Caci International Inc (CACI) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. Welcome to the CACI International Third Quarter Fiscal Year 2026 Earnings Conference Call. Today's call is being recorded. At this time, all lines are in a listen-only mode. Later, we will announce the opportunity for questions and instructions will be given at that time. If you should need assistance during this call, please press star zero and someone will help 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, Jeanne. Good morning, everyone. I'm George Price, Senior Vice President of Investor Relations for CACI International. Thank you for joining us this morning. We are providing presentation slides, so let's move to slide two. There will be statements in this call that do not address historical fact and as such constitute forward-looking statements under current law. These statements reflect our views as of today and are subject to important factors that could cause our actual results to differ materially from anticipated. Those factors are listed at the bottom of last night's press release and are described in the company's SEC filings. Our Safe Harbor Statement is included on this exhibit and should be incorporated as part of any transcript of this call. I would also like to point out that our presentation will include discussion of non-GAAP financial measures. These should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP. Let's turn to slide three, please. To open our discussion this morning, here's John Mangucci, President and Chief Executive Officer of CACI International.

Thanks, George, and good morning, everyone. Thank you for joining us to discuss our third quarter fiscal year 2026 results, as well as our updated fiscal 2026 guide, Jeff McLaughlin, our Chief Manager Officer. Let's move to slide four, please. Before turning to our results, I want to start by reminding everyone that CACI is a fundamentally different company than it was 10 or even five years ago. This evolution is a result of a clear and consistent strategy, intentional leadership, and disciplined execution over many years. The key elements of our strategy are in markets where we possess decades of deep mission knowledge. We know and understand what our customers need to target its narrow, deep funding streets. We are a software-defined technology leader. We differentiate ourselves by using software that has critical needs with the speed, agility, and efficiency our customers demand. We invest ahead of customer needs to show the art of the possible. We're not waiting for requirements. And fifth, we deploy capital to create value for our customers and our shareholders. Executing this strategy has enabled us to generate additional shareholder value. Turning to our third quarter results, revenue for the quarter was $2.4 billion, up 8.5% year-over-year. We also generated a strong EBITDA margin of 12.3% and robust cash flow of $221 million. In addition, we won $2.2 billion of awards, which represents a book-to-bill of .9 times for the quarter and 1.2 times on a trailing 12-month basis, strong recompete performance, an important indicator of customer confidence, and a key enabler of long-term growth. While award activity improved in the quarter, it has not yet fully recovered from the multiple government shutdowns and acquisition organization change. Excellent visibility, a strong pipeline, and see a very constructive macro environment. Our results continue to reinforce the CACI is differentiated and well-positioned in our fiscal 26 of ARCA and the strength of our organic margin performance. On that note, let's discuss our recent acquisition in a bit more detail. We close the acquisition of ARCA, a leading technology company focused on national security missions in the space domain. ARCA brings exquisite space-based imaging sensor technology with high technical barriers to entry, agentic AI-based ground processing software, and deep customer relationships built over decades' powerful addition to CACI. We now have sensors deployed across all domains. We can provide multi-source actionable intelligence and bring operationalized agentic AI capabilities to classify customers across the national security apparatus. In fact, we already have Agenic AI efforts underway with our shared customer footprint and we see significant additional costs. ARCA positions us for opportunities including Golden Dome, Indo-Paycom support, future ground architecture, and space superiority missions. To fully leverage our combined capabilities, we have integrated ARCA and CECI's existing space portfolio under the leadership of ARCA's former CEO. ARCA exemplifies the type of acquisition that investors should want us to make. Wide competitive moat, unique capabilities and technology, exceptional execution history, and strong financial performance, and all in one of the most strategically important domains in national security. It's our flexible and