CACI (CACI) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Apr. 23, 2026 at 8 a.m. ET

Call participants

• President and Chief Executive Officer — John S. Mengucci
• Chief Financial Officer — Jeffrey D. MacLauchlan

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Risks

• Chief Financial Officer Jeffrey D. MacLauchlan stated that the company continues to operate in a "recovering but still sluggish award environment," citing "modest disruption from the ongoing DHS shutdown."
• Management referenced "lumpiness" in quarterly margin and revenue performance due to program schedules and technology segment deliveries.
• Chief Executive Officer John S. Mengucci noted, "there is a number of short-term factors behind the slow award decision-making," and awards "are lumpy."

Takeaways

• Revenue -- $2.4 billion, reflecting 8.5% year-over-year growth; organic growth accounted for 6.8%.
• EBITDA margin -- 12.3%, up 60 basis points year over year, including $17 million in ARKA transaction costs.
• Adjusted diluted EPS -- $7.27, a 17% increase year over year, with higher operating income and lower share count offsetting increased interest expense and tax.
• Free cash flow -- $221 million for the quarter, reduced by about $20 million in transaction and acquisition financing fees.
• Book-to-bill ratio -- 0.9x for the quarter and 1.2x on a trailing twelve-month basis, with $2.2 billion in awards.
• Backlog -- Total backlog reached $33.4 billion, up 6% year over year; funded backlog increased 19%, with ARKA contributing $835 million to total and $422 million to funded backlog.
• Days sales outstanding -- 55 days, two days lower than the previous quarter.
• Leverage -- Pro forma net debt to trailing twelve-month EBITDA at 4.2x, with expectations to return to the low threes within six quarters.
• Guidance update -- Fiscal 2026 revenue projected at $9.5 billion to $9.6 billion, representing 10.1%-11.3% growth, including $150 million from ARKA.
• Fiscal 2026 EBITDA margin guidance -- Raised to 11.8%-11.9%, including $22 million in anticipated transaction costs.
• Adjusted net income and EPS guidance -- Updated to $615 million–$630 million net income and $27.70–$28.38 per share, indicating 5%-7% annual EPS growth.
• Free cash flow guidance -- Reaffirmed at a minimum of $725 million for the year, after absorbing nearly $50 million of transaction-related costs and incremental capital expenditures.
• Fiscal 2026 revenue visibility -- 98% of revenue expected from existing programs, 1% from recompetes, and 1% from new business.
• Pipeline -- $4 billion of bids under evaluation, with over 80% related to new business; plans to submit $22 billion in bids in the next two quarters, with 75% for new business.
• ARKA acquisition -- Closed during the quarter, adding advanced space-based imaging sensor technology and agentic AI-based ground software; now integrated with the legacy space portfolio.
• SPECTRAL program -- Achieved Milestone C, initiating low-rate initial production for shipboard signals intelligence and electronic warfare systems.
• Counter-UAS Merlin system -- Accelerating orders and deployment, with expanded domestic and international opportunities, including activity via U.S. Army Task Force 59, DIANA 401, and CENTCOM.
• Civil segment growth -- Up 7% year over year, led by NASA NCAPS ramp and partially offset by modest Department of Homeland Security headwinds.
• Capital expenditures -- Increasing, with half attributable to ARKA integration and partial investment in the electronic warfare portfolio.

Summary

CACI International (NYSE:CACI) reported year-over-year growth in revenue, margins, and cash flow, despite ongoing volatility in federal funding and award timing. The ARKA acquisition expanded CACI International’s space capabilities, introduced advanced imaging and agentic AI, and contributed to backlog and synergy opportunities. The SPECTRAL program reached Milestone C, and the Merlin counter-UAS platform saw increased demand, reflecting successful investment in high-demand technology. Updated fiscal 2026 guidance highlights performance in both organic and acquired segments, with margin expansion and free cash flow per share as key value drivers.

• CACI International leadership emphasized a focus on differentiated, software-defined technology across national security priorities, including space, electronic warfare, and counter-UAS.
• Management stated that ARKA provides "another $2 billion of noncompetitive franchise programs" not yet included in backlog, suggesting further future revenue visibility.
• Chief Executive Officer John S. Mengucci confirmed that the space segment now exceeds $1 billion in annual revenue post-ARKA acquisition, with additional growth expected into fiscal year 2027.
• The weighted average duration of backlog remains above six years, supporting long-term revenue predictability.
• Guidance projects approximately 65% year-over-year growth in free cash flow per share for fiscal 2026 versus 2025.
• The NASA NCAPS program and the legacy civil portfolio are expected to maintain their current trajectory, unaffected by recent or anticipated budget shifts.
• Chief Executive Officer John S. Mengucci reiterated that the company’s focus on core national security markets is resilient to political changes, citing bipartisan support for mission-critical programs.

Industry glossary

• Book-to-bill ratio: A measure comparing the value of new contracts awarded (bookings) to revenue recognized (billings) over a period; values above 1.0x indicate a growing pipeline.
• EBITDA margin: Earnings before interest, taxes, depreciation, and amortization as a percentage of revenue; an indicator of operational profitability.
• Low-rate initial production (LRIP): The first production phase for new military systems, used to test operational suitability and manufacturing processes.
• Agentic AI: Artificial intelligence systems with autonomy to adapt, process, and analyze data for mission-specific decision making without direct human input.
• Recompete: The process in which an incumbent contractor must bid again for a program as its contract period ends.
• NCAPS: NASA Consolidated Applications and Platform Services; a large-scale software modernization contract for NASA covered in CACI International’s civil segment.
• Funded backlog: Portion of total backlog for which funding has been authorized and is contractually guaranteed for near-term work.

