Caci International Inc (CACI) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. Welcome to the CACI International 4th Quarter and 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 any 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, Audra, 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're providing presentation slides, so let's move to slide two, please. 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 credit of SEC violence. 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. John. Thanks, George, and good morning, everyone.

Thank you for joining us to discuss our fourth quarter and fiscal year 2026 results, as well as our fiscal 2027 guidance. Jeff McLaughlin, our Chief Financial Officer. Before getting to our results, I want to start by reminding everyone of the technology-first national security company CACI has become and the key elements of the strategy that produced these results. First, we utilize our deep mission knowledge in the markets we serve to truly understand what our customers need. We focus on enduring national security priorities with narrow deep funding streams, deliver software-defying technology to address critical needs with the speed, agility, and efficiency our customers demand, invest ahead of customer need, and we deploy capital in a flexible and opportunistic manner to create value for our customers and our shareholders. Our financial results in fiscal 26 are the latest evidence that our strategy is working. Slide five, please. Our strong fourth quarter performance capped another exceptional year, which we exceeded all of our expectations. For a full year fiscal 26, we delivered revenue growth of 11%, EBITDA margin of 12.3%, and free cash flow of $735 million. We also won more than $10 billion in contract awards, representing a book-to-bill of 1.1 times. These results demonstrate the earnings power, cash generation potential, and durability of the company we have built. Our focus on national security priorities, differentiated capabilities, and long-duration work enables us to grow and execute even in slower war environments. Fiscal 26 accomplishments demonstrate the successful execution of our strategy, many of which are drivers of growth in fiscal 27. Our electronic warfare business is helping customers dominate the electromagnetic spectrum, a critical enabler of modern warfare. Our spectral program achieved milestone C is moving into low-rate initial production with deployment to begin in the second half of fiscal 27. This milestone also positions us for additional opportunities across the Department of War and international. Our SkyValor counter-UAS system was selected by the Department of War to help strengthen home and defense on the southern border. And just last week, we received a separate $500 million award for the domestic shield program. We invested ahead of need in Skyvalor, moving from concept to deployment in 12 months, and we are seeing strong demand and expanding backlog for this and other counter-US offerings. We landed our tactical EW footprint with initial orders from the Air Force, which provides for future Department Award growth. Fiscal 26 EW accomplishments are also great examples of the repeatable growth engine we've built. Mission knowledge informs investment, investment produces differentiated technology, and discipline delivery generates customer value and contributes to increasing financial returns. Next, our space business is benefiting from surging customer demand in this critical and increasingly contested domain. It completed the integration of ARCA, combining its sensing and AI-enabled analytics with CACI's existing technology and customer presence to create a leader in delivering actionable multi-source intelligence. We were recently notified of an award to help the US Space Force defend against adversarial threats, our first award leveraging the combined strengths of CACI and ARCA. We won a significant classified counter space program that combines adaptable software with our purpose-built mission hardware. Like Spectral was in EW, this is a statement win for CACI in counter space, winning against traditional large defense primes. Together with our Space Force RMT program, this new win positions us as a leader in next generation counter space technology, which is a significant opportunity for future growth. We also advanced to Phase 3 of the Space Force's Enterprise Space Terminal Program, reinforcing our leadership in delivering resilient, mission-ready communications across all orbits. EST is the optical communications terminal expected to be proliferated across multiple orbits as part of the Space Force's space data network. We provided critical technology that supported NASA's historic Artemis II mission, positioning CECI for additional growth opportunities supporting both manned and unmanned spaceflight. In our digital and network technology business, we are delivering enterprise-scale technology and network deployments to secure the digital backbone for national security. We are ramping up the Joint Transportation Management System Modernization Program for US Transcom, replacing fragmented logistics and financial systems with an integrated solution in partnership with SAP and AWS. We are partnering with Oracle to deliver an integrated HR shared service solution to the Office of Personnel Management that will support 2 million users across 96 federal agencies. We are modernizing critical national security networks to improve cyber resiliency, efficiency, and mission performance through our base infrastructure modernization awards with the Air Force and ongoing programs for the Army and DIA. Our mission-aligned operational support business is also central to our technology-first model. More than 1,400 CACI employees are embedded across combatant commands globally, providing intelligence analysis, mission planning, and operations support every day. They are involved in every operational headline you read, as well as the many operations you will never read about. So, their proximity to the mission gives us differentiated insight into customer needs, informs where we invest, and helps us deliver relevant technology faster. Finally, across our entire business, we continue to advance the use of AI to deliver better outcomes to our customers faster. We are leveraging AI tools across our full software development life cycle to reduce development time, improve quality, increase the amount of capability we deliver, and strengthen program profitability. And importantly, where we deliver savings to our customers, we are consistently seeing them deploy these savings back to CACI to address additional mission priorities. Extending ARCA-developed authentic AI solutions to additional national security missions with the speed of processing and analyzing massive amounts of sensitive data is critical. This approach, using AI to enhance both how we work and the outcomes we deliver to our customers, creates measurable value and competitive differentiation. These results prove that AI is a multiplier aligned with our strategy and is actively scaling our technology portfolio and growing our business. Slide seven, please. As we scale this technology-first business, we are also strengthening our leadership team in several areas that are central to our next phase of growth. During the past few months, we have added significant executive leadership in key areas of our business. First, Dr. Dave Young has joined CACI as our Chief Operating Officer. Dave has recently led a $7 billion national security space business at Lockheed Martin and will lead cross-business initiatives to drive engineering excellence, program performance, and growth. Next, Tom Kirkland rejoins CACI to lead our electronic warfare business. Tom most recently served as President of Targeting and Sensor Systems at L3 Eris and is also a combat veteran of the United States Army. Tom will be responsible for the growth and delivery of technology and support across all EW customers and programs. Next, Chris Monosky joins CACI as our EVP of Manufacturing, a critical function as we scale the production and delivery of technology across the company. Chris brings nearly three decades of experience in manufacturing and supply chain management, most recently as VP of Operations for L3URS. We also combine our existing space capabilities with those of ARCA under Andreas Nonenmacher. Andreas is the former CEO of ARCA and a proven leader of technology businesses in the national security space domain. These executives add the operational experience that will enable CECI to convert growing customer demand into even stronger revenue growth, profitability, and free cash flow. Slide 8, please. We continue to see strong customer budgets and demand signals across our markets. Our total addressable market exceeds $300 billion, and our portfolio is concentrated on enduring, well-funded national security priorities to give us significant room to grow without depending on top-line budget expansion. Customers are also moving to acquire our technology faster through non-traditional procurement methods, including CSOs, OTAs, and FAR Part 12 commercial acquisitions. This shift plays directly to CACI's model of investing ahead of need and delivering adaptable mission-focused technology quickly. We anticipated this change and have been executing our commercial delivery strategy for years, demonstrated by the fact that our OTA award value in fiscal 26 was more than double the values of fiscal 24 and fiscal 25 combined. Differentiated capabilities and strong past performance position us to win new business, expand existing programs, and successfully defend re-competes. Award activity is beginning to improve, which is evident in our pipeline metrics, and our consistent growth and funded backlog illustrates the importance of the mission outcomes we are delivering. Looking ahead, we are setting up to deliver another outstanding year in fiscal 27 based on our accomplishments in fiscal 26. We've developed the technology, won the programs, and strengthened the leadership team needed to scale our business in several key areas. With this in mind, in fiscal 27, we expect to deliver revenue growth of 12.4 percent at the midpoint, EBITDA margin in the high 12 percent range, and free cash flow per share growth of approximately 22 percent. This outlook also puts us on track to meet or exceed the three-year targets we established at our Investor Day in November 2024. Jeff will provide more detail on our guidance and our progress against our three-year commitments. With that, I'll turn the call over to Jeff. Thank you, John. Good morning, everyone.

