Executive Summary / Key Takeaways

• Strategic Transformation Driving Growth: CACI International has successfully transformed into a technology-focused leader, leveraging software-defined capabilities and agile development to address critical national security priorities, resulting in consistent double-digit revenue growth and expanding profitability.
• Differentiated Technology as a Core Moat: The company's significant investments in areas like Counter-UAS (Merlin), Counter-Space (RMT), and network modernization (ARCON, CSfC) provide tangible, often quantifiable, performance advantages and are central to its competitive differentiation.
• Robust Financial Performance and Outlook: CACI delivered strong Q1 FY2026 results with 11% revenue growth and an 11.7% EBITDA margin, reaffirming its FY2026 guidance for revenue between $9.2 billion and $9.4 billion and free cash flow of at least $710 million, signaling sustained momentum and early achievement of its 100% free cash flow conversion target.
• Resilience Amidst Macro Headwinds: Despite government shutdowns and administrative sluggishness, CACI's national security focus, essential work, and strong backlog of $34 billion provide stability and confidence in its ability to meet financial commitments.
• Competitive Edge in Evolving Market: CACI effectively competes by offering specialized, outcome-based solutions that deliver speed, agility, and efficiency, particularly in software-centric domains, positioning it favorably against both traditional defense primes and emerging tech players.

The Evolution of a National Security Powerhouse

CACI International Inc, founded in 1962, has undergone a profound strategic transformation over the past decade, evolving from a traditional government services provider to a technology-focused powerhouse. This deliberate pivot positioned the company to anticipate and capitalize on the rapidly changing demands of national security, emphasizing software-defined capabilities, agile development, DevSecOps, and open architectures. This strategic foresight has been instrumental in CACI's ability to deliver distinctive expertise and differentiated technology to its customers across the intelligence, defense, and federal civilian sectors.

The current geopolitical landscape, marked by escalating global threats and a heightened focus on homeland defense, underscores the enduring need for CACI's specialized offerings. Bipartisan support for national security spending remains robust, with significant incremental funding allocated through initiatives like the "One Big Beautiful Bill Act," which provides approximately $156 billion for defense (including $25 billion for the Golden Dome initiative) and $170 billion for border security. These funding streams directly align with CACI's core business, which generates approximately 78% of its revenue from defense-related customers, including the Intelligence Community. The U.S. government's increasing emphasis on software acquisition pathways, as highlighted by a recent Secretary of Defense memo, further validates CACI's long-standing software-centric strategy, reinforcing its competitive position.

Technological Leadership: CACI's Differentiated Moat

CACI's competitive advantage is deeply rooted in its technological differentiation and a proactive investment strategy that aims to stay "ahead of customer need." The company’s portfolio of software-defined technologies offers tangible, often quantifiable, benefits that enhance mission effectiveness, reduce costs, and accelerate delivery.

In Counter-UAS (C-UAS), CACI is a recognized leader, having developed "Merlin," its latest detect and defeat system. Merlin boasts non-kinetic capabilities designed for low to no collateral damage, a detection range of up to 75 kilometers, and industry-leading wireless capabilities to address threats utilizing cellular networks. This system has consistently outperformed competitors in government-sponsored demonstrations against a wide range of UAS systems and integrates with the Army's C-UAS fire control system. CACI's electromagnetic spectrum (EMS) portfolio, which includes C-UAS, currently generates about $2 billion in revenue and is poised for continued growth as drone threats escalate globally and domestically. For instance, CACI received a follow-on order from the Canadian government for manpack software-defined C-UAS systems and an order for vehicle-mounted systems, demonstrating international demand for its proven technology.

In the Counter-Space domain, CACI is addressing peer threats in the increasingly contested space environment. The company secured a $240 million award in Q1 FY2026 to modernize the Tactical Integrated Ground Support (TIGS) Counter-Space program for the Army. Furthermore, CACI received an initial production order from the U.S. Space Force for a Remote Modular Terminal (RMT), a broadband counter-satellite electronic warfare system that ingeniously leverages existing C-UAS software. This cross-application of software-defined technology underscores CACI's efficiency and innovation. The company is also making significant strides in photonics and optical communications terminals (OCTs), expecting to deliver at least six times greater volume in 2025 compared to 2024, with 25 OCTs already operating in space.

