash flow of at least 710 million dollars which equates to free cash flow per share of 31.84 based on our full year diluted share count assumption of 22.3 million shares this implies free cash flow per share growth of more than 60 percent 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 fy26 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 FY26. 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 25 awards were 10 billion dollars with a healthy mix of new work and recompense our trailing 12 months book to bill ratio 1.1 times reflects continued differentiation in the marketplace and our backlog of more than 31 billion dollars represents about three and a half years of annual revenue. The weighted average duration of awards that went into backlog in FY25 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 26, we expect approximately 84% of our revenue to come from existing programs, 11% from recompets, and 5% from new business. We continue to have a healthy pipeline of new opportunities. We have $16 billion of bids under evaluation, 80% of which are for new business to CACI. And we expect to submit another $11 billion 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 25 results during an uncertain environment highlighting the resilience of our business and the effectiveness of our strategy as we look to fiscal 26 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 and with that i'll turn the call back over to john 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. It's 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. This is how we built CACI to be resilient. This is how we're able to deliver strong 25 results, issue robust Fiscal 26 guidance, express confidence in achieving our three-year financial targets, and continue to drive growth and free cash flow per share to 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. 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.

Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw a question, again, simply press star one. We do request for today's session that you please limit to one question and one follow-up. Again, star one to join the queue. We'll pause for just a moment to compile the Q&A roster. Your first call comes from the line of Scott Mikas with Melius Research. Your line is now open.

Morning John and Jeff. Nice results and nice guidance. One of your peers this quarter mentioned they see a 70 billion dollar pipeline over the next 12 months with about three quarters of that being takeaway work and when I think of government services companies pursuing takeaway work it kind of 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 billion dollar pipeline of submitted bids and that 80 is for new business but how much of that is new programs launched by your customers versus takeaways from an incumbent yeah scott thanks i'll uh start on this one um i guess

first of all um i don't look at us at here at cci as being a traditional government services company. And that's why when I hear numbers of $80 billion or $90 billion, it's nothing that frightens us. It's nothing that we aspire to. Frankly, we've got over $250 billion 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 $1.6 billion dollars of free cash flow over the next three three years is that we're out there bidding things that matter and markets that matter areas that we can differentiate in we're going to drive single high single digit top line growth and um uh achieve mid to higher 11 11 percent percent margins um as for our pipeline there is the majority of that would be new work to caci ACI, and well over half of that is going to be new customer work as well. You know, we are going to talk about the level of re-competes we have, I think this year, I think Jeff shared we're around 11 percent of this year's revenue plan at the midpoint, and we're very confident on that. I also would say that the re-compete 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 with a customizable push rate. It competes down another one to two years. So, you know, there's an awful lot there to unpack, but, you know, I would boil it back to Absolutely. Pipeline supports the growth rates we have in our FY26 plan and in our three-year 25-27 plan. So nothing in those comments give us pause.

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.

Okay, and then if I could ask a quick one on ITAS, there was news that the ceiling had been reduced, I think, by about $700. dollars but your book the bill was really good so just want to make sure there wasn't any sort of price reduction you know potential impact on margin booking rates or no d book backlog just any color on that yeah scott thanks um look itaz is a 10-year program and the ceiling was reduced from 5.7 billion to 5 billion dollars it doesn't change a thing it's going to continue on this program we continue to execute it extremely well you know given the

efficiencies that I have spoken about that we've already brought to this program customers 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 10-year program but on a 10-year long program the Air Force can always program additional ceiling during any of the next eight years of institution as requirements change which in this world they inevitably will change I'd also like folks to recall that when we won the ITASC job we announced it in January of 2023 we booked two billion dollars of total contract value we didn't book five point seven billion the remainder of the ceiling five billion dollars over our of our projection still allows us for additional 150% growth over the 10-year period if it's fully spent so there's no backlog adjustments there's no D books there's no impact to guidance there's no reduction of revenue there's no reduction in margin or any of our three year targets so we we have programs and task order cancellations where revenue is impacted, current work and other moves that DOJ has proven, but that still stays at $1 million of reductions of revenue. So taking feeling down has nothing to do with our growth rates that we have published and our outstanding fiscal year 26 plan that we're looking forward to achieving.