Please turn to slide 10. We are extremely pleased with our fourth quarter and fiscal 26 performance in which we delivered record levels of revenue, EBITDA margin, and free cash flow. This exceptional performance underscores our portfolio evolution and the financial results of our strategy. In the fourth quarter, we delivered the double-digit year-over-year and sequential growth as we committed with revenue of $2.7 billion, representing 17.6% year-over-year growth, of which 11.6% was organic. EBITDA margin in the quarter was 13%, 150 basis points higher than last year, driven by strong program performance, a greater mix of higher margin technology, and the gain on a minor divestiture in our UK business unit, which added approximately 30 basis points. Fourth quarter adjusted diluted earnings per share of $8.91 were 6.1% higher than a year ago, driven by excellent operating performance, more than offsetting a much lower tax provision last year. Finally, free cash flow of $233 million for the quarter was driven by strong profitability and solid working capital management. Slide 11, please. For the year, we generated $9.6 billion of revenue, representing 10.9% growth, of which 7.2% was organic. EBITDA margin of 12.3% for the year, which includes 10 basis points from the UK divestiture gain, represents a 110 basis point increase over the prior year. Notably, CACI is now delivering nearly $1.2 billion of EBITDA annually. Adjusted diluted earnings per share increased 12.7% to $29.83, despite $120 million in additional interest and tax expense, demonstrating our robust operational execution and the continued strength of the business. Fiscal 26 free cash flow of $735 million reflects our strong profitability and working capital management and represents a 68% increase in free cash flow per share. We exceeded our initial guidance even after considering additional CapEx investment, ARCA-related costs, and the delay in the $40 million tax refund into FY27. These results show that our strategy is producing stronger growth, higher margins, and increasing free cash flow per share. Slide 12, please. Turning our attention to the balance sheet and capital structure, we've also made rapid progress reducing leverage following the ARCA acquisition. Proforma leverage ended the quarter at 3.7 times, representing a half-turn reduction in just one quarter. This is consistent with our track record of successfully deleveraging after major acquisitions. We now expect to return to leverage in the low threes by June of 2027, a quarter sooner than we had originally communicated. Slide 13, please. For fiscal 27, we anticipate another year of strong financial performance. We expect revenue between $10.65 and $10.85 billion, representing growth of 11.3% to 13.4%, including approximately $500 million of acquired revenue. We expect EBITDA margins in the high 12% range, an increase of 50 basis points at the midpoint and about 250 basis points over the last five years. We expect adjusted net income to be between $735 million and $755 million, which translates into adjusted diluted earnings per share between $32.96 and $33.86. And finally, we expect fiscal 27 free cash flow of at least $900 million, representing free cash flow per share growth of approximately 22%, and the second straight year where adjusted net income conversion would be at least 100%. Fiscal 27 free cash flow includes the delayed $40 million tax refund, as well as $115 million of cash benefit from the Section 174 R&D tax credit changes. The Section 174 benefit is larger than previously discussed, as it has become more advantageous with the ARCA acquisition to utilize the accelerated tax deduction. We provided a table in the appendix outlining these details. As always, while we are focused on full year results rather than any particular quarter, we provided additional details on the slide to assist with modeling, including information regarding timing trends we expect in fiscal 27. In addition to our expectation of stronger organic growth in the second half versus the first half, we expect first quarter organic growth to be in the low single digits. Slide 14, please. Our fiscal 25 and 2016 results and the fiscal 27 outlook put us on track to substantially beat our three-year free cash flow target of $1.6 billion by 31%, generating free cash flow of at least $2.1 billion for the three-year period. This performance is driven by exceeding our three-year EBITDA margin target of mid-11 percent, now expected to be 11.9 to 12 percent, and meeting or exceeding the high end of our three-year revenue target of high single-digit annual growth rate. These three-year performance estimates exclude the benefit from ARCA, which was the basis on which we provided the targets. Accordingly, when including the benefit of ARCA, our three-year results on a reported basis will be even stronger. These financial results are particularly notable given the dynamic environment of the past few years. Our consistently strong performance is a testament to our strategy, differentiation, and the evolution of our business, as well as the superior execution of the entire CACI team. Slide 15, please. Turning to our forward indicators, as we enter fiscal 27, we expect approximately 83% of revenue to come from existing programs, 9% from re-competes, and 8% from new business. Fiscal 26 awards were $10 billion, representing a healthy mix of new work and strong re-compete performance. The weighted average duration of these awards was nearly six years, providing us with strong visibility into the long-term strength and cash generation capacity of our business. I'd also like to expand on John's comments about seeing an increase in customers using non-traditional acquisition methods. While these methods continue to be very beneficial to CACI, metrics like book-to-bill, contract duration, and pipeline may need to be considered differently as these methods become more prevalent. Total backlog of more than $32 billion grew 2% year-over-year, while funded backlog increased by 29%. This represents the sixth time in the last seven quarters that we have delivered double-digit year-over-year growth in funded backlog, underscoring the critical national security priorities we address and the superior execution we deliver. We continue to see a healthy pipeline of new opportunities with nearly $11 billion of bids under evaluation, about 75% of these being for new business. We also expect to submit another $22 billion in bids over the next two quarters with about 80% of these being for new business. The significant increase in bids under evaluation while sustaining the level of expected submissions is another indicator that the acquisition process is returning to a more normalized cadence and demonstrates that CACI is positioned in the right markets, focused on enduring priorities with narrow deep funding streams. In summary, fiscal 26 was an outstanding year. We exceeded our commitments in a challenging environment, demonstrating the strength of our business and the effectiveness of our strategy. Our fiscal 27 outlook, substantial backlog, and strong market position give us confidence in continued growth, increasing free cash flow per share, and delivering additional shareholder value. And with that, I'll turn the call back over to John. Thank you, Jeff. Let's go to slide 16, please.

