Executive Summary / Key Takeaways

• CACI International has successfully transformed into a technology-focused company, leveraging differentiated software-defined solutions and agile development to address critical national security priorities.
• Strong financial performance, including double-digit revenue growth and expanding margins, is driven by successful execution on large programs and strategic acquisitions like Azure Summit and Applied Insight.
• The company's differentiated technology in areas like Electromagnetic Spectrum (EMS), Photonics, and Network Modernization provides a competitive moat and aligns with government mandates for faster, more efficient capability delivery.
• Management has raised FY25 guidance, projecting revenue between $8.55 billion and $8.65 billion and free cash flow of at least $465 million, reflecting confidence in organic growth and acquisition contributions.
• A flexible capital deployment strategy, balancing strategic M&A with share repurchases and debt management, aims to enhance long-term growth and free cash flow per share.

A Strategic Pivot Towards Technology Leadership

CACI International, founded in 1962, has evolved significantly over its six-decade history. While initially rooted in providing expertise and services, the company has, over the last decade, undergone a deliberate and strategic transformation to emphasize differentiated technology offerings. This pivot was not accidental but a calculated move involving increased investment in research and development and a focus on anticipating future customer needs, particularly within the U.S. national security landscape. This intentional approach aimed to build a more resilient business model capable of driving long-term growth and value creation.

This strategic shift has positioned CACI as a provider of both distinctive Expertise and differentiated Technology to its core customer base, which primarily comprises U.S. federal government agencies, including the Department of Defense (DoD), intelligence communities, and federal civilian agencies. Approximately 90% of CACI's revenue is derived from these customers, underscoring its deep alignment with national security priorities. The company's strategy is built on investing ahead of need, bidding selectively on larger, longer-duration programs, and proactively shaping opportunities. This approach is designed to create sustainable differentiation and enduring competitive advantages.

In the competitive landscape of government IT and services, CACI operates alongside major players such as Leidos Holdings (LDOS), Booz Allen Hamilton (BAH), Gartner (IT), and International Business Machines (IBM). While competitors like Leidos and Booz Allen offer broad government-focused IT and consulting services, CACI distinguishes itself through a unique blend of mission-focused expertise and proprietary software-defined technology. CACI's approach combines the structured processes often seen in large A&D primes with the agility of government services providers and the speed and innovation of commercial software development. This allows CACI to compete effectively in niche, high-value segments.

Compared to larger-scale competitors like Leidos and IBM, CACI often demonstrates an edge in innovation speed and specialized expertise, enabling it to win contracts requiring tailored, cutting-edge solutions. For instance, CACI's AI-driven analytics tools are described as achieving significantly faster data processing than standard industry benchmarks, offering a tangible performance advantage. While larger rivals may benefit from scale-driven cost efficiencies, CACI's focus on differentiated technology allows it to command higher margins in specific program areas. Against consulting-heavy firms like Booz Allen and Gartner, CACI's strength lies in its ability to integrate technology delivery with mission understanding, providing more comprehensive, outcome-based solutions rather than purely advisory services. This positioning allows CACI to capture market share in areas where its specific technological capabilities and deep customer relationships are paramount.

Technological Edge and Operational Excellence

A cornerstone of CACI's strategy is its investment in differentiated software-defined technology. The company has developed significant capabilities in areas critical to national security, including:

• Agile Software Development: CACI is a leader in applying commercial agile methodologies and DevSecOps to government programs. This enables faster, more efficient, and higher-quality software delivery. The company is currently executing three of the largest agile software development programs in the U.S. government, including IPPS Army, FADE, and the recently won NCAPS contract for NASA. These programs demonstrate the ability to handle complex, enterprise-scale modernization efforts, delivering thousands of software releases annually with high quality.
• Electromagnetic Spectrum (EMS) and Counter-UAS: CACI offers high-performance radio frequency technology and Counter-UAS solutions. The TLS Manpack system, a commercially developed software-defined system, allows dismounted soldiers to perform signals detection, direction finding, and electronic attack on the move. The Navy's Spectral program, focused on next-generation shipboard electronic warfare, leverages CACI's software-defined approach to enable rapid, over-the-air updates as threats evolve, keeping ships on station. The strategic acquisition of Azure Summit Technology significantly enhanced CACI's capabilities in this domain, bringing complementary technology and talent already contributing to programs like Spectral. CACI's Counter-UAS solutions are deployed globally and designed to address a range of drone threats, from small commercial systems to complex nation-state actors.
• Photonics and Optical Communications: CACI is involved in developing Optical Communications Terminals (OCTs), such as the CrossBeam system, which recently won an Edison Award. These terminals provide reliable data communications for space-based applications. The company has made significant investments in this area and is ramping up deliveries, expecting a substantial increase in volume in the current fiscal year compared to the last.
• Network Modernization: CACI designs and deploys software-defined networks that replace legacy infrastructure, offering enhanced security, efficiency, and extensibility. Programs like Army CIPRAMOD and the Air Force's EITaaS demonstrate the company's ability to modernize critical networks, enabling capabilities like JADC2 and AI integration while potentially reducing long-term operating costs for the government.

These technological differentiators provide CACI with a competitive moat. The ability to deliver software-defined, open-architecture solutions that can be rapidly updated gives customers greater flexibility and avoids vendor lock, a key priority for the government. This differentiation supports CACI's ability to win high-value contracts and contributes to profitability, as these technology-centric programs often carry higher margins than traditional expertise-only work. The company's continued investment in R&D and strategic partnerships, such as the CRADA with the U.S. Military Academy to advance EW technologies, underscores its commitment to maintaining this technological edge.