Yeah, I mean, you covered it. There is zero impact to anything.

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

Hey, good morning. Thank you for the question. Good morning. The guidance outlook, it sounds like you're assuming PR 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 can 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.

Okay, Colin, Colin, thanks. Let me cover our 26 guidance range. Look, you know, we intentionally put out low-end, high-end guidance. And as we've discussed many, many times, we have quite a robust process, you know, looking at how we would post this current current guidance. But 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. and 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 26 ahead of us. So, you know, and we're already talking about, you know, bursting through the high-end. Look, if funding is slower and uneven and we have a full-year CR, that mostly stakes us more towards the lower end. If the fiscal year 26 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 have followed us for an extremely long time. But we feel comfortable that we can support the current guidance that we have. 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 you know the only thing we don't have covered frankly is that the government shuts down for several months but frankly when the government shut down most recent recently we had a negative and negligible impact to our overall guide Jeff you want to talk about the second part of that yeah I would only I'd only comment that as John described there's ten 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 uh you know we have a lot of a lot of the year ahead of us got it and then as you think about um the implied margin progression to the investor date targets i think folks are probably assuming

you know 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 direct up old history but but as you think about kind of the pathway of this company to mid-teams 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 yeah 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 uh 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. 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 a heavier second half i think did i cover your whole question did i miss anything i think this part um you're probably going to wait till later in the year

to follow up on kind of the algorithm on longer term, mid-teach potential. But appreciate the color as always. And thank you for the question. Thanks, Colin.

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

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

Yeah, Gavin. Gavin, thanks. Look, we have talked 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, you know, that are taking a little bit longer. Jeff mentioned that things that used to take one to two days are, you know, taken three to four days around slower invoice payment and uh processing but i'd also couch that with you know remember that awards are lumpy and in any environment um you know we're not a business that i like to say we don't live hand to mouth we don't have to book an award by a certain day to badge flip you know 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. 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 billion pipeline that are looking for our work to come up on our e-compete soon. I think the odds of that are more in us holding on to that work longer. And then second, 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. So all in all, we're very much prepared for fiscal year 26, and should that workforce continue to shrink, I believe that we have that covered within our current current guidance.

I 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?

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 Do we have a differentiated solution? And then do we have the right business model, which is going to involve, you know, period point a period point investments and then the types of margins that we would expect for doing that type of type of work so um you know i i honestly believe that we're we're in the right we're in the right place and uh we put so much time left of the rfp come out coming out that we have a pretty good idea as to how this work will unfold so um i hate to be predictive but uh you my expectation of our entire team here is that we continue to grow backlog um and especially as Jeff's comments mentioned you know 11 growth of funded backlog is really really crucial for us

to achieve in our 26 plan thank you your next question comes from the line of Peter Arment with Baird your line is yeah thanks uh good morning John Jeff George a nice result um hey hey John 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? There's just been so much talk around Golden Dome and other areas with SDA, and you guys have been investing there a lot. Maybe if you could just give us an update there.

Yeah, thanks. Look, we're having great success with the technology. As you mentioned, there's a lot of strong demand from across government. Our technology is the most mature. We 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. You know, we know we have best-in-class terminals. We know we are U.S.-designed, developed, and manufactured. We have a full U.S. bill of material. So there's a lot of positive things there. We've also announced that we're on Trance 0, 1, and 2. We have a lot of terminals on Trance 3. 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. This is an addressable market for up to three vendors where the customer is looking to spend about $200, $300 million per year, which also, to your reference, does not include any of the projected increase to the United States space-based force and the constellations that they'll have to launch due to the Golden Dome initiative. 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 continue to work with the Space Force. So I like where we are today. 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, now investing less, and we are delivering more.