opportunistic capital deployment strategy in action, positioning CACI to drive long-term growth in free cash flow per share and additional shareholder value. CACI is a national security company. That focus continues to be a powerful differentiator in the marketplace. We have more than 1,400 people embedded in mission spaces across all performing planning, intelligence analysis, cyber, and operational support. We are involved in every operational headline you read, as well as the many operations you will never read about. This proximity to mission gives us an advantage that is hard to replicate. We understand the mission and the threats because we see them every day. This creates a feedback loop that sharpens our business development, strengthens our reputation for execution, and informs on decision-making, allowing us to confidently invest to have These are meaningful discriminators that create competitive advantage and help drive our financial For example, CACI recently received multi-year extensions on several contracts in critical mission-focused areas as a direct result of our exceptional delivery. Slide eight, please. Our strategic investments, informed by the position of CACI, is a leader in software-defined technology and key warfighting domains that are receiving significant attention and funding from our customers. And these investments also demonstrate a repeatable strategy that would drive future growth and shareholder value. A great example is our spectral program where we are developing the next generation of shipboard signals intelligence and electronic warfare capabilities for the Navy's surface combatant ships. We initially invested ahead of customer needs to show them the art of the possible and to demonstrate of differentiating the solution during the bid phase. Now, we are actively investing in the head of need during execution to accelerate delivery of capabilities to the field, a key ask of the current administration. During the quarter, the program continued to progress as we achieved milestone C, marking the start of spectral's low rate initial production and deployment phase. This was a defining step towards ramping up the program and delivering this critical EW technology to the fleet. and because Spectral is built using software-defined technology with open architectures, another key administration priority, we see significant additional opportunities across the Department of War and internationally. Another example is that we are seeing accelerating demand, increasing orders, and a growing pipeline driven by Merlin, our commercially sold counter-UAS system. Two decades of our counter-UAS investments and work across the Department of War to deliver a system that sees further, detects more, provides more critical decision-making time, and delivers more effective low-to-no collateral damage capabilities than any other available system. Merlin is a software-defined system that can be rapidly updated and provides a nearly unlimited magazine of economically sustainable non-kinetic effects, including unique cellular detection and defeat capabilities. From concept to deployment in under a year, we are not only providing the Department of War with the capabilities they are asking for, but we are also delivering them at the speed demanded. We are proving this, and real-time, an example, is our strong positioning for Golden Doe. CCI has been investing in, developing, and building many of the capabilities this mission requires across many critical layers. Defending the homeland is not just about ballistic or hypersonic threats, it's also increasingly about threats from unmanned aircraft systems. CCI's technology is ideally suited for this mission, where extended detection range provides critical time for decision-making, and low-to-no collateral damage effects are critically important for mission success. Second are our exquisite left-of-launch capabilities. These include sensitive cyber-activities as well as our worldwide set of embedded sensors, which can detect and defeat threats before they are deployed. And third is our space-based sensing. ARCA significantly expands our capabilities in the space domain, including technologies such as hyperspectral imaging for missile detection. Spectral, Merlin, and Golden Dome are three significant proof points of how CACI creates value for our customers and our shareholders. They demonstrate where we identified an enduring need early, invested well ahead of award, and have established differentiated positions through years of discipline execution and continued innovation up to budgets and demand signals while the government fiscal year 27 budget is still evolving the proposed spending looks very positive in many key areas for CDCI including electronic warfare and counter UAS by space and counter space programs C5 ISR and IT modernization including AI and the digital backbone we are in the right markets that are aligned to