Full Conference Call Transcript

John S. Mengucci: Thanks, George, and good morning, everyone. Thank you for joining us to discuss our third quarter fiscal year 2026 results, as well as our updated fiscal 2026 guidance. With me this morning is Jeffrey D. MacLauchlan, our Chief Financial Officer. Let us move to Slide 4, please. Before turning to our results, I want to start by reminding everyone that CACI International Inc is a fundamentally different company than it was ten or even five years ago. This evolution is the result of a clear and consistent strategy, intentional leadership, and disciplined execution over many years. It did not happen by accident.

The key elements of our strategy are, first, we operate in seven markets where we possess decades of deep mission knowledge. We know and understand what our customers need. Second, we focus on enduring priorities. We are a national security company that targets narrow, deep funding streams. Third, we are a software-defined technology leader. We differentiate ourselves by using software to address critical needs with the speed, agility, and efficiency our customers demand. Fourth, we invest ahead of customer need to show the art of the possible without waiting for requirements. And fifth, we deploy capital in a flexible and opportunistic manner to create value for our customers and our shareholders.

Executing this strategy enabled us to expand our portfolio, increase free cash flow per share, and generate additional shareholder value. Slide 5, please. Turning to our third quarter results. We delivered another quarter of outstanding performance on our way to another exceptional year. Revenue for the quarter was $2.4 billion, up 8.5% year over year. We also generated a strong EBITDA margin of 12.3%, and robust free cash flow of $221 million. In addition, we won $2.2 billion of awards, which represents a book-to-bill of 0.9x for the quarter and 1.2x on a trailing twelve-month basis. These awards were driven by our exceptionally strong recompete performance, an important indicator of customer confidence and a key enabler of long-term growth.

While award activity improved in the quarter, it is not yet fully recovered from the multiple government shutdowns and acquisition organization changes. As we said before, quarterly awards can be lumpy. But we continue to have excellent visibility, a strong pipeline, and see a very constructive macro environment. Our results continue to reinforce that CACI International Inc is differentiated and well positioned. With that said, we are raising our fiscal 2026 revenue and EBITDA margin guidance, driven by the addition of ARKA and the strength of our organic margin performance. Slide 6, please. On that note, let us discuss our recent acquisition in a bit more detail.

During the third quarter, we closed the acquisition of ARKA, a leading technology company focused on national security missions in the space domain. ARKA brings exquisite space-based imaging sensor technology with high technical barriers to entry, agentic AI-based ground processing software, and deep customer relationships built over decades of strong performance. ARKA is a powerful addition to CACI International Inc. We now have sensors deployed across all domains. We can provide multi-source actionable intelligence and bring operationalized agentic AI capabilities to classified customers across the national security apparatus. In fact, we already have agentic AI efforts underway with our shared customer footprint and we see significant additional cross-selling opportunities.

ARKA positions us for opportunities including Golden Dome, INDOPACOM support, future ground architecture, and space superiority missions. To fully leverage our combined capabilities, we have integrated ARKA and CACI International Inc’s existing space portfolio under the leadership of ARKA’s former CEO. ARKA exemplifies the type of acquisition that investors should want us to make: wide competitive moat, unique capabilities and technology, exceptional execution history, and strong financial performance, and all in one of the most strategically important domains in national security. It is our flexible and opportunistic capital deployment strategy in action, positioning CACI International Inc to drive long-term growth and free cash flow per share and additional shareholder value. Slide 7, please.

CACI International Inc is a national security company. That focus continues to be a powerful differentiator in the marketplace. We have more than 1,400 people embedded in mission spaces across all combatant commands performing planning, intelligence analysis, cyber, and operational support. We are involved in every operational headline you read, as well as the many operations you will never read about. This proximity to mission gives us an advantage that is hard to replicate. We understand the mission and the threats because we see them every day. This creates a feedback loop that sharpens our business development, strengthens our reputation for execution, and informs our decision making, allowing us to confidently invest ahead of customer need.

These are meaningful discriminators that create competitive advantage and help drive our financial performance. For example, CACI International Inc recently received multiyear extensions on several contracts in critical mission-focused areas as a direct result of our exceptional delivery. Slide 8, please. Our strategic investments, informed by the mission proximity I just described, have positioned CACI International Inc as a leader in software-defined technology and key warfighting domains that are receiving significant attention and funding from our customers. And these investments also demonstrate a repeatable strategy that will drive future growth and shareholder value.

A great example is our SPECTRAL program, where we are developing the next generation of shipboard signals intelligence and electronic warfare capabilities for the Navy’s surface combatant ships. We initially invested ahead of customer need to show them the art of the possible and to demonstrate our differentiated solution during the bid phase. Now we are actively investing ahead of need during execution to accelerate delivery of capabilities to the field, a key ask of the current administration. During the quarter, the program continued to progress as we achieved Milestone C, marking the start of SPECTRAL’s low-rate initial production and deployment phase.

This is a defining step towards ramping up the program and delivering this critical EW technology to the fleet. And because SPECTRAL is built using software-defined technology with open architectures, another key administration priority, we see significant additional opportunities across the Department of Defense and international. Another example is in countering UAS, where we are seeing accelerating demand, increasing orders, and a growing pipeline driven by Merlin, our commercially sold counter-UAS system. Merlin leverages nearly two decades of our counter-UAS investments and work across the Department of Defense to deliver a system that sees farther, detects more, provides more critical decision-making time, and delivers more effective low- to no-collateral-damage capabilities than any other available system.