Network Modernization is another critical area where CACI excels. The company is actively involved in seven federal government programs, replacing outdated infrastructure with modern, self-healing, software-defined networks that are more secure, extensible, and cost-effective. Notably, the Air Force awarded CACI approximately $400 million in task orders for the base infrastructure modernization program (EITaaS Wave 2) to upgrade networks for the U.S. Indo-Pacific Command and U.S. Space Force. On the SIPRMOD program, CACI achieved NSA authorization for its software-defined Commercial Solutions for Classified (CSfC) technology, paving the way for the network to become operational in 2026.

CACI's leadership in Digital Application Modernization is evident in its agile software development processes and DevSecOps approach. The BEAGLE program for DHS Customs and Border Protection, one of the largest agile software development programs in the federal government, received its second one-year contract extension in Q1 FY2026. This program is on track to deliver well over 1,000 software releases annually with greater than 99% defect-free quality. The company also secured a $1.6 billion Joint Transportation Management System (JTMS) award for TransCom, leveraging agile software development, AI, and SAP (SAP)'s S/4HANA to unify transportation and financial processes across the DoD. CACI is expanding its use of AI tools to further enhance the speed, efficiency, and scalability of its agile software development.

For investors, CACI's technological prowess translates into a robust competitive moat. Its ability to develop and deliver advanced, software-defined solutions that directly address evolving national security threats allows for higher-value contracts and stronger margins. The continuous innovation, often funded by internal R&D, ensures that CACI remains at the forefront of critical defense and intelligence capabilities, securing its market positioning and driving long-term growth.

Competitive Landscape and Strategic Positioning

CACI operates in a highly competitive environment, facing both large, diversified defense primes and specialized IT and technology firms. Key direct competitors include Leidos Holdings (LDOS), Booz Allen Hamilton (BAH), General Dynamics (GD), and Lockheed Martin (LMT), while indirect competition comes from cloud providers and emerging AI technologies.

CACI's strategic positioning is distinct. Unlike some larger primes that focus on broad hardware integration, CACI emphasizes software-defined solutions and agile development, which allows for greater flexibility and quicker adaptation to evolving threats. For instance, in cyber and electronic warfare, CACI's specialized tools and software-defined solutions offer significantly higher efficiency in threat detection compared to some competitors, potentially enhancing its pricing power and market share. While larger rivals like Leidos and Lockheed Martin may possess greater operational scale and broader reach in defense systems, CACI's focus on mission-critical, niche segments within intelligence and cyber provides a qualitative edge in adaptability and specialized expertise.

Against consulting-heavy firms like Booz Allen Hamilton, CACI differentiates itself with a more hands-on engineering and implementation approach, providing robust platform integration capabilities. While Booz Allen may lead in AI analytics depth, CACI's strategy of integrating AI into its agile software development processes aims to close this gap, enhancing its offerings in digital transformation. CACI's commitment to outcome-based contracting, where it invests upfront to deliver specific results rather than merely selling labor hours, further distinguishes it. This approach, prevalent in its technology segment, aligns with the government's desire for greater efficiency and value.

The company's minimal exposure to the federal civilian sector (only 6% of total revenue) is a material differentiator, shielding it from potential budget reductions and regulatory reforms more likely to impact that segment. CACI's long-standing relationships and deep mission understanding within the DoD and Intelligence Community act as significant barriers to entry for new competitors, who would struggle to replicate the specialized expertise and regulatory licenses required for such sensitive work. While competition for skilled personnel with security clearances remains intense, CACI's appeal as a technology-focused company helps attract talent, mitigating some of this pressure.

Financial Performance: A Trajectory of Strength

CACI's financial performance consistently reflects the successful execution of its strategic transformation. For the first quarter of fiscal year 2026, the company reported robust results:

• Revenues: $2.29 billion, an 11% increase year-over-year, with 5.5% organic growth. This growth was partially driven by new contract awards and expansion on existing programs.
• EBITDA Margin: 11.7%, representing a 120 basis point increase year-over-year. This expansion was primarily due to strong program execution, the timing of higher-margin software-defined technology deliveries, and overall business mix.
• Net Income: $124.81 million, up from $120.18 million in the prior year period.
• Diluted Earnings Per Share (EPS): $5.63, a 16% increase compared to $5.33 in Q1 FY2025. This was driven by greater operating income and a lower share count, which more than offset higher interest expense and a higher income tax provision.
• Free Cash Flow: $143 million, demonstrating strong profitability and effective working capital management. Days Sales Outstanding (DSO) stood at a healthy 56 days.