Before we open the call for questions, I want to take you back to November 8, 8th, 2024, when we held our investor day at the New York Stock Exchange and provided our three-year financial targets. Three days after the presidential election and four days before the incoming administration announced Doge, in an ambitious effort to reduce regulations and bureaucracy. A period of significant change and uncertainty across the government market. Lengthy government shutdowns, a multitude of executive orders, and changes to the government acquisition process, an extended slower war environment, and numerous other dynamics. Against that backdrop, we remain focused on delivering the three-year financial targets we presented at Investor Day. We did not build our commitments around the expectation of an easy operating environment. We built them based on our long-term strategy around serving and enduring national security priorities, delivering differentiated technology, executing a disciplined invest ahead of need model, consistently executing, and all the while taking our customer where we knew they needed to go. Now, over two years into our three-year targets, our results speak for themselves. We have delivered on our commitments, and our fiscal 27 guidance puts us on track to outperform the three-year plan we established. This is the key takeaway from today's call. Strategy has always been a place where we come from. Core principles of that strategy are resilient today. We've proven again and again that regardless of the larger macro environment changes we face, our business is stronger, our resolve unwavering. We are well positioned to continue delivering value for our customers. As is always the case, our success is driven by our 27,000 employees who are ever vigilant in expanding the limits of national security. To everyone on our CECI team, I'm extremely proud of what you do every day for our company and our nation. And to our shareholders, I thank you for your continued support. With that, Audra, let's open the call for questions.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 or join the telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. We ask that you please limit yourself to one question and one follow-up to allow everyone an opportunity to ask a question. We'll take our first question from Gavin Parsons at UBS.