Merlin is a software-defined system that can be rapidly updated and provides a nearly unlimited magazine of economically sustainable nonkinetic effects, including unique cellular detection and defeat capabilities. From concept to deployment in under a year, we are not only providing the Department of Defense with the capabilities they are asking for, we are also delivering them at the speed demanded. We are proving this in real time with the Merlin system that our customers deployed on the southern border. A final example is our strong positioning for Golden Dome. CACI International Inc has been investing in, developing, and building many of the capabilities this mission requires across many critical layers. First, our counter-UAS systems.

Defending the homeland is not just about ballistic or hypersonic threats. It is also increasingly about threats from unmanned aircraft systems. CACI International Inc’s technology is ideally suited for this mission, where extended detection range provides critical time for decision making and low- to no-collateral-damage effects are critically important for mission success. Second, our exquisite left-of-launch capabilities. These include sensitive cyber activities as well as our worldwide set of embedded sensors, which can detect and defeat threats before they are deployed. And third is our space-based sensing. ARKA significantly expands our capabilities in the space domain, including technologies such as hyperspectral imaging and missile detection.

SPECTRAL, Merlin, and Golden Dome are three significant proof points of how CACI International Inc creates value for our customers and our shareholders. They demonstrate where we identified an enduring need early, invested well ahead of award, and established differentiated positions through years of disciplined execution and continued innovation. Slide 9, please. Turning to the macro environment. We continue to see constructive budgets and demand signals. While the government fiscal year 2027 budget is still evolving, the proposed spending looks very positive in many key areas for CACI International Inc, including electronic warfare, counter-UAS, space (especially classified space and counter-space programs), C5ISR, and IT modernization, including AI and the digital backbone.

We are in the right markets that are aligned to enduring, well-funded priorities. We are providing the right capabilities to address our national security customers’ most pressing needs. And with that, I will turn the call over to Jeff. Thank you, John, and good morning, everyone. Please turn to Slide 10. As John mentioned, we are very pleased with our third quarter performance.

Jeffrey D. MacLauchlan: Despite some modest disruption from the ongoing DHS shutdown, our revenue and awards reflect our strong market position in a recovering but still sluggish award environment, while our strong margins and cash flow demonstrate the high-value, differentiated characteristics of our offerings and our operational excellence. In the third quarter, we generated revenue of $2.4 billion, representing 8.5% year-over-year growth, of which 6.8% was organic. Despite the modest DHS impacts that I mentioned, we still saw the expected acceleration in organic growth moving into the second half of the year. EBITDA margin of 12.3% in the quarter represents a year-over-year increase of 60 basis points, even after absorbing $17 million of ARKA transaction costs.

Adjusting for these expenses, our strong third quarter profitability was driven primarily by overall mix and strong program execution. Third quarter adjusted diluted earnings per share of $7.27 were 17% higher than a year ago. Greater operating income along with a lower share count more than offset higher interest expense, including $11 million related to ARKA, a higher income tax provision, and the transaction costs I mentioned earlier. Finally, we delivered healthy free cash flow of $221 million in the quarter, driven by strong profitability and good working capital management. Third quarter cash flow was reduced by approximately $20 million due to transaction costs and other acquisition-related financing fees.

Days sales outstanding, or DSO, were 55 days, two days lower than the prior quarter. Slide 11, please. Turning to our balance sheet and capital structure. Our pro forma leverage at the end of Q3 was 4.2x net debt to trailing twelve-month EBITDA, slightly better than the expectation we provided when we announced the ARKA acquisition. We continue to expect leverage to return to the low threes within six quarters based on the strong cash flow characteristics of our business. I will remind you again that we have a strong track record of successfully and quickly deleveraging after major acquisitions. This underscores our consistent financial performance, disciplined capital deployment, and demonstrated access to capital.

As we have previously indicated, ARKA is accretive to both growth and margins. The acquisition of ARKA is just the latest example of our flexible and opportunistic capital deployment strategy and the evolution of our portfolio, which positions CACI International Inc to deliver long-term growth and free cash flow per share and additional shareholder value. Slide 12, please. We are pleased to increase our fiscal 2026 revenue and EBITDA margin guidance driven by the addition of ARKA and the strength of our organic margin performance. You will notice on the right-hand side of the chart, we have provided a breakdown of costs associated with an acquisition for transparency and your modeling purposes.

We now expect revenue to be between $9.5 billion and $9.6 billion. This represents total growth of 10.1% to 11.3%, which includes about 3.5 points of growth from acquisitions, including approximately $150 million from ARKA. We are increasing our fiscal 2026 EBITDA margin to the 11.8% to 11.9% range, underscoring our strong execution and evolving portfolio as well as contributions from ARKA. Our full-year margin outlook includes the impact of approximately $22 million of transaction costs related to the acquisition. Our updated FY 2026 adjusted net income guidance is between $615 million and $630 million.

Adjusted net income reflects the after-tax impact of approximately $60 million of pre-tax transaction costs and higher interest expense, largely offset by stronger organic margin and ARKA’s earnings contribution. This yields full-year adjusted EPS guidance of between $27.70 and $28.38 per share, which represents growth of 5% to 7% even as we absorb these costs. And finally, we are reaffirming our free cash flow guide of at least $725 million, even after absorbing nearly $50 million of transaction costs, interest expense, and an increased investment in capital expenditures.

As we consistently say, we see free cash flow per share as the ultimate value creation metric, and our FY 2026 guidance represents 65% growth in free cash flow per share over FY 2025. Slide 13, please. Turning to forward indicators. All metrics continue to provide good long-term visibility into the strength of our business. Our third quarter book-to-bill of 0.9x and our trailing twelve-month book-to-bill of 1.2x reflect good performance in the marketplace, even with the multiple shutdowns and slow rebound in award decisions. Trailing twelve-month weighted average duration of our awards in Q3 continues to be just over six years.