Operational execution is paramount to translating contract wins into financial performance. CACI emphasizes superior execution, which builds a strong track record and supports on-contract growth and high recompete win rates (traditionally >90%). The successful ramp-up and performance on large programs like IPPS Army, EITaaS, and recent network modernization awards demonstrate the company's capacity to deliver complex solutions at scale.

Financial Strength and Growth Trajectory

CACI's strategic focus and operational execution are reflected in its recent financial performance. For the three months ended March 31, 2025, CACI reported revenues of $2.17 billion, an 11.8% increase compared to the same period in the prior year. For the nine months ended March 31, 2025, revenues totaled $6.32 billion, up 12.5% year-over-year. This growth was driven by a combination of new contract awards, expansion on existing programs, and contributions from the fiscal year 2025 acquisitions of Applied Insight and Azure Summit Technology.

Profitability has also shown strength. Income from operations for the nine months ended March 31, 2025, was $557.5 million, a significant 23.4% increase from the prior year period. Net income for the nine months was $342.0 million, up 19.9%. EBITDA margin for the third quarter of fiscal 2025 was 11.7%, a 40 basis point increase year-over-year, benefiting from business mix and the timing of software-defined technology deliveries. While interest expense increased due to higher debt levels from acquisitions, the growth in operating income more than offset this.

The company maintains a healthy balance sheet and strong cash flow generation. As of March 31, 2025, total assets stood at $8.58 billion, with total liabilities of $4.88 billion and total shareholders' equity of $3.70 billion. Net debt to trailing twelve-month EBITDA was 2.9 times on a pro forma basis following the recent acquisitions and share repurchases, within management's target range of 2.5x to 3x. Operating cash flow for the nine months ended March 31, 2025, was $391.0 million, an increase from the prior year, reflecting strong profitability and effective working capital management, although partially offset by increased vendor disbursements. Days Sales Outstanding (DSO) remained efficient at 55 days in Q3 FY25.

CACI's forward indicators remain robust. Total backlog as of March 31, 2025, stood at $31.4 billion, a 9.8% increase from a year ago, representing nearly four years of annual revenue. The trailing twelve-month book-to-bill ratio was a strong 1.5 times. As of the start of Q4 FY25, over 97% of the expected revenue for the fiscal year is from existing programs, providing significant revenue visibility. The pipeline of bids under evaluation is substantial at $17 billion, with nearly 80% representing new business opportunities for CACI.

Outlook and Risks

Based on its strong performance and positive forward indicators, CACI has raised its fiscal year 2025 guidance. The company now expects revenue between $8.55 billion and $8.65 billion, representing 14.5% to 16% total growth, including approximately six points from acquisitions. Adjusted diluted earnings per share are projected to be between $24.24 and $24.87, an increase of 15% to 18% compared to the prior year. Free cash flow guidance has also been increased to at least $465 million, implying approximately 22% growth in free cash flow per share, driven in part by capital efficiencies from integrating acquired assets and program timing. Management remains confident in achieving its previously stated three-year financial targets.

The guidance reflects management's confidence in continued organic growth, the successful integration and contribution of recent acquisitions, and the favorable market environment for CACI's differentiated offerings. Underlying assumptions include continued bipartisan support for national security spending, the ability to effectively manage program ramps (noting that technology programs may ramp revenue slower but offer longer duration and higher margins), and the capacity to navigate potential impacts from continuing resolutions or administrative transitions, which are expected to be minimal.

Despite the positive outlook, several risks warrant investor attention. Reliance on U.S. government contracts exposes CACI to risks related to appropriations delays, legislative changes, and shifts in budgetary priorities, although the company's alignment with enduring national security needs and the flexibility in the current full-year CR help mitigate some of these concerns. Competitive pressures, particularly for skilled personnel with security clearances, remain intense. Integrating acquired businesses always carries execution risk, although management reports positive progress on recent deals. Legal proceedings, such as the ongoing Al Shimari lawsuit, while vigorously defended and not currently expected to have a material adverse effect, represent potential liabilities. Changes in tax law, such as the TCJA provision requiring R&D capitalization, will impact cash flow, although the company has quantified the near-term effect.

Conclusion

CACI International's journey from a services provider to a technology leader has positioned it strongly within the dynamic government IT and services market. The company's deliberate strategy of investing in differentiated software-defined capabilities, coupled with a disciplined approach to business development and operational execution, is driving robust financial performance and creating a competitive moat. The recent acquisitions of Azure Summit and Applied Insight further enhance its technological portfolio and market access in critical areas like EMS, Photonics, Cloud, and AI, aligning well with current and future national security priorities and government modernization mandates.

With a healthy backlog, a strong pipeline of new business opportunities, and management's upwardly revised guidance for FY25, CACI appears well-positioned for continued growth and increasing free cash flow per share. While challenges inherent in the government contracting environment and competitive landscape persist, CACI's focus on high-value, enduring work and its demonstrated ability to execute complex programs differentiate it from peers. The emphasis on software-defined solutions and agile development is not merely a strategic talking point but a tangible advantage that resonates with customer demands for speed, efficiency, and adaptability in addressing evolving threats. Investors should monitor the successful ramp-up of recent large awards, the continued integration of acquisitions, and the company's ability to maintain its technological edge in a competitive market.