Thank you. Good morning. Morning, Gavin. Morning.

John, I mean, at risk of asking, just sound a bit like a broken record, but if I go back 10 years, CACI organic growth has kind of more or less been in line with the industry average. But, you know, in 2024, it kind of really started to pick up steam. I mean, you grew even faster in 25. And, I mean, in 26, you grew just that much faster than the industry. I mean, is there anything you can point to in the last few years that's allowed that really to accelerate or diverge?

Yeah, and, Gavin, look, thanks much for that question. Look, it all starts with a clear strategic plan, right? We put a very new road ahead in 2019. We spent a lot of time talking about the expertise in tech and the interplay between those two. A complete business development reset. You all heard me talk about bid less and win more and bid longer and larger programs. We really doubled down on focusing on our customers' needs, really gaining unique mission understandings. We've talked about the 1,400 people we have embedded. That didn't happen by accident. That was a well-orchestrated strategy for us to build those teams out. We invested ahead of NEAT and markets that mattered. And then most importantly, Gavin, if you look at the 19-23 timeframe, we spent a lot of time in Treasure creating a differentiated, really aimed at the real needs of the DoD and the intelligence community. You know, we were able to take all the co-coms around the world and really build and commercially deliverable products. So if you think about it, it's a good 10 years. In 19 through 23, I think we were a little bit ahead of our time, and we were sort of priming the pump. In 24, everything really came together. You know, we talked about the programs we put in backlog were six years of duration versus three. We had a strong tech portfolio that was commercially available. We obtained a lot of talent. And frankly, 27 is going to be the next year of differentiating. It's all around, unfortunately, continually being compared against companies we have very little in common with. I've always said that when I hear somebody say, hey, we're going to move to technology from where we are today, I probably say you just had your best day because there's a long number of years and a large moat for you to go build what it means to deliver tech. analogy to this new age battles. Again, pace of change in battle needs to equal pace of change in the tech. And I think where we've come and where we've been and connecting where customers are buying today, I think it's why you can focus on 25, 24, 25, 26, and you're all going to see exactly the same kind of performance in 27.

I think that's the real takeaway. You don't just say this and do it. I mean, once you identify this path, it takes a couple years of concerted, focused energy for it to start to...