Our total backlog of $33.4 billion increased 6% year over year, while our funded backlog increased 19% over the same period. Both metrics reflect healthy organic growth even when normalizing for ARKA’s contribution of $835 million to total backlog and $422 million to funded backlog. Additionally, ARKA has another $2 billion of noncompetitive franchise programs from which we expect to recognize revenue over time but that do not yet meet the regulatory criteria to be added to backlog. For fiscal year 2026, we now expect 98% of our revenue to come from existing programs, with 1% each from recompetes and new business.

Progress on these metrics reflects our continued strong operational performance and yields increased confidence in our outlook as we close out the year. In terms of our pipeline, we have more than $4 billion of bids under evaluation, over 80% of which are for new business to CACI International Inc. We expect to submit another $22 billion in bids over the next two quarters, with over 75% of those being for new business. We continue to have excellent visibility, are well positioned in a very constructive macro environment, and remain very comfortable with our outlook, including our three-year targets. In summary, we delivered another quarter of strong results.

Our performance continues to demonstrate our differentiated position in the marketplace, which is further enhanced by our acquisition of ARKA. Our ongoing investment ahead of customer need enables us to win and execute high-value, enduring work that drives long-term growth, increased free cash flow per share, and additional shareholder value. And with that, I will turn the call back over to John.

John S. Mengucci: Thank you, Jeff. Let us go to Slide 14, please. In closing, I want to emphasize what truly differentiates CACI International Inc. While others talk about adjusting to the changing market, we are already delivering. We anticipated years ago that speed, software-defined solutions, and mission proximity would define success for the long term in national security. We positioned the company accordingly through deliberate investments and disciplined execution of our strategy. This is all about expanding the limits of national security. It is not about chasing trends. It is about understanding where threats are evolving, where our customers’ hardest problems will be, and building the capabilities to address them before they ask.

That is what has allowed us to compete and win against a broader set of competitors. Our third quarter and fiscal 2026 results to date demonstrate this differentiation in action: strong organic growth, expanding margins, robust cash generation, and the strategic addition of ARKA to further strengthen our position in the space domain. We are executing our strategy, delivering for our customers, and driving long-term shareholder value. Before I turn the call over for questions, I want to congratulate NASA and the Artemis II crew on their historic achievement. I also want to recognize that both CACI International Inc and ARKA contributed critical technology that exemplifies the caliber and mission impact of our offerings.

CACI International Inc’s optical communications technology enabled high-definition video and data transmission throughout the entire mission, while ARKA provided essential sensing technology on the SLS rocket to ensure a safe crew ascent. To both teams, thank you for your exceptional work on this landmark achievement for our nation’s space program. As is always the case, our success is driven by our now 27,000 employees who are ever vigilant, expanding the limits of national security. To everyone on the CACI International Inc team, I am proud of what you do every day for our company and for our nation. And to our shareholders, I thank you for your continued support of CACI International Inc.

With that, Operator, let us open the call for questions.

Operator: At this time, in order to ask a question, press star then the number 1 on your telephone keypad. Star 1 again. For today’s call, we do ask you that you limit yourself to one question and one follow-up. Thank you. Your first question comes from the line of Jonathan Siegmann with Stifel. Please go ahead.

Jonathan Siegmann: Morning, John, Jeff, and George. Thanks for taking my question, and congratulations on closing the transaction. Just a real quick one. With ARKA, now that it is all integrated under one leadership, can you scale how big your space exposure is today?

John S. Mengucci: Yeah, John, thanks. Well, it has definitely gotten larger, and not just in size, but frankly, in scale and just the absolute eye-watering capabilities that national asset brings in. Look, we do not use that national asset term loosely. They are a 62-year-old company, have been at the forefront of technology developments since the Cold War, with an outstanding track record of execution. We talked to the majority of the satellite primes that utilize what ARKA provides in space, and we received outstanding feedback: a consistent partner consistently delivering on schedule and within cost.

Jeffrey D. MacLauchlan: You know, what drives the growth of the space business further? Definitely Golden Dome. Some of the backlog numbers that I mentioned earlier—just to have an asset that has another $2 billion of noncompetitive sole-source franchise programs from which we are going to continue to expect revenue—really does drive future growth.

John S. Mengucci: All in all, today, looking at space, you are looking at greater than $1 billion worth of total business, with future growth we see coming forward when we get to talking about fiscal year 2027.

Jonathan Siegmann: Appreciate that. And maybe I will just ask one for Jeff on margins because that was pretty impressive for the quarter. Previously, you made statements quantifying the difference between tech and expertise, which was helpful for us. Now that you have added the super A’s—ARKA and Azure—is there any framework that we can think about for the relative margin differences between those two segments? And any lumpiness or seasonality to keep in mind?

Jeffrey D. MacLauchlan: Yeah, thanks, John. Look, you hit at an item that we are probably not going to provide a lot more specificity around, at least at this point, but clearly, the addition of these significant technology franchises is important in the evolution of the portfolio we have been talking about for some time and the attendant margin expansion that comes with that. So you put your finger on something that we are not quite ready to quantify, but the condition that you observe is clearly the case. I would add relative to the second part of your question that does come with a certain amount of lumpiness in terms of margin.

You can see that a little bit when you do the algebra around the fourth quarter margin, where we have particularly strong margins this quarter and you will quickly figure out that increasing our margin performance for the year probably means some lumpiness in the fourth quarter that goes the other way, the way this quarter went the right way. So there is some variability around that you have noted. Overall, however, we clearly have embarked on this strategy with the expectation that margin continues to go up and to the right, despite an occasional quarterly bounce.