enduring well-funded priorities we're providing the right capabilities to address our national security customers most pressing needs and we're back oh thank you John good morning everyone please turn to slide 10 as John mentioned we're very pleased with our third quarter performance despite some modest disruption from the ongoing DHS shutdown our revenue and awards reflect our strong market position in a recovering but still sluggish award environment while our strong margins and cash flow demonstrate the high value differentiated characteristics of our offerings and our operational excellence in the third quarter we generated revenue of 2.4 billion dollars representing eight and a half percent year over year growth of which 6.8 percent was organic despite the modest dhs impacts that i mentioned we still saw the expected acceleration in organic growth moving into the second half of the year EBITDA margin of 12.3% in the quarter represents a year-over-year increase of 60 basis points, even after absorbing $17 million of ARCA transaction costs. Adjusting for these expenses, our strong third-quarter profitability was driven primarily by overall mix and strong program execution. Third quarter adjusted diluted earnings per share of $7.27 were 17% higher than a year ago. Greater operating income, along with a lower share count, more than offset higher interest expense, including $11 million related to ARCA, a higher income tax provision, and the transaction costs I mentioned earlier. Finally, we delivered healthy free cash flow of $221 million in the quarter, driven by strong profitability and good working capital management. Third quarter cash flow was reduced by approximately $20 million due to transaction costs and other acquisition-related financing fees. Day sales outstanding, or DSO, were 55 days, two days lower than the prior quarter. Slide 11, please. Turning to our balance sheet and capital structure, our pro-forma leverage at the end of Q3 was 4.2 times net debt to trailing 12-month EBITDA, slightly better than the expectation we provided when we announced the ARCA acquisition. We continue to expect leverage to return to the low threes within six quarters based on the strong cash flow characteristics of our business. I'll remind you again that we have a strong track record of successfully and quickly de-leveraging after major acquisitions, which underscores our consistent financial performance, disciplined capital deployment, and demonstrated access to capital. As we have previously indicated, ARCA is accretive to both growth and margins. The acquisition of ARCA is just the latest example of our flexible and opportunistic Capital Deployment Strategy, and the evolution of our portfolio, which positions CACI to deliver long-term growth in free cash flow per share and additional shareholder value. Slide 12, please. We're pleased to increase our Fiscal 26 Revenue and EBITDA margin guidance, driven by the addition of ARCA and the strength of our organic margin performance. You'll notice on the right-hand side of the chart, we've provided a breakdown of costs associated with the acquisition for transparency and your modeling purposes. We now expect revenue to be between $9.5 and $9.6 billion. This represents total growth of 10.1% to 11.3%, which includes about 3.5 points of growth from acquisitions, including $150 million from ARCA. We're increasing our Fiscal 26 EBITDA margin to the 11.8% to 11.9% range, underscoring our strong execution and evolving portfolio, as well as contributions from ARPA. Our full-year margin outlook includes the impact of approximately $22 million of transaction costs related to the acquisition. Our updated FY26 Adjusted Net Income Guidance is between $615 and $630 million. Adjusted net income reflects the after-tax impact of approximately $60 million of pre-tax transaction costs and higher interest expense, largely offset by stronger organic margin and ARPA's earnings contribution. This yields full-year adjusted EPS guidance of between $2770 and $2838 per share. which represents growth of 5% to 7% even as we absorb these costs. And finally, we are reaffirming our free cash flow guidance of at least $725 million, even after absorbing nearly $50 million of transaction costs, interest expense, and an increased investment in capital expenditures. As we consistently say, we see free cash flow per share as the ultimate value creation metric, and our FY26 guidance represents 65% growth in free cash flow per share over FY25. Slide 13, please. Turning to forward indicators, all metrics continue to provide good long-term visibility into the strength of our business. Our third quarter book-to-bill of .9 times and our trailing 12-month book-to-bill of 1.2 times reflect good performance in the marketplace, even with the multiple shutdowns and slow rebound in award decisions. The trailing 12-month weighted average duration of our awards in Q3 continued to be just over six years. Our total backlog of $33.4 billion increased 6% year-over-year, while our funded backlog increased 19% over the same period. Both metrics reflect healthy organic growth, even when normalizing for ARCA's contribution of $835 million to total backlog and $422 million to funded backlog. Additionally, ARCA has another $2 billion of non-competitive franchise programs from which we expect to recognize revenue over time, but that don't yet meet the regulatory criteria to be added to backlog. For fiscal year 26, we now expect 98% of our revenue to come from existing programs, with 1% each from re-competes and new business. Progress on these metrics reflects our continued strong operational performance and yields increased confidence in our outlook as we close out the year. In terms of our pipeline, we have more than $4 billion of bids under evaluation, over 80% of which are for new business to CACI. We expect to submit another $22 million in bids over the next two quarters, with over 75% of those being for new business. We continue to have excellent visibility, are well-positioned in a very constructive macro environment, and remain very comfortable with our outlook, including our three-year targets. In summary, we delivered another quarter of strong results. Our performance continues to demonstrate our differentiated position in the marketplace, which is further enhanced by our acquisition of ARCA. Our ongoing investment ahead of customer need enables us to win and execute high-value, enduring work that drives long-term growth, increased free cash flow per share, and additional shareholder value. And with that, I'll turn the call back over to John.

