CACI(CACI) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported revenue of $2.2 billion for the second quarter, representing a year-over-year growth of 5.7%, with 4.5% being organic growth [15] - EBITDA margin for the quarter was 11.8%, an increase of 70 basis points year-over-year [15] - Free cash flow was $138 million for the quarter, driven by strong profitability and effective working capital management [15] - Adjusted diluted earnings per share were $6.81, a 14% increase compared to the previous year [15] - The company raised its fiscal 2026 guidance, now expecting revenue between $9.3 billion and $9.5 billion, reflecting total growth of 7.8%-10.1% [18] Business Line Data and Key Metrics Changes - The technology segment has grown to represent nearly 60% of total revenue, with significant contributions from electronic warfare and agile software development [5][8] - Electronic warfare alone generated approximately $2 billion in revenue, highlighting the company's leadership in this area [8] - The company has won $1.4 billion in awards for the quarter, resulting in a book-to-bill ratio of 0.65 times for the quarter and 1.3 times on a trailing 12-month basis [7] Market Data and Key Metrics Changes - 90% of the company's revenue comes from national security customers, with increasing visibility into funding streams from reconciliation funds [12] - The backlog increased by 3% year-over-year to $33 billion, with a funded backlog increase of 7% [20] - The company expects 95% of its revenue for fiscal year 2026 to come from existing programs, with 3% from recompetes and 2% from new business [21] Company Strategy and Development Direction - The company emphasizes a strategy focused on expanding national security capabilities and investing ahead of customer needs [4][5] - The acquisition of ARCA is seen as a strategic move to enhance the technology portfolio and support long-term growth in the space market [8][14] - The company aims to maintain a flexible and opportunistic capital deployment strategy to drive shareholder value [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate a dynamic operating environment and continue delivering strong financial performance [7][22] - The company anticipates that the reconciliation funding will positively impact various programs, particularly in border security and space modernization [42] - Management highlighted the importance of adapting to changing customer demands and the evolving landscape of national security [22][23] Other Important Information - The company has a strong track record of quickly deleveraging after acquisitions, with expectations to return leverage to the low threes within six quarters post-ARCA acquisition [17] - The company is actively engaging in a growing number of bids, with $6 billion of bids under evaluation, over 70% of which are for new business [21] Q&A Session Summary Question: Impact of higher U.S. military operational tempo on CACI - Management indicated that the current operational tempo is favorable for CACI, as it aligns with the demand for mission technology [27][28] Question: Pipeline and conversion cadence - Management acknowledged the slower ramp-up post-government shutdown but expressed optimism about the pipeline filling back up [32] Question: Update on recent protest win - Management confirmed the denial of a protest, allowing the company to ramp up on a significant long-term technology program [40] Question: Impact of reconciliation funding - Management noted that reconciliation funding is expected to positively impact various programs, including border security and space modernization [42] Question: Federal Acquisition Regulation reform - Management stated that the company is aligned with acquisition reform and is well-positioned to support government needs [48][50] Question: Addressable market from reconciliation bill - Management highlighted that reconciliation funding will significantly expand the addressable market, particularly in electronic warfare [61] Question: Defense spending growth in 2027 - Management expressed cautious optimism regarding defense spending growth, emphasizing the company's strong market position regardless of budget fluctuations [82] Question: Incremental program ramp from large contract wins - Management indicated that there remains significant incremental ramp from recent contract wins, with many programs still in early phases [84]