John S. Mengucci: And, John, let me also add on the revenue side. The expected financial contribution over the next twelve months that we shared with you all in December is still accretive to revenue growth and margin. But on the revenue side, revenue is not going to be linear. It is a technology business. You make deliveries; you book revenue. When you book, you book profit. So, you know, unfortunately or fortunately, program schedules are not congruent with quarter-end points. We cannot apologize for that. It is very much like the rest of our technology business. We will do our best to estimate quarter to quarter, but this is a full-year business. We have said that a lot.

And ARKA is a fantastic growth addition for us as we move forward.

Operator: Your next question comes from the line of John Godin with Citigroup. Please go ahead.

John S. Mengucci: John? John, are you there? Operator, let us move on to the next question.

Operator: Your next question comes from the line of Gavin Eric Parsons with UBS. Please go ahead.

Gavin Eric Parsons: Thank you. Good morning. John, you talked about this a bit, but maybe it is a two-part question on the booking environment. It seems like the submits are building really nicely, but that is not converting to the pipeline. So what are you seeing there? And then second, on funding, if I exclude ARKA, your funded backlog was up high single digits. So is the funding environment still behaving better even if the award environment maybe is lagging? Thanks.

John S. Mengucci: Yeah, Gavin, thanks. Let us unpack that. Look, we continue to see excellent visibility and a strong pipeline. We see a really constructive macro forecast as we look forward. Let me just start with we are in the right places. We are investing ahead of need in the right capabilities. We are able to deliver them faster and more efficiently. That is exactly what the administration wants. But it is safe to say we are not a short-term hand-to-mouth business. We have a large and growing backlog, as you mentioned—nearly $34 billion, which is up 7% year over year. Funded backlog is up 19% year over year, and a healthy trailing twelve-month book-to-bill of 1.2x.

And then the last thing I would like to share is a statistic I enjoy: the weighted average duration of backlog on a rolling basis is greater than six years as we get through Q3. So funding trends, customer demand, a potential $1.5 trillion GFY 2027 budget (which includes reconciliation funding), all continue to support what we are looking at going forward. We have talked about the fact that there is a number of short-term factors behind the slow award decision-making, and we could spend the rest of the day being 50/50 on reasons why. There is a lot of money in the budget. That means there is an awful lot of planning. Reconciliation funds are multiyear money.

But at the end of the day, awards are lumpy. I like our plan. I like the pipeline. I like the bids submitted. Over the next couple of quarters, I fully believe that the government will go back to the days of awarding most programs within 100 to 300 days of when they plan to, and we will continue to move forward. But at the end of the day, not a hand-to-mouth business. We are growing just fine. We will continue to grow, we will get through this awards trough, and we will continue to deliver. Jeff?

Jeffrey D. MacLauchlan: Gavin, I would add to that. You noted the funded backlog increase. The organic piece of that is 10%. I would also note that the sluggishness that we have seen in the acquisition and award structure—and this is underscored by the backlog statistic that we just used—we have not experienced any administrative part of the contract administration. So the government is, by and large, funding programs. They are paying bills. They are processing invoices. Payment offices are working. The sluggishness in the awards mechanism has not translated into that side of the government.

Gavin Eric Parsons: Okay, thanks, guys. And a long shot here, but guidance implies growth accelerates in April, and you have got some pretty easy comps this year. So any early thoughts on if the exit growth rate can continue into next year?

Jeffrey D. MacLauchlan: Yeah. We do see growth accelerating in the fourth quarter, which has always been the plan. When I referred to the fact that we were seeing the growth acceleration we expected in the third, that was part of that. But I would also encourage you to keep John’s comments in mind relative to the fact that the business is managed to the year. We have customers that have rhythmic buying patterns at different times of year. They buy differently, and we typically have a strong fourth quarter—strong second half and particularly fourth quarter—which we see again this year. But I would encourage you to not think about that as an exit rate for the year.

If you look over time at the distribution of our margin and revenue growth, you will see that back-end-weighted trend. Do not extend that into 2027 as we close out 2026.

John S. Mengucci: If I added a comment about 2027, I would encourage you to look forward to us continuing to deliver—driving revenue, driving margins, driving free cash flow. Again, we would not say that if we were not very comfortable with our three-year targets.

Jeffrey D. MacLauchlan: The momentum in the business that you see is real.

Operator: Your next question comes from the line of Gautam Khanna with TD Cowen. Please go ahead.

Gautam Khanna: Good morning, guys. How are you doing?

John S. Mengucci: Morning.

Jeffrey D. MacLauchlan: Morning.

Gautam Khanna: Good. I wanted to follow up on that last question. I remember last quarter you kind of explained the Q4 sequential ramp that is expected—JTMS and some other programs. I am curious why those would not continue to be at a very high rate exiting June into September. Is there anything one-time with those specific contracts that are driving so much of the sequential growth that then tapers off? And then I just wanted to get your broad perspectives on the fiscal 2027 budget request and how that might benefit CACI International Inc—in what parts of the business?

Jeffrey D. MacLauchlan: Why do I not take the first part of that, and let John take the broader budget question. I would refer you back to the discussions that we have had about the different ramp profiles, and there are a couple of things that are happening in the fourth quarter and the sequence from third to fourth. One is that we have a number of programs that ramp in sort of a bimodal growth rate. One of the patterns that I talked about is a lot of these large agile software programs have an initial phase that is planning the second phase. So there is acceleration and then a leveling off and then a reacceleration.