Thank you, Jeff. Let's go to slide 14, please. In closing, I want to emphasize what truly differentiates talk about adjusting to the changing market or already delivering. We anticipated years ago, with speed, software-defined solutions, and mission proximity, we've defined success. We positioned the company accordingly through deliberate investments and discipline execution of our strategy. This is all about expanding the limits of national security. It isn't about chasing trends. Understanding where threats are evolving, where a customer's hardest problems will be, and building the capabilities to a driving long-term. Before I turn the call over for questions, I want to congratulate NASA and the Artemis 2 crew on their historic achievement. I also want to recognize that both CACI and ARC have contributed critical technology that exemplifies the caliber and mission impact of our offerings. CACI's optical communications technology enabled high-definition video and data transmission throughout the entire mission. while ARCA provided essential sensing technology on the SLS rocket to ensure a safe crew ascent. To both teams, thank you for your exceptional work on this landmark achievement for our nation's space program. As is always the case, our success is driven by our now 27,000 employees in expanding the limits. I am proud of what you do every day for our company and for our nation, and to our shareholders, I support a CACI. With that, Jeanne, let's open the call for questions.

At this time, in order to ask a question, press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star one again. For today's call, we do ask you to limit yourself to one question and one follow-up. Thank you. Your first question comes from the line of John Siegman with Stiefel. Please go ahead.

Good morning, John, Jeff, and George. Thanks for taking my question. Good morning, John. Congratulations on closing the transaction. Just a real quick one, just with ARCA, and now that it's all integrated under one leadership, can you scale how big your space exposure is today?

Yeah, John, thanks. Well, it's definitely gotten larger. And, you know, it's not just the absolute eye-warning capabilities that that national asset brings in. Look, they're a 62-year-old company. They've been at the forefront of technology developments. Like I said, it provides in space. And just outstanding feedback, a consistent delivery on schedule and within cost. You know, so what drives the growth of the space business further? Definitely golden, golden, golden dome. Some of the backlog numbers that Jeff mentioned earlier, you know, just to have an asset that has another $2 billion of non-margin, because that was pretty impressive for the quarter.

Previously, you made statements quantifying the difference between tech and expertise, which was helpful for us. now that you've added the super-A's, ARCA, and Azure. Is there any framework that we can think about of the relative margins differences between those two segments and any lumpiness or seasonality to keep in mind? Thank you very much.

Thanks, John. Look, you hit at an item that we're probably not going to provide a lot more specificity about around, at least at this point. I believe the addition of these significant technology franchises is important in the evolution of the portfolio we've been talking about for some time and the attendant margin expansion that comes with that. So, I mean, you put your finger on something that we're not quite ready to quantify, but the condition that you observe is clearly the case. I would add, relative to the second part of your question, that that does come with a certain amount of lumpiness in terms of margin. And you can see that a little bit when you do the algebra around the fourth quarter margin, where we have particularly strong margins this year or this quarter. We're increasing our margin performance for the year, and you will quickly figure out, you know, that that probably means some lumpiness in the fourth quarter that goes the other way, the way this quarter went the right way. So, you know, this is a little bit of a, there is some, there is some variability around that that you've noted. Overall, however, we clearly are embarked, have embarked on this strategy with the expectation that margin continues to go up and to the right, despite an occasional quarterly, you know, bounce.

Yeah, and then, John, let me also add, on the revenue side, you know, the expected financial contribution over the next 12 months that we shared with you all in December is still accrued to revenue growth and margin, but on the revenue side, revenue is not going to be linear, folks. It's a technology business. You make deliveries, you book revenue, and you book your book profit. So, you know, unfortunately or fortunately, program schedules are endpoints, and so, you You know, we can't apologize for that. It's very much like the rest of our technology business, so we'll do our best to estimate quarter to quarter, but this is a full-year business. We've said that a lot, and, you know, ARCA is a fantastic growth addition.

Comes from the line of John Godin with Citigroup. Please go ahead. Your next question comes from the line of Gavin Parsons with UBS. Please go ahead.

Thank you. John, you've talked about this a bit, but maybe it's kind of a two-part question on the booking environment.

