CACI International Inc (CACI) Earnings

Management highlights

- Overall FY26 Financial Results * Full year FY26 revenue hit $9.6 billion, 10.9% year-over-year growth with 7.2% organic growth * Full year EBITDA margin was 12.3% (including 10 basis points from a UK divestiture gain), an 110 basis point increase year-over-year, with annual EBITDA now nearly $1.2 billion * Adjusted diluted EPS increased 12.7% to $29.83, full year free cash flow was $735 million * Q4 FY26 revenue was $2.7 billion, 17.6% year-over-year growth with 11.6% organic growth; Q4 EBITDA margin was 13% (150 basis points higher YoY), Q4 adjusted diluted EPS was $8.91 (6.1% higher YoY), Q4 free cash flow was $233 million * Total contract awards for FY26 were over $10 billion, representing a 1.1x book-to-bill ratio, with a weighted average award duration of nearly six years * Total backlog grew 2% YoY to over $32 billion, while funded backlog increased 29% YoY, marking the sixth double-digit YoY funded backlog growth in the last seven quarters - Strategic Execution and Accomplishments * Management's "technology-first" strategy focused on deep mission knowledge, investment ahead of customer need, disciplined capital deployment, and focus on enduring national security priorities has delivered consistent outperformance even amid market uncertainty * AI is scaled across the business: it is used to shorten software development timelines, improve quality, boost program profitability, and extend ARCA's GenTech AI solutions to sensitive data processing missions, creating competitive differentiation * Non-traditional procurement (OTAs, CSOs, FAR Part 12 commercial acquisitions) grew rapidly: FY26 OTA award value was more than the combined total of FY24 and FY25, and this shift aligns well with CACI's invest-ahead model * New executive leadership was added to support scaled growth: a new Chief Operating Officer (former Lockheed Martin $7B national security space leader), new EW business lead, new EVP of Manufacturing, and combined ARCA/CACI space leadership under the former ARCA CEO * Deleveraging progress after the ARCA acquisition was faster than planned: pro forma leverage hit 3.7x at quarter-end (a 0.5x reduction in one quarter), with a target of low 3x leverage by June 2027 (one quarter ahead of original schedule) - Market Position * Total addressable market exceeds $300 billion, with portfolio concentration on well-funded enduring priorities that supports growth independent of overall top-line budget expansion * Pipeline is strengthening: nearly $11 billion in bids under evaluation (75% for new business), with another $22 billion in bids expected to be submitted over the next two quarters (80% for new business), signaling a return to more normalized acquisition cadence

Guidance

- Fiscal 2027 revenue is projected between $10.65 billion and $10.85 billion, representing 11.3% to 13.4% year-over-year growth (midpoint 12.4% growth), including ~$500 million of acquired revenue - EBITDA margin is expected to be in the high 12% range, a 50 basis point increase at the midpoint versus FY26 - Adjusted diluted EPS is projected between $32.96 and $33.86, with adjusted net income between $735 million and $755 million - Full year FY27 free cash flow is expected to be at least $900 million, representing ~22% free cash flow per share growth, with 100%+ adjusted net income conversion for the second straight year; FY27 free cash flow includes a $40 million delayed tax refund and $115 million benefit from Section 174 R&D tax credit changes - Organic growth is expected to be stronger in the second half of FY27 versus the first half, with first quarter organic growth projected to be in the low single digits - CACI is on track to substantially beat its November 2024 investor day three-year targets: the three-year cumulative free cash flow target of $1.6 billion is expected to be exceeded by 31% (to at least $2.1 billion), the three-year EBITDA margin target of mid-11% is expected to hit 11.9-12%, and the high single-digit annual revenue growth target is expected to be met or exceeded at the high end (excluding ARCA benefits, which will make reported results even stronger)