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

Yeah, Peter, you know, if you look at our large IT programs, things that are bringing network modernization and better efficiencies, what would transfer to GSA are more on the catalog pricing IT services, but, you know, major defense department and intelligence community IT programs are going to stay exactly where those are. we're already delivering great efficiencies there so there's a lot of language and there's a lot of nuanced 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 in our Intel community and we are delivering at a very high op tempo. We are delivering savings to customers in the United States Army, the United States Air Force, and other areas. So I don't see any impact, small to no impact, to some of that press around IT going to GSA. Thanks, Peter.

Thank you. Your next question comes from the line of Seth Seekman with JPMorgan.

Your line is now open okay uh thanks very much and uh good morning um morning um first wanted to ask just about the the cadence of of revenue and um and growth through the year it looks like the organic growth will start out kind of low and then you know move to uh above the midpoint in the second half of the year uh are there particular items that you're looking at that that will accelerate the organic growth in the second half?

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.

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, you know, providing any specific opportunities for the companies or any risks yeah 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 uh command and control uh you know we're still looking through what type of strategy uh we want there it's going to be highly competitive uh so i'm probably not going to share too much as to uh what our plans are there but uh we expect it uh just like everything else across the Army, you know, 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.

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

Thanks, good morning. Good morning. Good morning. John, the 20% or so of your business that said CIV, can you just remind us your exposure there and, you know, what you're seeing in terms of the budget outlook?

Yeah, 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 percent, with a full 1 percent coming from our NASA NCAPS program, and you all heard during my prepared remarks, teams doing an outstanding job are off to a very strong start. That leaves about 5 percent 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 civilians. there's nothing wrong with the federal civilian work but when we sat down and looked over the last 30 to 40 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 does gsa actions really hitting the federal civilian area area hard uh but as the ceo of a bubbly traded company who moved away from

that market a number of years back it really doesn't have any impact so it doesn't really keep us up at night the kind of changes that are that are happening in that part of our of our um business okay that's great color thanks for that and um um in terms of uh the cash flow outlook um When does the tax benefit that you're calling out, the $40 million, when do you expect that to hit in the year? And then the Section 174 benefit, does that stay with you beyond fiscal 26? Thanks.

It does. Let me start first with the $40 million 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, all the issues are resolved. This is just now sort of working its way through the bureaucracy, 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 million this year. It's a similar amount next year, and then it starts to drop off a little bit. It's about $200 million, a little over $200 million in total. 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, you know, of 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 to do it the way we're doing it but you ought to think about 50 million this year which we 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 three or so years thank you your next question comes from the line of jonathan siegman with stifle your line is now open Good morning, John, Jeff, and George.

Thanks for taking my question.

Good morning, John.

Welcome.

You bet. Good morning.

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, just 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 the timing of these things? And do you anticipate similar types of consolidation at other military branches?

Yeah, John, thanks. Look, every time I hear the word software, it puts a smile on my face, frankly. Look, you know, threats are changing continuously, and there's a lot of things that platform hardware can absolutely do, 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 it's 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 mean 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? How do you collapse networks so they can handle unclass, classified, and, you know, TS and secret and top secret data? That's all going to be driven by software. You know, we don't put new fiber in the ground, we actually find more creative ways to push, you know, to push protective bits and bytes over those strands of fiber or over sync. The drive will be to consolidate software in a more rapid manner. 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. You know, the purpose of those type of agreements are really to consolidate contracts to get volume discounts. You know, so licensed products. We're not so much on the licensed side, John. 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's 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.

Thank you. Good luck for the new year. Thanks, John.

Your next question comes from the line of Toby Sommer with Truist. Your line is now open.

Thanks. I wanted to get your perspective on your pipeline and backlog through a prism 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 your initiative to kind of move towards outcome-based pricing where you're sort of spearheading something is represented within both of those buckets.