It seems like the submits are building really nicely, but that's not converting to the pipeline. So, I guess, what are you seeing there?

And then, second, on kind of funding, I think if I exclude ARCA, your funded backlog was up high single digits. So, is the funding environment still behaving better, even if the award environment maybe isn't?

Yeah, Gavin, thanks. So, let's unpack that. Look, we continue to see excellent visibility, a strong pipeline. We see a really constructive method. Let me just start with, we're investing ahead of the backlog, as you add, is up seven duration of backlogs on a rolling basis for greater than six years as we get. Funding trends, customer demand, and a potential $1.5 trillion GFY 27 budget, which includes reconciliation funding, that definitely continues to support of what we're looking at only going forward you know so we've we've talked about the fact that there's a number of short-term factors behind the slower reward decision-making and then you know there's a lot of money in budget reconciliation funds are but the end of the day I can say government will go

back to the days of awarding most programs 300 days of women to add to that you noted the funded backlog increase the organic piece of that is 10%. I would also note that the sluggishness that we've seen in the acquisition and award structure, and this is underscored by the backlog statistic that we just used, we have not experienced any administrative part of the contract administration. So the government is, you know, by and large funding programs. They're paying bills. They're processing invoices. payment offices are working the sluggishness in the awards mechanism has not translated into that side of that side of the government thanks guys and a long shot here but you know guidance implies growth accelerates in 4q and you've got some pretty easy comps this year so any early thoughts on if kind of the exit growth rate can continue into next year yeah we do see growth accelerating in the fourth quarter, which has always been the plan, and when I referred to the fact that we were seeing the growth acceleration we expected in the third, that was part of that, but I would also encourage you to keep John's comments in mind relative to the fact that the business is managed really to the year, and we have customers, you know, that have rhythmic buying patterns, different times of year they buy differently. And we typically have strong fourth quarter, strong second half, and particularly fourth quarter, which we see again this year. But I would encourage you to not think about that as an exit rate for the year. If you look over time at the distribution of our margin and revenue growth, you'll see that back end weighted trend. And, you know, I'd encourage you to not extend that into 27.

I added a comment about 27. I would encourage you to us continuing to deliver, you know, growth, driving revenue, driving margins, driving free cash flow. And, again, you know, we wouldn't say that, but we're, if we weren't very comfortable with our three-year targets. Yeah, the momentum in the business, you know, that you see is real.

This is from the line of Gavin Connell with TD Cohen. Please go ahead.

Good morning, guys. How are you doing? Good, good. I just wanted to follow up on that last question. So I remember last quarter you kind of explained the Q4 sequential, you know, ramp that's expected of JTMS and some other programs. I'm curious, though, why wouldn't those continue to be at a very high rate, you know, exiting the June quarter into the September quarter, is there anything one time with those specific contracts that are driving so much of the sequential growth that tapers off? And then I just wanted to get your broad perspectives on the fiscal 27 budget request and how that might benefit Kaki in what parts of the business.

So why don't I take the first part of that? I would refer you back to the discussions that we've had about the different RAMP profiles. There are a couple of things that are happening in the – one is that we have a number of programs that RAMP in sort of a – have sort of a bimodal growth rate. And one of the patterns that I talked about is a lot of these large agile software programs have an initial phase that is planning the second phase. And so there's acceleration and then a leveling off and then a re-acceleration. We're working through those phases right now on ITAS and to a lesser extent NCAPS. We very much are in that mode for JTMS. And the other thing I would point out is that we do have, in a number of the technology areas, we do have customer communities that are particularly heavier buyers at different times of year, often with increased activity in the fourth quarter of our fiscal year. And then the final variable is that we have a number of items where we're in the early stages of activities that are driving investment for future growth that is another variable in that mix. So the real answer is it's a portfolio, and while a mix sometimes feels like a handy explanation, there really are three or four substantive conditions that are in play here, you know, and they come together from time to time with the outcomes that...