We'll move next to Scott Mikas at Mellius Research.

Morning, John and Jeff. Very nice results. Morning, Scott. Thank you. John, since you've been at CACI, you've really transformed the portfolio and made it much more of a defense tech hardware business. You talked about the executives that you recently brought on board. And I noticed a lot of them have backgrounds in hardware and also space. So should we take that as the company is going to increase its acceleration to becoming even more of a software-defined hardware company? And could that possibly lead towards de-emphasizing the expertise side of the business?

Yeah, look, I mean, let me talk a little bit about the talent that we brought on board. Yeah. I mean, look, Dave has a lot of space background. He He has a lot of networks background. He's been in both PE-held companies as well as publicly traded companies. Chris, definitely, you know, you heard me talk about what we've done on the manufacturing side. I mean, Chris is going to move us from good to, you know, awesome and, you know, just bypassing great. You know, Tom's back into our PEW business. So there's no doubt that we've brought Trenton's talent in. And, look, we all set those terms, expertise and technology out there really as markers to really say, look, we're going to transform this company. And for those fortunate investors who up to this point have been by our side, 2015, 16, all the way through 19 to 23, when we were, you know, average growth and now we're where we are now, they've seen, they've been able to bear the fruits. So where do we go next? next, we're always going to have expertise in this company. We like to call it operational support. We like to call it deeply embedded with the mission. Because at the end of the day, folks, you know, you want us to have the knowledge of where the mission is going long ahead of where everybody else does. And that's what it takes. And that's what we get when we have 1,400 people forwardly deployed all around this globe. We know the issues that are out there. We understand uniquely how the mission has changed and how the battlefield tactics have changed and that's why it makes investing in our software-based tech that much more safe safe meaning that a lot of our our investments and our bets do come in and we're able to continue to grow so i don't think there's a day that we don't have expertise uh within our business but i think you're seeing is that whether it's tech or whether it's EW or cyber or we're that company that customers are now beginning to really come software-based technology as long as with as well as the support that they

need to you know fight an ever-changing battle battlefield so thanks for the question thank you we'll move to our next question from Colin Canfield at Cancer Fitzgerald hey thank you for the question.

Good morning. Total book-to-bill is not the right metric. Maybe if you could talk about your funded booking expectations contemplated in the guide, and then if you're able to talk about funded bookings in order to date. Thank you.

Yeah, thanks for the question, Colin. I think there are a couple of related statistics that you have to think about to get a holistic view of this. of the nature, the core of your question. The first one is the increase in funded backlog, and I commented in my prepared remarks about this being the sixth of the last seven quarters that we've had double-digit increases. That, combined with the size of the overall backlog, tells you that customers are laser-focused on what we do and the criticality of the positions, and they're, you know, they're doing what they need to do for us to grow and prosecute that part of the strategy. The second factor that I would point to is the size of the bids under evaluation. So that's grown in a quarter from $4 billion to nearly $11 billion, two and a half times or so larger, while at the same time, the $22 billion pipeline of proposals we expect to submit over the next six months is relatively stable. So I think you get a sense of two things from those two statistics. One is the customer priority on the positions that we're holding and executing on. And the second is the continued opportunity-rich environment that we see for the things that we do. And I think the awards, per se, in any particular quarter, you know, have a lot of kind of administrative, you know, month-to-month kind of changes. But the durable statistics that I just referenced, I think, are at least as important to thinking about where we stand on that matter.

During my prepared remarks, I was talking about CSOs and OTAs. Look, TA content was like the actual, in the near term, these year-over-year comparisons, because the ground under us, you know, $500 million of OTA work last year alone, which is more than double what we did the prior two years, that has a near-term impact on all of us watching numbers into larger-dollar production programs. We're watching that internally as well to make certain that we've got the right book of business to continue to grow the company. And frankly, this management team wouldn't put the guidance we have in 27 if we were sitting here nervous nellieing.

Maybe if we can talk about remaining gaps in the Khaki portfolio, specifically within electromagnetic superiority space and cyber. Or, you know, how does the team think about kind of, I guess, like expanding the manufacturing kind of for acquiring more manufacturing work over time versus the profitability that you get from kind of, let's say, approaching or developing, investing in new phenomenology for intelligence? Like, notably, like, it's electro-optical imagery now, RF, which has already been a significant franchise, but assume there's, like, other things that you want to chase over time that are part of the portfolio.