Yeah, Toby, 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 at least give you some level of guidance. Look, new work or somebody else's work, right? you know that that's come up a couple of times here um if cci is bidding it it is work that maybe someone else has that we believe we can do faster better and cheaper 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 that they may be uh that may be being delivered uh to them today Look, as we look at things as Conway AS building out, we look at the Golden Dome, we look at other things, that percentage of new, new work is going to continue to climb. Do we track that internally? Because to us, we're either bringing new, 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. So there's plenty of examples in the agile software development area where as 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, yeah, that's going to be work taken from others, but it's a brand new experience for a 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 in a customer need. Because every time we see a customer who's buying, quote, unquote, the old way, we get to walk in there and show them the art of the possible. So the fact that it comes out is new work to us, it's the same. Having said that, today it's probably, Toby, 60-40, 70-30 around new, new work, and then the 30-40 percent is on the, quote-unquote, 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. And if the market hasn't, we sure as hell have, because we're out there looking at ways that we're closer to the mission side.

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 the traditional contracts as John described them. So those things actually kind of go together pretty nicely.

Thank you. Your next question comes from the line of Louis De Palma with William Blair. Your line is now open.

John, Jeff, and George, good morning. Morning, Louis.

Morning, Louis.

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

Let me unpack that. Easy answer first. It is not part of the $500 million TLS MANPAC 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, The Army is doing that same as you look across the EW-SIGINT space. So, you know, this is based on a lot of the CCI commercial companies that we have and that we've purchased 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. So it's a $500 million program. It actually started from a $1 million OOTA. I'll relate back to Toby's question, you know, if you really want to talk about quick reaction, performance-based, that OOTA was a million-dollar OOTA within 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 MANPAC program is a standalone loan program it is there purely to deliver deliver man pack solutions now the fact that we talked 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 think of think Apaches think every other mobile asset that a customer has we've been doing right 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 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 of any other movie v vehicle there 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 brand brand brand new work so yes we'll all be on the lookout for something that uh you know may come along in 26 maybe it's in in the next budget cycle uh but But that is definitely a drive to the United States Army today. And I would be remiss if I didn't say that other services are looking at the same type of stuff in your eight feet.

Thank you.

Operator, I think we have time for one more question.

All right, great. Your final question comes from Mariana Perez-Mora with Bank of America. Your line is now open.

Morning, Mariana.

Thank you so much 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 27 outlook that you gave, well, like nine months ago. If I look at EBITDA margin, you are at the mid 11% a year earlier. You do have some tax benefits, both from like section 174, but also from these like new ongoing benefit that you're going to 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?

Yeah, I'll start and John may want to put a finishing flourish on this. But first of all, I'd point out that we gave three-year targets. We didn't give FY27 specifically. It was a three-year number. And you correctly note that there are several positive developments that we were unaware 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, you know, we said that we're increasingly confident in our ability to deliver on the three-year targets, and you're seeing you're seeing some of that performance now and and you know I would not I would I would encourage you to not infer from that that there's some slowing in 27 you know we feel we feel increasingly good about the targets and expect to deliver them 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 $1.6 billion 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 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 2, or is it 2.2? You know, 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 50 years is not the kind of services company we are the next 50 years. 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 And we are well-positioned to do much more bottom-line generating work because it's just outstanding for eCash flow. And the optionality that comes with delivering more for eCash flow is we return capital to our shareholders. We also return it to our customers in ways that invests ahead of customer deep. So really appreciate that question.

Thank you. And one final question coming from the line of Sheila with Jeffries. Your line is not open.

Yeah, operator, I think we're ready to, I don't hear anyone.

I think we're ready to end the call. Yes, that's the final question. So, yes, I would like to turn the call back over to Mr. Mangucci. Please go ahead.

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. Jack McLaughlin, George Price, and Jim Sullivan are available after today's call. Stay healthy, and all my best to you and your families. This concludes our call. Thank you, and have a great day.

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