Around the 27 budget, you know, larger budgets never hurt. We would have had larger budgets than shrinking ones. But as I've said many, many times, you know, we're going to pay much more attention to where the funds are flowing out of the surface. But, you know, what we see in the President's budget request looks very positive. The J-books, I think, came out earlier this week, so we'll be able to garner much more details from those as we build our fiscal 27, 28, and 29 plans. You know, we're $300 billion TAM, and we're roughly a $10 billion company, so there's plenty of room for us to go grow. So, you know, we firmly believe that the electronic warfare and the counter-UAS areas, both in the Department of War and in the DHS, show great promise for having all the right meetings and planning sessions and doing the right things we need to do and making the right investments internally so that we can meet those market needs. You know, really good on both the classifieds. We are very strong in those future budgets, especially those that are in the FY2027 plan. You know, C5ISR and then IT modernization, you know, both bringing in AI and doing network modernization. So very supportive of where we're going ahead. More importantly is where the money is going. The company is 27.

Thank you.

Your next question comes from the line of Scott Mekas with Melius Research. Please go ahead.

Good morning, this is Matt Muratolo on for Scott Micas. Good morning. Good morning. Congrats on Mouse MC on Spectral. So, as that program moves into LRIP and eventually into forage production, are there any challenges that you foresee or investments that need to be made to support the production ramp? And then, obviously, what's the market benefit as it moves into production?

Yeah, thanks. So, look, we're extremely proud about where the spectral program is. That was a long road for us to achieve victory there and done an outstanding setting job with it. So we did achieve and, I'm sorry, we did receive Milestone C. We're just beginning the LRIP portion. In the October-November time frame, we'll be looking at sort of delivery zero, delivering some of the systems. On the investment side, you know, as my prepare remarks stated, we invested long ahead of the award of that program. It makes certain that the brains are, you know, multiple antenna feeds and looking at all of the known threat baseline for naval. And we continue to invest in this program. We deliver the first system down. improve point on excellent execution it's a new large type program for us but a great partnership with the Navy coupled with the right the right funding timing allows us to 100 ships through in the US Navy fleet today thank you guys I'll take one question thank you thanks your next question comes from the line of Seth Stephman with JP Morgan please go ahead tomorrow guys this is rock on for

Steph? Morning Rocco. How should we think about ARCA and passing margins moving forwards? You mentioned that quarter-to-quarter margins can be lumpy from the technology side of the business, but is the 11.6 that's implied for next quarter the right way to think about kind of the lower ends of the new company margins post these deals?

Yeah, the ARCA contribution in the fourth quarter is pretty consistent with our expectations. You know, John mentioned this is a delivery and mixed business and very much not linear. You know, we gave some indication of margin in the December 22nd call, you know, but I would point out that, you know, within any particular quarter, you know, around that average you know you may see we may you know we may see three or four point swings in a particular quarter so I would I don't know if I'm getting exactly to the question that you asked the mark the ARCA expectation for the fourth quarter is is well aligned with our expectation when we made that announcement the

organic business mix will be a softer quarter when you do that math and then And what type of directed energy capability does ARCA bring to CACI, and have they been fielded at this point?

They bring a portion of directed energy, things we can't talk about on the line. Yes, it's a new capability for us. We're not in the directed energy business. I think we'll be able to talk more on that in the quarters to come. I do want to touch back on your earlier question. Look, ARCA is a long-term play for us. It's probably one of the strongest acquisitions that we've done in terms of both doubling down on capabilities and customer relationships. Frankly, us only growing a price-based business in a market that's going to see valuations of those with such a strong space portfolio grow in years to come. We've been able to do that all inside of a company that covered down on our transaction. We're in the very early innings. We just got to April as to how we can continue to grow in space.

Next question comes from the line of Toby Sommer with Truett Securities. Please go ahead.

If I think about the business from a really high level mission tech expertise, etc., it's fair to think of mission techs in a makeshift of two to three points per year because of faster growth as well as, generally speaking, applying more capital on acquisitions in that direction?

Yeah, I think, Toby, that's probably right. It's a hard thing to generalize, but the condition you observe is certainly true, and you're on the right vector, to be sure.

With respect to counter UAS, I was wondering if you could characterize what the experience in the war so far has meant to the opportunities that you see in front of you and maybe how that has impacted customer conversations and decision making.