Looking back at fiscal year 2025, CACI delivered $8.63 billion in revenue, marking nearly 16% total growth and 10% organic growth on an underlying basis. The full-year EBITDA margin was 11.2%. Adjusted diluted EPS for FY2025 reached $26.48, a 26% increase from the prior year, despite a significant rise in interest expense. The company generated $442 million in free cash flow for FY2025, representing a 16% increase in free cash flow per share.

CACI's liquidity remains strong, supported by cash and equivalents, operational cash flow, and its Master Accounts Receivable Purchase Agreement (MARPA). As of September 30, 2025, the company had no outstanding borrowings under its $1.975 billion revolving credit facility. The net debt to trailing 12-month EBITDA ratio stood at a modest 2.6x in Q1 FY2026, well within management's target range of 2.5x to 3x, providing ample flexibility for capital deployment. In Q4 FY2025, CACI strategically diversified its debt stack with a $1.0 billion offering of 6.375% senior unsecured notes due in 2033, which was substantially oversubscribed, further enhancing its access to capital.

Outlook and Guidance: Sustained Momentum

CACI has reaffirmed its fiscal year 2026 guidance, reflecting confidence in its business momentum and the constructive macro environment. The company expects:

• Revenue: Between $9.2 billion and $9.4 billion.
• EBITDA Margin: In the mid-11% range.
• Adjusted Net Income: Between $605 million and $625 million.
• Free Cash Flow: At least $710 million, which translates to free cash flow per share of $31.84, implying over 60% growth. This guidance also suggests CACI will achieve its goal of returning to a 100% free cash flow conversion rate by the end of its 3-year targets a year early.

The strong Q1 FY2026 performance has helped derisk the anticipated EBITDA margin step-up from the first half to the second half of FY2026, with Q2 FY2026 EBITDA margin expected to be around 11%. CACI's backlog stands at a record $34 billion, representing nearly four years of annual revenue and providing significant long-term visibility. For FY2026, over 92% of expected revenue is from existing programs, with less than 4% from recompetes and 4% from new business, underscoring the stability of its revenue base. The company's robust pipeline includes $6 billion of bids under evaluation (80% for new business) and an additional $13 billion in expected submissions over the next two quarters (75% for new business).

Underlying these projections are key assumptions, including the continued bipartisan support for national security spending and the positive impact of reconciliation funding. Management believes that even with the ongoing government shutdown, CACI's national security focus and essential work will minimize material disruptions, with any short-term revenue impacts expected to be recovered over the full fiscal year. The company also anticipates a $40 million tax refund related to prior-year tax method changes in the second half of FY2026, and a Section 174 tax benefit of approximately $50 million in FY2026, further bolstering cash flow.

Risks and Challenges

While CACI's outlook is strong, investors should be mindful of several risks. The company remains reliant on U.S. government contracts, which inherently carry risks such as bid protests, delays or reductions in appropriations, and termination risks. The current government shutdown, while deemed manageable by management due to CACI's essential work, can still lead to "administrative sluggishness" and "cash collections disruption," though these are expected to be de minimis and recoverable within the fiscal year.

Legal proceedings, such as the Al Shimari, et al. v. L-3 Services, Inc. (LHX) et al. civil suit, which resulted in a $42 million jury judgment against CACI in November 2024, pose a potential financial risk, although CACI is vigorously defending the case and has recognized no amounts in its financial statements. Competition for highly skilled personnel, particularly those with security clearances, remains intense, which could impact operational execution and costs. Furthermore, while CACI's strategy is well-aligned with initiatives like the Department of Government Efficiency (DOGE), broader regulatory reforms or shifts in government spending priorities could still present challenges, particularly in the limited federal civilian sector where CACI operates.

Conclusion

CACI International stands as a compelling investment opportunity, having successfully transformed into a technology-driven leader uniquely positioned to address the evolving demands of national security. Its strategic pivot towards software-defined capabilities, agile development, and proactive investments in critical areas like Counter-UAS, Counter-Space, and network modernization has created a robust competitive moat. This technological leadership, coupled with a deep understanding of customer missions, enables CACI to deliver superior, outcome-based solutions that drive efficiency, agility, and lethality for its government clients.

The company’s consistent financial performance, marked by double-digit revenue growth, expanding EBITDA margins, and strong free cash flow generation, underscores the effectiveness of its strategy. With a reaffirmed FY2026 guidance and confidence in achieving its long-term financial targets, CACI demonstrates resilience even amidst macro uncertainties like government shutdowns. While competitive pressures and operational risks persist, CACI's differentiated technology, strategic positioning, and disciplined capital deployment strategy are expected to continue driving long-term growth in free cash flow per share and enhanced shareholder value.