Yeah, Colin, thanks. So let me take a part of that. I may hand part of that off to Jeff as well. Look, our M&A program has been quite discriminating within this sector, and I would say within the broader industry writ large. We're always looking for gaps, and admittedly, the number of gaps clearly over the last 15 or so years have gotten smaller. And I think our investors have been extremely well rewarded with the organic growth that we've built, building on those acquisitions. But we're sort of doing both, right? First of all, we do have an on-the-portfolio. We're always looking to see how do we advance it, how do we add capabilities to it. And then how do we take AI and everything that AI gives us, right? And how do we push our software-based tech to do more so we can process more information and provide much more battlefield effects? You know, every time we do that, where we don't change the base unit, but we add new software to those units, we increase capabilities out there, and that makes us even more sticky. But if we look at the gaps, yeah, we do have gaps, and we're always, we have a live M&A pipeline always. But I think at the heart of your question is now it's not about trying to fill gaps. It's about enhancing everything that we have. And, frankly, Chris Monosky on the manufacturing side, we build software-based tech and unique integrated solutions at 10 to 12 different places around the U.S. And, you know, where are we at production centers of excellence, whether it's defense electronics, space-based solutions, integrated solutions, where does the best workforce live for that kind of work, then how do we bring solutions to our warfighters sooner?

Yeah, and Colin, let me remind you that, you know, before we get to acquire, we run through the possibilities around investing and partnering first. So, you know, we don't have – obviously, we're serial acquirers, and M&A is an important part of our strategy, but that's not always the first place that we look when we identify a gap. So having said that, obviously, John's characterization of what we're doing is consistent with what we've said and aligned with the pipeline that we continue to manage and look for. As we grow, the nature of some of the gaps is changing, and it becomes less sometimes about specific little pockets of technology and sort of is morphing into being a little more maybe capability and market access, but nevertheless still a gap-driven strategy. And we're not going to talk about that for obvious reasons with any real specificity, but we are always on the prowl.

We'll now take a question from Peter Arment at Baird.

Hey, good morning, John. Jeff, nice results. Good morning, John. Hey, John. So fixed price revenue surge, and I'm sure some of that's tied to ARCA, but up to almost 35% of your mix. I was wondering if you expect that to kind of continue to climb going forward. And then as a follow-up, Jeff, could you just talk a little bit about fiscal 27 kind of cadence, how you're expecting EBITDA? I know you guys have always been kind of a little second-half weighted. Just if you could walk us through a little bit of that.

Yeah, thanks, Peter. So fixed price, right? Hey, more sooner is better. Look, we're really comfortable with fixed-price work, and we regularly advocate for it. You know, it aligns really well with our investment software development work, where, frankly, customers procure software now in a fixed unit price manner. So, on the other side, we're really mindful of terms, and when fixed price is used, there's a lot of scope that has to be defined, or it's uncertain. There's probably areas where cost plus is more, we need to bend the laws of physics, that probably isn't good work for the fixed price. Well, look, we built out a FAR Part 12 selling commercially, which is code for, you know, firm fixed price. You can see the results in EBITDA margins year-over-year growth. I think we're at, you know, if you look at the high 12s now versus where we were just last year, which was another remarkable move in margin fantastically for our customer. And it works fantastic for us to drive that work. So I don't think quarter four is an anomaly. I think we're just hitting our stride. I think back to Gavin's comment earlier, we're hitting our stride, and it may be the firm fixed price in the 27, 28, 29 window is going to be driving either even, you know, greater margins, better revenue growth, which to me is all about free cash flow growth.

Yeah, related to the first half, second half part of your question, Peter, you obviously, the answer to your question is in your question. We obviously have a pretty clear established cadence of having a heavier back half. Depending on whether you look at revenue or cash flow or margin progression, the patterns are slightly different. The ranges are slightly different. But the pattern is the same. And, you know, you ought to think about kind of a 45, 55, first half, second half revenue distribution. In terms of cash flow, that's kind of one-third in the first half, two-thirds in the back half, which, again, is if you look at the last several years, you'll see ample evidence of that pattern. And probably the more pronounced progression, though, among those key metrics that we talk to you about regularly is margin. And the margin variability is an artifact of the portfolio. It's an artifact in the sense that it represents a mix of different programs and contracts and customers and different buying patterns. And you'll see over time, it's not unusual for us to have, you know, 150, 200 bips of margin variability in the course of the year. And this year is not going to be any different, we expect, from the most recent couple of years. So we said mid-11s on our way to high 12s. And I think if you look at some of the recent patterns, you'll see those interior quarter kind of shape up separately. But I don't know if that answers all of your questions, but clearly the first half, second half pattern you know is an artifact of the portfolio and where we are.

