CACI INTERNATIONAL INC /DE/ Q2 FY2025 earnings call

• Second quarter was a strong quarter with 14.5% revenue growth, 11.1% EBITDA margin, and solid free cash flow. Won $1.2 billion of awards, trailing 12-month book-to-bill 1.7 times. - Acquisitions of Azure Summit and Applied Insight are on track; Azure Summit received a $300 million award on the [C increment F] contract with the Navy. - Focus on modernizing enterprise-scale software applications, critical networks, and delivering mission-critical systems. Aligned with DOGE objectives, with only 6% of revenue from other federal civilian agencies. - Strategy combines the best qualities of competition, A&D primes, government services providers, and commercial world, positioning for long-term growth.

In the second quarter, CACI generated revenue of $2.1 billion, representing 14.5% growth. Organic growth was 8.1% or 14.3% on an underlying basis. Second quarter EBITDA margin was 11.1%, a year-over-year increase of 180 basis points. Backlog was $32 billion, increasing 18% from a year ago, representing just under four years of annual revenue. For fiscal 2025, approximately 95% of revenue is expected to come from existing programs, with ~3% from repeats, recompete, and ~2% from new business. The trailing 12-months book-to-bill ratio was 1.7 times, and there was $12 billion of bids under evaluation, around 75% of which are for new business to CACI.

• Raised fiscal 2025 revenue guidance to between $8.45 billion and $8.65 billion, driven by stronger organic growth. - Expect fiscal 2025 EBITDA margin to be in the low 11% range. - Increased adjusted net income guidance to between $537 million and $557 million, and free cash flow guidance to at least $450 million. - Backlog at $32 billion, representing nearly four years of annual revenue; pipeline has $12 billion of bids under evaluation.

• Exposure to federal civilian agencies, which may be a focus of DOGE and could pose risks. - Timing-related items affected second quarter EBITDA margin, with third quarter expected to have a slight contraction in margin and fourth quarter expected to tick up.

Q: Scott Mikus with Melius Research asked about meeting with the incoming administration and recommendations.

A: John Mengucci said they would focus on accelerating IT infrastructure modernization, funding for missions, countering homeland threats, a national strategy for regulation, and training acquisition officials.

Q: Peter Arment with Baird asked about DOGE and civilian workforce reductions.

A: John Mengucci said there could be opportunities for CACI to drive growth as federal staff are reduced, with CACI's expertise in technology enabling more efficient work.

Q: Mariana Perez Mora with Bank of America asked about CACI's appetite for civilian opportunities.

A: John Mengucci said CACI is already in the civilian IT modernization space and benefits from its software and cost-effective solutions.

Q: Rocco Barbero with JPMorgan asked about confidence in growing in areas with new competition.

A: John Mengucci said competition is good, forcing innovation, and CACI's expertise in understanding customer missions gives it an edge.

Q: Gautam Khanna with TD Cowen asked about contract award adjudication pace.

A: John Mengucci said he doesn't foresee a major delay, with uniform service transitions being normal and no significant impact expected.

Q: Sheila Kahyaoglu with Jefferies asked about margins.

A: Jeff MacLauchlan said third quarter margin may contract slightly, with fourth quarter expected to have the strongest margin.

Q: Joshua Korn with Barclays asked about capital deployment.

A: Jeff MacLauchlan said focus is on delevering near-term but remains flexible and opportunistic for share buybacks.