We are working through those phases right now on ITAS and, to a lesser extent, NCAPS. We very much are in that mode for JTMS. The other thing I would point out is that we do have a number of the technology areas where customer communities are particularly heavier buyers at different times of year, often with increased activity in the fourth quarter of our fiscal year. And then the final variable is that we have a number of items where we are in the early stages of activities that are driving investment for future growth—that is another variable in that mix. So the real answer is it is a portfolio.

While mix sometimes feels like a handy explanation, there really are three or four substantive conditions that are at play here, and they come together from time to time with outcomes that we try to suggest you expect.

John S. Mengucci: On the 2027 budget, larger budgets never hurt. We would rather have larger budgets than shrinking ones. But as I have said many times, we are going to pay much more attention to where the funds are flowing under the surface. What we see in the President’s Budget request looks very positive. The J-books came out earlier this week, so we will be able to garner much more detail from those as we build our fiscal 2027, 2028, and 2029 plans. We are in a $300 billion TAM, and we are roughly a $10 billion company, so there is plenty of room for us to grow.

We firmly believe that the electronic warfare and counter-UAS areas, both in the Department of Defense and in DHS, show great promise. We are having all the right meetings and planning sessions and making the right internal investments to meet those market needs. Space looks really good, both in the classified space programs where we are very strong in those future budgets—especially those in the FY 2027 plan—C5ISR, and then 2027 and beyond.

Operator: Your next question comes from the line of Scott Stephen Mikus with Melius Research. Please go ahead.

Matt Martolo: Good morning. This is Matt Martolo on for Scott Stephen Mikus. Good morning, and congrats on Milestone C on SPECTRAL. As that program moves into LRIP and eventually into full-rate production, are there any challenges that you foresee or investments that need to be made to support the production ramp? And then how should we benefit as it moves into production? Thank you.

John S. Mengucci: Yeah, thanks. We are extremely proud of where the SPECTRAL program is. That was a long road for us to achieve victory there, and the team has done an outstanding job. We received Milestone C. We are just beginning the LRIP portion in the October–November timeframe—sort of Delivery Zero—where we will begin delivering some of the systems. On the investment side, as my prepared remarks stated, we invested long ahead of the award of that program to make certain that the brains of that system, which is looking at multiple antenna feeds and all of the known threats, provide a great AI baseline for naval combatant ships. We have performed those investments.

We have also continued CapEx investments in our production facility in Melbourne, where we are rolling out both CAESAR/CAF and the SPECTRAL program. We have continued to invest in this program, driving, frankly, long-lead item purchases slightly ahead of Milestone C so that we could take that timeline between C and when we can deliver the first system down. It is an absolute proof point for us on our focus on excellent execution. It is a new large-type program for us, but a great partnership with the Navy coupled with the right funding timing allows us to deliver to the well over 100 ships that are in the U.S. Navy fleet today.

Operator: Your next question comes from the line of Seth Michael Seifman with JPMorgan. Please go ahead.

Rocco Barbero: Good morning, guys. This is Rocco on for Seth. How should we think about ARKA impacting margins moving forward? You mentioned that quarter-to-quarter margins can be lumpy from the technology side of the business. But is the 11.6% that is implied for next quarter the right way to think about the lower end of the new company margins post these deals?

Jeffrey D. MacLauchlan: The ARKA contribution in the fourth quarter is pretty consistent with our expectations. John mentioned the fact that this is a delivery and mix business and very much not linear. We gave some indication of margin in the December 2022 call, but I would point out that within any particular quarter, around that average, we may see three- or four-point swings. I do not know if I am getting exactly to the question that you asked. The ARKA expectation for the fourth quarter is well aligned with our expectation when we made that announcement. The organic business mix will be a softer quarter when you do that math.

Rocco Barbero: Right, that makes sense. And then what type of directed energy capability does ARKA bring to CACI International Inc? And have they been fielded at this point?

John S. Mengucci: They bring a portion of directed energy—things we cannot talk about on the line. Yes, it is a new capability for us. We were not in the directed energy business prior, and I think we will be able to talk more on that in the quarters to come. I do want to touch back on your earlier question. Look, ARKA is a long-term play for us. It is probably one of the strongest acquisitions that we have done in terms of both doubling down on capabilities and customer relationships, and us owning and growing a price-based business in a market that is going to see valuations of those such a strong space portfolio grow in years to come.

We have been able to do that all inside of a company that covered down on our transaction and our interest costs and is still delivering $725 million of free cash flow. We are in the very early innings. We just got to integration on April 1. We are still in the month of April, so in the first twenty or so days, we have gotten a lot done. And Andreas, who is running the combination of ARKA’s business and our space business, is already making a major impact as to how we can continue to grow in space.

Operator: Your next question comes from the line of Tobey O’Brien Sommer with Truist Securities. Please go ahead.

Tobey O’Brien Sommer: Thank you. If I think about the business from a really high level—mission tech, expertise, etc.—is it fair to think of mission tech as a mix shift of two to three points per year because of faster growth as well as, generally speaking, applying more capital on acquisitions in that direction?

Jeffrey D. MacLauchlan: I think, Tobey, that is broadly right. It is a hard thing to generalize, but the condition you observe is certainly true, and you are on the right vector, to be sure.

Tobey O’Brien Sommer: And with respect to counter-UAS, I was wondering if you could characterize what the experience in the war so far has meant to the opportunities that you see in front of you and maybe how that has impacted customer conversations and decision making.

John S. Mengucci: Yeah, Tobey, thanks. Let us start with where we are in the counter-UAS market. We are already in government inventory. We have been doing this for a couple of decades. Merlin is our family of counter-UAS systems. It is part of our broader $2 billion EW portfolio. We continue to expect growth from counter-UAS. The foundational part of this is that we are able to sell it under two different vectors—under FAR Part 12 and FAR Part 15—so we can meet the administration’s priorities. We are in place for world events and the like. We are currently providing counter-UAS to all four of the armed services.