I appreciate the color. That answers it.

Thanks, Jared.

We'll move next to Katam Khanna at TD Callen.

Hey, thanks. Good morning. I was wondering if you could talk about your expectations for contract awards, given you had a big uptick in bids-awaiting decision and kept the to-be-submitted flat, which is pretty impressive. So I'm just curious, what are your expectations into the September quarter and if we have, you know, an extended CR in the December quarter just based on your idiosyncratic submissions and pipeline?

Well, yeah, that's a big question.

Look, let's start off with where the budget is, right, and whether we're in a CR or not.

A helpful way to answer that is as follows.

Extended three to six years over the last. We clearly, in the earlier question, talked through the fact that we're very comfortable with the guidance that we've put out there based on the current awards environment. Jeff shared some metrics of things improving. You know, we've talked about the impact of OTAs, which is a positive impact for us, should be seen as a negative one. And then beyond that, we see the reconciliation funding starting to flow in areas like budget or security, our intelligence programs, space, absolutely, as you think through Golden Dome, modernization of a lot of different logistics systems out there, and then the entire counter-counter UAS market. So, you know, the other thing that I would share is if you look at the new business content, increasingly the new business content that we share in our metrics, a lot of that is by new software-based product sales. And those sort of turn and burn in the same year and some even in the same quarter. So, again, even those metrics are starting to be skewed as we're becoming more of a technology company and less of the traditional government services side, where a lot of that 8% or 9% of new business is going to be filled in with an uberly rich pipeline of high-margin software-based tech programs. So the dynamics are changing. What you should hear from Jeff and I is that we don't see any issues in achieving 27 guidance and future growth in 28 in the years out because we're in this small period of time where, you know, things are taking a little bit longer to abort.

And you won't be surprised, Gautam, to know that practice, you know, our development of the guidance range can accommodate, you know, some amount of opportunities for on-contract growth and other things that factor into the range as well, in addition to just the new business. So it's not all new business. John mentioned a couple of things that could contribute to growth here that aren't necessarily ever visible in the awards number. I'd also point to our continued success and growth in the funded. There's a lot of moving parts here that we're processing to come up with, you know, with kind of a high confidence range. There's a lot of...

I could follow up. I'm just curious if you're seeing customers move to procure things that, you know, licenses and other pass-throughs directly, and if that's factored into the guidance as well.

Yeah, I guess the most talked about part of that, so I guess quickly, yes, it is factored into our guidance. If you look at some of the enterprise software platform providers, you know, yes, we're seeing U.S. government customers go directly to those folks, or known as OEMs, we overuse that term, but I'll stick with that one for now. Look, we're absolutely fine with that model. While that might mean revenue is reduced by the value of the licenses that at one time passed, so I actually used to see this as margin-accretive to us. So those are a couple thumbs up. Small revenue impact, more positive. And on top of that, customers traditionally repurpose those savings right back to CECI that gives us an ability to deliver additional capabilities. We've had a couple of press announcements out there, whether it's with us. You know, what the OEM might do to deliver is the full fact that the government's going to the companies. We've built tremendous relationships. We've been in partnerships with them over the last 8 to 10 years for a lot of those large. Over time, maybe that pendulum swings back. Maybe it doesn't. Frankly, do this work very differently than others. We're software-defined. We're bringing in AI pretty much irrelevant to where we're going. But, again, I'll say we've got all that factor in 27 guidance.

We'll move next to John Siegman at Stiefel.

Morning, John. Good morning.

Good morning, thanks for taking the question.

I was excited to hear about that statement, Wynn Counterspace program that you guys won. I understand you're not going to be able to say much, but we'll ask about it anyways. What does it leverage? Is it Legacy ARCA or is it CACI coming together? Just any more details, you can talk about that and how many more opportunities are there in that domain that could be relevant to you?