Yeah, totally, totally, thanks. So a couple of decades, Merlin is our family of, you know, it is part of our broader $2 billion EW port and we do continue to expect growth from Tarnio OAS. And the foundational part of this is that we've actually, we are able to sell it. We can meet the administrators for world events, active discussions, 16 other agencies and organizations across the federal, prepared remarks, a system that's already been fully developed. If there's anything competitive, we're not gonna provide any details, but we will absolutely be more than willing to share those details on the next quarterly call and in incremental press releases as we go forward. On the international front, as an update, we are now very active, working sales in theater to the U.S. Army, Task Force 59, giant four drones and those are all the ones that dollars to give us access to markets process for the building issues long in this market we've talked about current events on stronger demand and a strong market well funded in the US through both reconciliation bills adding billions to our TAM which is which is what moved us in 300 billion dollar level as well as other from wall so the right dollars of investments and you saw the CapEx is up of your portfolio and we are full speed ahead in how we want to grow this market.

Thank you very much.

Question comes from the line of Sheila Kayagulu with Jeffries. Please go ahead, Sheila.

Hi, good morning, guys. Just one question from me. Great stuff on the backlog growing, John, despite the environment. Maybe just honing in on your civil business, still solid growth there up 7%. What are you seeing and how do we think about major program drivers within Civil into Fiscal 27?

Yeah, there are a couple things going on in Civil, Sheila. You can see the modest DHS headwinds, but you can also see the NASA NCAPs. Those would be the principal drivers of the change that you see.

Okay, great. Thank you. It comes from the line of David Strauss with Wells Fargo. Please go ahead.

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

Sorry.

Oh, I wanted to follow up on the broader defense budget question. So it's a note in the slides that the reconciliation funding is starting to flow through. So I was wondering if there's any way you could quantify, I guess, to what extent your programs benefit from the base budget versus the reconciliation benefit from last year, and then any thoughts on what that might look like for 2027.

Yeah, so the majority of what we do and what we have been able to grow to is in the base It will continue to be in the base budget because we have selectively decided in our summer markets to go after areas that are traditionally funded within the base. On the reconciliation funding, we have seen those start to flow. They're really going to be very prevalent in Golden Dome. Golden Dome. We're doing a lot of AI-based object tracking tech. We're currently modernizing the Space Force Critical Infrastructure through Active Reconciliation Funding. Again, you can directly tie that to things in the Golden Dome. We continue to enhance what we do in the left of launch area. I see modernization. We have a lot of large enterprise systems that we're looking to try to make common across the Department of War. So if the Army has a, you know, picture-perfect enterprise system doing X we are we are pushing to have that same solution be used through the the rest of the Department of War so I mean a lot of nice funding and whether it's already T&E or in procurement versus OM&M it doesn't quite matter to us we're always doing a modernization which is a we'll see increasing amounts of R&D or new T&E funding so really well funded close out 2026 and just as nicely funded as we go forward in fiscal year 20 so great

thank you thank you your next question comes from the line of Mariana Perez Mora with Bank of America please go ahead oh hey guys this is Alex Preston on for Mariana this morning for you I just wanted to go back to NASA and the civil side real quick. Given the sort of budget fluctuations there in FY27, right, obviously the request calls for, again, pretty soon being cut year over year. But there's also this shift towards exploration away from pure science, so there's a bit of a dynamic there. I'm just curious if you had any sort of broad twists and takes on that budget request and where you see CACI and ARCA playing within that context. Thanks.

Yeah, so I guess we're on both sides of that, right, Alex? You can catch first. You know, we continue to successfully ramp that program. We're receiving a very high price from our customer. So what we're deploying there is a commercial Angeles-scale delivery model to really standardize and centralize software development across NASA. So very similar to what we have done with Customs and Border Patrol on Beagle. So the way to think about that work in terms of budgets and administration priorities. We're reducing software development times, we're increasing efficiency, we're bringing administrative systems across NASA into compliance with federal reporting. We've got all key metrics and we're supporting, I think, 800 to 900 different applications. There's no work, there's no impact to the work. We're driving commonality and spending our cost savings across the organization. A nice thing for us, it supports the theme and asking wanted to reduce their reliance on the organization that really is taking full advantage of what we're doing in one part of our business, driving Android software development practices, and the even sweeter news of that and how that will continue to ramp to support.