We are in active discussions or negotiations with 16 other agencies and organizations across the federal government, and we already have, as I talked about in my prepared remarks, a system that has been fully deployed on the southern border. As you all know, it is our practice that for anything competitive, we are not going to provide details, but we will absolutely share those details on the next quarterly call and in incremental press releases as we go forward. On the international front, as an update since our last call, we are now very active working sales in theater through the U.S. Army Task Force 59, DIANA 401, and CENTCOM for mobile counter-UAS units.

We are getting kits prepared to support testing against one-way attack drones—the ones that have been in the news over the recent quarter. We have established relationships with resellers to give us access into the Saudi, Kuwaiti, and Qatari markets through their Ministries of Defense. They are all in various stages of the process, but you should expect those folks to be on board within 45 days, and we have to work through the exportability issues. We are very strong in this market. We have talked about this for quite a long time. Current events are driving stronger demand, as well as with the seven countries to whom we have already delivered EW.

So it is a strong market, well funded in the U.S. through both direct reconciliation bills, adding billions to our TAM, which is what moved us to a $300 billion level, and really strong interest in counter-UAS for Golden Dome, as well as other initiatives like the eastern flank drone wall. A lot of positive work here. We are putting the right dollars of investment to work, and you saw the CapEx is up slightly—half of that was to ARKA, and a portion goes through our EW portfolio—and we are full speed ahead in how we want to grow this.

Operator: Your next question comes from the line of Sheila Karin Kahyaoglu with Jefferies. Please go ahead, Sheila.

Sheila Karin Kahyaoglu: Hi. Good morning, guys. Just one question for me. Great stuff on the funded backlog growing despite the environment. Maybe just honing in on your Civil business—still solid growth there, up 7%. What are you seeing, and how do we think about major program drivers within Civil into fiscal 2027?

Jeffrey D. MacLauchlan: There are a couple of things going on in Civil, Sheila. You can see the modest DHS headwinds, but you can also see the NASA NCAPS ramp. Those would be the principal drivers of the change that you see.

Sheila Karin Kahyaoglu: Okay, great. Thank you.

Jeffrey D. MacLauchlan: You are welcome.

Sheila Karin Kahyaoglu: Operator?

Operator: Your next question comes from the line of David Egon Strauss with Wells Fargo. Please go ahead.

Joshua Korn: Hi, good morning. This is Joshua Korn on for David. I wanted to follow up on the broader defense budget question. It is noted in the slides that the reconciliation funding is starting to flow through. Is there any way you could quantify to what extent your programs benefit from the base budget versus the reconciliation benefit from last year? And then any thoughts on what that might look like for 2027? Thanks.

Jeffrey D. MacLauchlan: The majority of what we do and what we have been able to grow is in the base budget, and it will continue to be in the base budget because we have selectively decided in our several markets to go after areas that are traditionally funded within the base. On the reconciliation funding, we have seen those start to flow. They are going to be very prevalent in Golden Dome, as well as border security. We have seen some additional funding show up there. We are doing a lot of AI-based object-tracking tech, as well as additional spend in our counter-UAS area. We are currently modernizing the Space Force’s critical infrastructure through reconciliation funding.

Again, you can directly tie that to things in the Golden Dome area. In the intelligence world, we continue to enhance what we do in the left-of-launch area around situational awareness. And then in IT modernization, we have a lot of large enterprise systems that we are looking to try to make common across the Department of Defense. If the Army has a picture-perfect enterprise system to X, we are pushing to have that same solution be used through the rest of the Department of Defense. A lot of nice funding. Whether it is RDT&E or in procurement versus O&M, it does not quite matter to us.

We are always doing modernization through sustainment, which is a large use of O&M funding. Clearly, as our business continues to evolve, we will see increasing amounts of RDT&E funding. So we are really well funded to close out 2026, and just as nicely funded as we go forward in fiscal year 2027.

Joshua Korn: Great, thank you.

Operator: Your next question comes from the line of Mariana Perez Mora with Bank of America. Please go ahead.

Alex Preston: Hey, guys. This is Alex Preston on for Mariana this morning. I just wanted to go back to NASA and the Civil side real quick. Given the budget fluctuations there in FY 2027—right, the request calls for significant cuts year over year, but there is also this shift towards exploration away from pure science, so there is a bit of a dynamic there. I am curious if you had any broad puts and takes on that budget request and where you see CACI International Inc and ARKA playing within that context. Thanks.

John S. Mengucci: Yeah, so I guess we are on both sides of that, Alex. Let us start with NASA NCAPS first. We continue to successfully ramp that program. We are receiving very high praise from our customer. We are deploying a commercial agile-scale delivery model to really standardize and centralize software development across NASA, very similar to what we have done with Customs and Border Patrol on BEAGLE. The way to think about that work in terms of budgets and administration priorities: we are reducing software development times, increasing efficiency, and bringing administrative systems across NASA into compliance with the plethora of federal reporting requirements.

We have all key metrics, and we are supporting, I think, 800 to 900 different applications and platforms. So there is no impact to the work that we are doing. By driving commonality and moving NASA and their software development frameworks closer to the way that commercial companies and CACI International Inc do software development, it is going to generate cost savings across the organization. The nice thing for us, it supports the theme of NASA wanting to reduce their reliance on outside headcount and push those dollars more into mission, which is fantastic for us as we look at our space business.

