CACI International Inc Q2 FY2026 earnings call

Strategy Reiteration: CACI's strategy focuses on seven markets, leveraging decades of mission knowledge to address national security priorities. It differentiates by delivering software-defined technology, with technology now making up nearly 60% of total revenue and expected to continue increasing. ### Second Quarter Performance: Delivered free cash flow of $138 million, 6% revenue growth, and 11.8% EBITDA margin. Won $1.4 billion of awards, with a book-to-bill of 0.65 times for the quarter. ### Technology Portfolio: Strong position in electronic warfare, with software-defined capabilities driving performance. Enterprise technology is also strategically positioned, having won three largest agile software development programs in the federal government. ### Acquisition: Announced acquisition of ARCA, a step in the technology-driven portfolio evolution and space market strategy. ### Fiscal 2026 Guidance: Raising guidance with expected free cash flow of at least $725 million, revenue growth of nearly 8% to 10%, and EBITDA margin in the 11.7% to 11.8% range.

In the second quarter, CACI generated revenue of $2.2 billion, representing 5.7% year-over-year growth, with 4.5% organic growth. The technology portfolio constitutes nearly 60% of total revenue. Electronic warfare alone represents about $2 billion in revenue. The second quarter EBITDA margin was 11.8%, a year-over-year increase of 70 basis points. Free cash flow for the quarter was $138 million, driven by strong profitability and working capital management.

Fiscal 2026 Guidance: - Expect free cash flow of at least $725 million. - Revenue growth of nearly 8% to 10%. - EBITDA margin in the 11.7% to 11.8% range. - Adjusted net income between $630 million and $645 million. - Adjusted EPS between $28.25 and $28.92. - Backlog of $33 billion, with 95% of revenue expected from existing programs, 3% from recompetes, and 2% from new business. ### Pipeline: $6 billion of bids under evaluation, with over 70% for new business to CACI, and expected to submit another $20 billion in bids over the next two quarters, over 70% of which being for new business.

Q: In light of recent developments around the world, what does higher US military op tempo mean for CACI specifically and how that changes the opportunity set?

A: John Mengucci stated that higher op tempo is good for CACI as it requires mission technology at the speed of mission, with CACI's software-defined solutions in electronic warfare being well-suited. It demands resiliency, speed, and optionality.

Q: Could you give an update on the JTMS protest and the timing of the award?

A: John Mengucci said the JTMS protest was virtually denied, and they are starting to ramp up on the program, which is a longer-term technology program that will contribute to growth in 2027-2028 and help drive fourth-quarter revenue.

Q: How are you thinking about CACI's addressable market from the reconciliation bill both for CUAS in general and Merlin more specifically?

A: John Mengucci mentioned that reconciliation funding will benefit the EW area, with counter UAS being part of it, and CACI is well-positioned in the counter UAS market with active engagement in various acquisition organizations.

Q: Do you anticipate another strong year of defense spending growth in 2027?

A: John Mengucci said he read about a $1.5 trillion fiscal year 2027 figure but noted it's early, and CACI is in the right markets and capabilities to grow regardless of budget changes.