We really appreciate the help.

Your next question comes from the line of John Godin with Citigroup, please go ahead.

Hi, this is Jeremy Jason, I'm from John Godin. Thank you for speaking me in. So I just wanted to ask, As we think about these complex sort of technical solutions transitioning from development to production, like structural, I kind of wanted your take on what your outlook is for the scalability of these technologies across, you know, different customers and upcoming budget cycles. And could that, in theory, be sort of affected by a potential blue wave?

Yeah. You know, the nice thing, I'll take the last comment first. The beautiful thing of being an investor in CCI is a number of years back when we set this company on its next course, we had spent a lot of time looking strategically at the kind of markets we wanted to support and the parts of the federal government we were going to be very focused on. Mark my words, it's no accident that we're focused on national security, which is DOD, the Intelligence Community, and DHS, all dot dot dot which are fully have bipartisan support red ways purple ways doesn't much matter to where we're doing things we're in very critical areas that the government tomorrow morning will not decide to just try to talk about systems that we're out there doing kind of UAS for a lot in Melbourne to be able to deliver Merlin it's a tough supply chain right right now there's a lot of people buying flat, flat panel radars, but what differentiates us there, frankly, and how we enhance it going forward, is the software capability of that system. So it's not so much of always having to update hardware, and whether this is fly-by-wire drones, one-way attack drones, you name it, we've already seen them all over the planet. So we are more than able to scale forward from that position as well. And we can talk a lot about optical communication terminals and everything else you've done in the tech area but they all follow that common theme right you need to understand mission so that you can deliver and we hear a lot about AI how that's going to move you know different parts of our business forward but frankly AI without mission is like a car without gas it's great to look at but you really can't do much with it so we've been able to scale AI use throughout a lot of what we do and we're looking forward to driving the The next question comes from the line of Jan Engelbrecht with Barrett.

Please go ahead.

Good morning, John, Jeff, and George. Congrats on another good order. I want to talk about the ARCA and legacy CACI space portfolio, and I was just wondering sort of is there an ability to sort of – I wouldn't say sort of cross-sell, but like how do you combine those capabilities into sort of a solution for the customer?

Yeah, thanks, Sean, Frantz. You know, probably the most prolific revenue synergy we have is going to be on the ground processing side, where ARCA operates authentic AI solutions and a number of different mission models that allow them to process and find different things in the geo-end stream with authentic AI on that. customer meetings, given that we just got everything. So there are that haven't even begun that will allow us to the intelligence community further down the path that we know that they want to move towards, which is getting to higher level multi-hand solutions. The other area, larger scale, ones of the same size that need to push, you know, a terabit of data through a tunicor mag. You know, ARC is a 60 plus year space company. you know we are a six plus year space company in the world of optics through production we're looking at different ways we can do it so this is so much who build satellite need information from those emissions so future banks for us thanks very helpful then a quick follow-up if I may just look at FY 27 you've obviously got great visibility in this business it's straight to four years

of annual revenue in the backlog, but any sort of large multi-year contract that you've bid on, sort of multi-billion dollar contract that you expect to be adjudicated in FY27 or any sort of notable recompete that we should look out for in the next 12 months?

Yeah, I think on the new business front, excuse me, you know, we're always, we always have a number of multi-billion dollar things that are rumbling around at different stages. You know, do we have some jobs that are over a billion dollars that are going to be awarded if it's year 27? Absolutely so. You know, and frankly, we were looking at some of 2026, but then 2027. On our A-compete front, this year, 2026, has been a really large year for us. You know, as I think Jeff mentioned during his prepared remarks on our A-compete front, And what's just as exciting in the 20-24 months, we can piece right just to never have to bid on them. You only get there when the areas that we're in, the importance of the level of performance.

That concludes our Q&A session. I will now turn the conference back over to John Mangucci for closing remarks.

Thanks, Jeannie, and thank you for your help on today's call. We really want to thank everyone who dialed in or listened to the webcast for their participation. We know that many of you have follow-up questions. and Captain Walken and George Pratt for today's calls and your families. This concludes our call. Thank you and have a fantastic day.

This concludes today's conference call. Thank you all for joining. You may now disconnect.