So it is the organization taking full advantage of what we are doing on one part of our business—driving agile software development practices and putting DevSecOps in place—that has been saving the organization money. And the even sweeter news is we are on the receiving end of that as we look at what we do in space. Very much aligned, and not a funding threat to where we are going on NCAPS, and it will continue to ramp to support 2027 growth rates.

Alex Preston: Great. Thank you. Really appreciate the color.

Operator: Your next question comes from the line of John Godin with Citigroup.

Jeremy Jason: Hi. This is Jeremy Jason on for John Godin. Thank you for squeezing me in. As we think about these complex technical solutions transitioning from development to production—like SPECTRAL—I wanted your take on the outlook for the scalability of these technologies across different customers and upcoming budget cycles. And could that theory be affected by a potential blue wave? Thanks.

John S. Mengucci: I will take your last comment first. The beautiful thing about being an investor in CACI International Inc is that a number of years back, when we set this company on its next course, we spent a lot of time looking strategically at the kind of markets we wanted to support and the parts of the federal government we were going to be very focused on. It is no accident that we are focused on national security—DoD, the Intelligence Community, and DHS—all of which have full bipartisan support. Blue waves, red waves, purple waves—it does not much matter to what we are doing. We are in very critical areas that the government will not decide to just turn off.

So first and foremost, that is where we are at. On systems like counter-UAS, SPECTRAL, and our work in agentic AI—those all scale wonderfully as we move forward. Our optical communication terminals move beyond the 2- and 4-watt proliferated LEO systems to very exquisite systems. For SPECTRAL, its scalability is to deliver the baseline we have agreed upon to well over 100 combatant ships, and then move into the FMS side of where SPECTRAL goes.

On top of the FMS work is all the topside and antenna work that we and the Navy believe should be the next phase of SPECTRAL so we can secure even more signals from those topside antennas and drive processing improvements that will protect ships not only from missiles, but also from drones. In the counter-UAS area, we have been scaling up production capabilities in Sterling and in Melbourne to be able to deliver Merlin. It is a tough supply chain right now—there are a lot of people buying flat panel radars. What differentiates us, and how we enhance it going forward, is the software capability of that system. It is not always about updating hardware.

Whether this is fly-by-wire drones, one-way attack drones, cellular drones—you name it, we have seen them all over the planet. We are more than able to scale forward from that position as well. We can talk a lot about optical communication terminals and everything we have done in the tech area, but they all follow that common theme: you need to understand the mission so that you can deliver. We hear a lot about AI and how that is going to move different parts of our business forward. Frankly, AI without mission is like a car without gas—it is great to look at, but you cannot do much with it.

We have been able to scale AI use throughout a lot of what we do, and we are looking forward to driving the growth further in fiscal year 2027.

Operator: Your next question comes from the line of Jan-Frans Engelbrecht with Baird. Please go ahead.

Jan-Frans Engelbrecht: Good morning, John, Jeff, and George. Congrats on another good quarter. I wanted to talk about the ARKA and legacy CACI International Inc space portfolio. Is there an ability to combine those capabilities into a solution for the customer?

John S. Mengucci: Thanks, Jan-Frans. Probably the most prolific revenue synergy we have is going to be on the ground processing side, where ARKA already has authorizations to operate agentic AI solutions in a number of different mission models that allow them to process and find different things in the GEOINT stream. We are just as adept on the SIGINT side, but we have not moved to AI on that side. We are just beginning to have customer meetings, given that we just got everything integrated. So there are revenue synergies there that have not even begun, which will allow us to move the Intelligence Community further down the path toward higher-level, multi-INT solutions.

The other area that we are already connecting is how do we go about building larger-scale optical communication terminals—larger ones, or ones of the same size that need to push a terabit of data through them versus 2 to 4 meg. ARKA is a 60-plus-year space company. We are a six-plus-year space company in the world of optics. There are a lot of synergies already taking place there. We are looking at different ways that we can get through production and different ways we can do engineering. There is so much more we can be doing for the folks who build satellites and the customers who absolutely need information from those missions.

We are really excited about what the future brings for us.

Jan-Frans Engelbrecht: Thanks, John. Very helpful. And then a quick follow-up, if I may. If we look at FY 2027, and you have great visibility in this business—close to four years of annual revenue in the backlog—any large multiyear contracts that you have bid on, sort of multibillion-dollar contracts, that you expect to be adjudicated in FY 2027? Or any notable recompetes that we should look out for in the next twelve months?

John S. Mengucci: On the new business front, we always have a number of multibillion-dollar things that are rumbling around at different stages. Do we have some that are over a billion dollars that can be awarded in fiscal year 2027? Absolutely. Frankly, we were looking at some of those to be awarded toward the end of 2026, but we were not there. We will be able to report on how 2026 wraps up and how they go forward within 2027. On the recompete front, 2026 has been a really large year for us. As Jeff mentioned during his prepared remarks, we are already greater than 90% on the recompete front.

What is just as exciting is that future recompetes that would have come up in 2027 have already been extended by 18 to 24 months, which is a great way to win a recompete—never having to bid on it. You only get there when customers recognize the importance of the areas we are in, the importance of national security, and the level of performance we have had.

Operator: That concludes our Q&A session. I will now turn the conference back over to John S. Mengucci for closing remarks.

John S. Mengucci: Thanks, Jeanne, and thank you for your help on today’s call. We really want to thank everyone who dialed in or listened to the webcast for their participation. We know that many of you have follow-up questions, and Jeffrey D. MacLauchlan and George A. Price and Jim Sullivan are available after today’s call. Please stay healthy, and all my best to you and your families. This concludes our call. Thank you, and have a fantastic day.

Operator: This concludes today’s conference call. Thank you all for joining. You may now disconnect.

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