Segment performance

CACI does not break out formal segment financials with absolute revenue and contribution percentages in this call, but outlines performance by its core business areas aligned to its strategy: 1) Electronic Warfare (EW): Grew contract wins including a $500 million domestic shield program award, achieved milestone C for the Spectral program (entering low rate initial production ahead of H2 FY27 deployment), secured Air Force initial orders for expanded tactical EW footprint, and grew Sky Valor counter UAS backlog and demand. 2) Space: Completed integration of acquired ARCA, won the company's first combined ARCA/CACI classified counter space program against large traditional defense primes, advanced to phase 3 of the Space Force's Enterprise Space Terminal Program, provided critical technology for NASA's Artemis II mission, and secured a new U.S. Space Force defense threat award. 3) Digital and Network Technology: Ramping up the Joint Transportation Management System Modernization Program for US Transcom, delivering an integrated HR shared service solution for OPM supporting 2 million users across 96 federal agencies, and ongoing modernization of critical national security networks for the Air Force, Army, and DIA. 4) Mission-Aligned Operational Support: Over 1,400 employees embedded globally across combatant commands providing intelligence analysis, mission planning, and operations support, which delivers differentiated customer insight to guide investment priorities.

Risks & headwinds

- No material new operational risks or failures were discussed in the call. Management noted that extended continuing budget resolutions and government acquisition process delays have impacted near-term award timing, but CACI's longer average contract duration (now six years) and strong existing backlog provide sufficient visibility to meet FY27 guidance, and the impact of extended budget uncertainty is already incorporated into guidance ranges. Management also noted that fixed-price contracting carries appropriate risk discipline, with cost-plus contracting still used for uncertain scope projects where it is more appropriate for both the customer and CACI.

Analyst Q&A

• Q: Why has CACI's organic growth accelerated and outpaced industry averages in recent years, after tracking in line with the industry for a long period? /

  A: Management credits a deliberate 10-year strategic transformation starting in 2019: CACI reset its business development strategy to focus on fewer, larger, longer-duration contracts, built out a deeply embedded workforce of 1,400 employees across global combatant commands to gain unique mission insight, invested years ahead of customer demand to build a differentiated, commercially priced software-based technology portfolio focused on DoD and intelligence community needs. These investments primed the pump for growth, which came together starting in 2024, with this outperformance expected to continue in FY27. (217 words)

• Q: New executive hires have deep hardware and manufacturing backgrounds – should investors expect faster expansion of software-defined hardware offerings, and will operational support/expertise be de-emphasized? /

  A: Management confirmed it will continue growing its software-defined hardware business, but will never de-emphasize embedded mission expertise. Deep embedded knowledge of customer mission needs informs CACI's investment decisions, making technology bets more likely to succeed, and this interplay between expertise and technology is core to CACI's competitive advantage. The new hires were added to scale manufacturing and program execution to meet growing customer demand for CACI's technology offerings, not to shift the company's core strategy. (144 words)

• Q: Counter UAS has seen multiple recent large awards – is it a primary driver of current and future growth? /

  A: Management confirmed counter UAS is just the beginning of a multi-decade, high growth franchise. CACI's Sky Valor and other counter UAS systems can defeat all drone threat groups (1 through 5), have longer detection ranges and faster response times than competing systems, and can be updated over-the-air with new countermeasure software. CACI already has export approval for most systems, has delivered variants to 17 countries, and is part of an expedited U.S. government export program that will support further global growth. (119 words)

• Q: The recently won classified counter space program leverages what combination of legacy CACI and ARCA capabilities, and does this signal more growth opportunity in the domain? /

  A: The win is the first to combine the complementary capabilities of legacy CACI and acquired ARCA. ARCA brought qualifications for space vehicle, payload development and integration, while legacy CACI brought qualifications for ground system software development and on-orbit mission integration. The combined capability created a strong competitive advantage that led to the win, and this proves the revenue synergies of the ARCA acquisition that were not included in original financial models. Increased classified space funding is driving stronger demand for CACI's counter space offerings, creating additional future growth opportunities. (122 words)