Yeah, John, thanks. So, yeah, you're definitely right in your question. We probably can't talk a lot about it. But, yeah, we were recently notified of an award to assist Space Force in preparing to respond to adversaries' threats to our national space group that leveraged the combined capabilities of our legacy space. So if you remember when we did the ARCA deal, Jeff mentioned that all of our financials and fiscal outlooks were not, we didn't have any cost synergies or revenue synergies in our model. You can check the box that we're beginning the days of moving forward. There is a program out there that we are able to use the hardware and software solutions that we deliver across the space. DCI brought the quals for a ground system software development and integration. As you put those two things together, it gave a great one-two punch to winning this Nightstar. I'll also tell you, it's going to be supported by increased classified space funding, so you can imagine as that relates to Golden Dome and all. So we've checked the box on winning a really nice program that allows both companies to work together. And then we've also done a lot more in the – which is another win that really builds on our RMT program.

Thank you very much.

Next, we'll go to Seth Seifman at J.P. Morgan.

Hi. Good morning. This is Rocco. I'm for Seth.

Hey, Rocco. Hey, Rocco.

Hey. There have been a bunch of awards recently in the CUAS business.

Should we be thinking about it as being a primary driver of the strong growth that we saw last year and the strong growth that we expect to see again next year? yeah rocker you should see it as all of the above uh you know as we've been talking about counter yes for uh for quite a long time and doing for a couple decades um look we've we've now got uh five program awards with six systems some with four some with 10 some 12 uh so we're getting to build this 500 million dollar domestic shield win uh you know 50 competitors uh more than just SkyValor. Those IDIQ vehicles, which are single award, by the way, will include some of our mobile systems like Beam and other ground-based products that we build. Yeah, you should definitely see where we're going in the County OAS area as just the very tip of a multi-year, you know, decade-long franchise build-out of software-based mission tech. You know, a couple of things that I want to make sure I use this call to push out to our investors, you know, what differentiates us and why have I been saying for the last five to seven years that this is about to explode? We, it's a family trailer, truck, and group one through five drones, not just one and twos, exactly what the customers are asking for. Longest detection range versus the other systems that are out there, we provide 18 minutes of response. We want to be guarded by, we're going to see that over the next three to four quarters, the nation is going to decide that they're going to want to be covered by the longer range, more efficiently, either non-kinetically defeat. So as you're all hearing about reconciliation and protection of the homeland, I don't care if it's infrastructure protection based. And every time we learn something new in the RF spectrum, we push updates just like your iPhone gets for every single thing that is different to every single deployed system that are out there. So we sort of mass connect all these systems together to make certain they all have the latest detection. So, yes, I think this is just the beginning. Again, it takes some time to prime the pump, but very happy what the team's done. And there is nobody better in this nation than CACI when it comes to protecting the nation against.

Right.

Then as a quick follow-up, have you received export approval for the majority or all of the systems? we have extra for approval for the majority and all of our systems we've already delivered and different variations to 17 different countries i showed you all last quarter we were looking at getting into the into the middle east and putting bar agreements in place and expanding our sales sales teams reach into areas like kuwait and check all those boxes we've done all that we're having really good discussions there. 401 has that $500 million win comes the opportunity to get, to be a part of the Secretary of the Army's sort of expedited export for us to be able to sell this system globally. So we're part of that fast pass. Yes, yes, and yes, and we're, you know, looking for that to grow 2027 over the next decade.

Great. Thank you very much.

Our next question comes from Toby Sommer at Truist.

Thank you for the quarterly update. I wanted to ask a multi-year question. As we look at your EW and space businesses collectively, and you can add any others you think are sort of in that high margin rapid growth bucket, is it fair to assume a mix shift that direction as they grow more quickly, organically, such that they'll represent low to mid-single digits more of revenue and profit annually over the next handful of years?

Yeah, Toby, I'm not sure we're ready to quantify that, but the condition you identify is true. I mean, the things that we're talking about that are growing more quickly are generally strong demand areas and generally better margin. So that makes us, that gives us some confidence in continued modest margin expansion. I would encourage you to think about modulating that expectation relative to investment to kind of grow more quickly. And I would remind you that we run the enterprise here looking at free cash flow. So if we can modulate investment with growth and solve for cash, that's the decision making framework that we use.

Thank you.

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

Thanks, Audra, 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 have follow questions, so Jeff McLaughlin, George Price, Jim Sullivan, and we've added Lisa Parkinson to that team as well, are available after today's call. Stay healthy. All my best to you and your families. Operators concludes our call. Everyone, thank you, and have an outstanding day.

And again, this does conclude today's conference call. Thank you for your participation. You may now disconnect.