CACI International Inc Q4 FY2025 earnings call

• Acknowledged the recent passing of Chairman Mike Daniels, expressing condolences and his contributions. - Highlighted strong fiscal '25 performance with 16% revenue growth, 11.2% EBITDA margin, $442M free cash flow, and $10B of contract awards with a book-to-bill of 1.1x. - Discussed market trends like speed, efficiency, software-based capabilities, and modernization, and how CACI anticipated these changes and invested ahead. - Provided examples such as TLS Manpack for the Army, counter-UAS technology, enterprise software modernization (e.g., IPPS-Army), and the NASA NCAPS program demonstrating software-based capabilities driving growth.

For fiscal '25, CACI delivered revenue growth of 16% on an underlying basis, EBITDA margin of 11.2%, free cash flow of $442 million and free cash flow per share growth of over 16%. In the fourth quarter, revenue was $2.3 billion, a 13% year-over-year growth with 5.3% organic growth. EBITDA margin was 11.5% in the quarter, and fourth quarter adjusted diluted earnings per share were $8.40, 27% higher than a year ago. Free cash flow for the quarter was $139 million, with days sales outstanding (DSO) of 56 days, though Azure was a modest headwind to DSO impacting about 4 days.

Fiscal '26 guidance: Revenue expected between $9.2 billion and $9.4 billion (6.6%-8.9% growth). EBITDA margin expected in the mid-11% range. Adjusted net income expected between $605 million and $625 million, translating to adjusted diluted earnings per share between $27.13 and $28.03. Free cash flow expected at least $710 million, equating to free cash flow per share of $31.84, implying free cash flow per share growth of over 60%. Guidance does not contemplate acquisitions or share repurchases during the year.

Delayed tax refund related to an outstanding IRS R&D tax credit audit was a prior risk, but adjusting for the delay, free cash flow was ahead of expectations. Azure was identified as a modest headwind to days sales outstanding (DSO) due to billing terms and milestones in legacy contracts, impacting DSO by about 4 days.

Q: Scott Mikus asked about the pipeline and EITaaS, specifically the ceiling reduction and impact on margin, booking rates, etc.

A: John S. Mengucci responded that EITaaS is a 10-year program, ceiling reduction doesn't change CACI's execution, efficiencies already brought to the program are positive, and there's no impact to guidance. Jeffery D. MacLauchlan added there's 0 impact to anything.

Q: Colin Canfield inquired about guidance outlook, margin progression to Investor Day targets, and long-term margin potential.

A: John S. Mengucci discussed guidance range and factors affecting it, Jeffery D. MacLauchlan explained margin distribution with attenuated margins in first half and higher in second half, and cash flow back-end loaded.

Q: Gavin Parsons asked about award environment, slowness, and book-to-bill.

A: John S. Mengucci mentioned modest impacts, prepared for fiscal '26, and belief in continuing to grow backlog with a good idea of work unfolding.

Q: Peter Arment asked about space optical terminals and GSA impact.

A: John S. Mengucci provided update on space terminals, noting progress despite production challenges, and stated major defense/intel IT programs stay intact, GSA impact small on large IT programs.

Q: David Strauss asked about Fed civilian exposure and budget outlook.

A: John S. Mengucci stated Fed civilian exposure is ~6% of revenue, with specific programs like NASA NCAPS, and intentional strategic shift away from federal civilian to focus on defense, intel, and DHS.

Q: Jonathan Siegman asked about DoD software acquisition directive and Army consolidation timing and opportunities.

A: John S. Mengucci emphasized focus on software, support for software modernization, and belief in more software solutions driving faster, better, cheaper outcomes.

Q: Tobey Sommer asked about pipeline and outcome-based pricing.

A: John S. Mengucci stated CACI brings new solutions to customers, whether brand-new work or modernizing existing work, and Jeffery D. MacLauchlan added outcome-based pricing ties in with focusing on different contracts.

Q: Louie DiPalma asked about TLS Manpack mounted variant and contract modification.

A: John S. Mengucci explained mounted variant not in current $500M TLS Manpack program, but software-based capabilities allow expansion to other platforms, and lookout for future work.

Q: Mariana Perez Mora inquired about free cash flow and 3-year targets.

A: Jeffery D. MacLauchlan stated they're increasingly confident in 3-year targets, and John S. Mengucci emphasized focus on markets that matter, high free cash flow, and returning capital to shareholders and customers.