CACI International Inc

Thank you for joining us this morning. We are providing presentation slides, so let's move to slide two. There will be statements in this call that do not address historical fact and as such constitute forward-looking statements under current law. These statements reflect our views as of today and are subject to important factors that could cause their actual results to differ materially from anticipated. Those factors are listed at the bottom of last night's press release and are described in the company's SEC violence. Our safe harbor statement is included on this exhibit and should be incorporated as part of any transcript of this call. I would also like to point out that our presentation will include discussion of non-GAAP financial measures. These should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP. Let's turn to slide three, please. To open our discussion this morning, here's John Mangucci, President and Chief Executive Officer of CECI International.

John. Thanks, George. Good morning, everyone. Thank you for joining us to discuss our third quarter fiscal year 25 results, as well as our updated fiscal 25 guidance. With me this morning is Jeff McLaughlin, our Chief Financial Officer. Slide four, please. CECI's third quarter results represent another strong quarter on our way to a great year. We delivered revenue growth of 12 percent, EBITDA margin 11.7 percent, and free cash flow of $188 million. In addition, we won $2.5 billion of awards, representing a book to build 1.2 times for the quarter and 1.5 times on a trailing 12-month basis. We've said it's not unreasonable to expect some slower decision-making in the current environment, but we continue to see our customers issuing RFPs and making awards. In fact, so far in the fourth quarter, we have won an additional $1.3 billion of awards. The business is performing well. Our strategy, differentiation, resilience, and superior execution are borne out by our results. We're in the right places doing the right things and controlling what we can control. Given our strong execution and healthy pipeline metrics, we are raising our fiscal year 25 guidance for revenue, adjusted EPS, and free cash flow. Jeff will discuss this in more detail shortly. And we remain confident in our ability to achieve our three-year financial targets and to continue driving long-term growth and free cash flow per share and shareholder value. Slide five, please. Turning to the macro environment, we continue to see good demand signals from customers in our key focus areas. The world is a dangerous place. and demand is being driven by geopolitical realities as well as the new administration. We see a constructive funding environment with healthy budgets and an upward bias in national security spending and investment. And our strategy and capabilities are extremely well aligned with the new administration's priorities. As an example, Secretary of Defense Hexeth recently issued a memo emphasizing the criticality of software-defined capabilities and mandating the use of the software acquisition pathway to pivot from a hardware-centric to a software-centric approach. We came to this same conclusion years ago, that software would be the enabler of greater speed, agility, efficiency, and even lethality. And we developed a strategy and invested ahead of need to position CACI for where we saw the market going. The SECDEF's directive is a clear validation of our strategy and the software-based approach we employ in everything we do. On the budget front, visibility is beginning to improve. For fiscal 25, we have a full year continuing resolution in place that includes increased flexibility for our customers, allowing new starts and greater discretion in allocating funds. While there may be a learning curve for the DoD, given this is the first full year CR for defense, we don't expect any material impact to our business. Additionally, both the House and Senate recently passed separate budget reconciliation bills which would provide additional funding for defense and border security. While these bills still have to go through the conference process, they represent significant incremental multi-year funding in key areas of our addressable market. Looking further out, government fiscal year 26 is still evolving. The president's budget request, or PBR, is not expected until next month, but early comments are positive, with the administration showing support for a $1 trillion defense budget. Both the reconciliation bills and the PBR comments are strong signals for our business. It generates 90% of its revenue from solving the toughest challenges of the DOD, the intelligence community, and the Department of Homeland Security. Finally, the Department of Government Efficiency, or DOGE, continues to conduct the reviews. We've seen minimal impacts thus far, but we continue to stay close to our customers to support whatever they need. While DOGE is not done with its work, We remain confident that our strategy, differentiated software-based capabilities, and superior program execution are extremely well aligned to the new administration and DOJA's objectives of peace through strength, secure borders, increased efficiency, and technology modernization. Slide six, please. With that in mind, I'd like to highlight some of our recent successes on key programs supporting enduring national security priorities. Our proven commercial agile software development capabilities and software-defined approach on these programs continue to accelerate speed, agility, efficiency, and lethality across the national security space, which is exactly what this administration is asking for. First, our TLS MANPAC technology is a perfect example of our strategy playing out in the electromagnetic spectrum. TLS MANPAC is a commercially developed software-defined system that allows dismounted soldiers to conduct signals detection, direction finding, and electronic attack while on the move. MANPAC's upgradable software and signal sets enable our warfighters to be more capable and more lethal, and demand for this technology continues to strengthen. Our program of record ceiling was increased this quarter, and the number of systems we have delivered has more than doubled and will continue to grow. GLS MANPAC was even featured on the cover of the April edition of the Journal of Electromagnetic Dominance. Next, our Navy spectral program continues to progress well as we enter the next phase of the program. We are beginning to upgrade existing systems as an interim step to deliver enhanced capability to the fleet faster and enable a more efficient transition to the full spectral system. Spectral software-defined capabilities and upgradable signal sets enhanced with AI to reduce the cognitive burden on the sailor will make our warfighters more capable and more lethal. The continued success of the program is not only a resounding endorsement of our investing ahead of customer need and our software-defined approach, but also a great example of the strategic value of the Azure Summit acquisition. Next is one of our seven large network modernization programs, Army SIPR Mod. Here we are modernizing the U.S. Army's secure internet protocol network, a highly complex network for transmitting classified information around the globe. The software-defined network technology we're deploying includes Archon, which is a CCI commercial technology that was developed ahead of customer need and proved to be a crucial differentiator in winning the program. We recently installed the first Archon Gateway, which represents an important program milestone. The Army SuperMod program highlights the significant opportunity for additional software-defined network modernization across the federal government increased security and delivery efficiency, and is another great example of CCI winning by investing ahead of customer need. Our support of DOD's push for financial accountability and transparency is yet another success story. Last quarter, we highlighted our work on the Defense Agencies Initiative, or DAI program, where we have developed and deployed commercial software to enable successful financial audits for DOD agencies. This quarter, I'm pleased to report another great milestone. The U.S. Marine Corps recently received their second clean financial audit. CACI is the only technology company that has helped a service-level agency in the DoD achieve a clean financial audit, now for the second year in a row. And we've done the same for many other DoD entities as well. With the software we have implemented for the DAI, CACI has provided the blueprint for DOD agencies to successfully pass audits and provide financial accountability and transparency. And we expect other DOD agencies to follow the Marine Corps' example. Finally, this past February, our Beagle program for DHS Customs and Border Protection saw the highest monthly volume of software releases ever. This significant increase in release demand was driven by the new administration's border security policy. Our agile software development capabilities are purpose-built for exactly this type of rapid changes and requirements. We are on track to deliver well over 1,000 software releases this year with greater than 99% defect-free quality. We are taking these same capabilities to NASA where our MCAPS program is increasing velocity and efficiency by consolidating software applications from 11 centers across NASA using the same proven commercial agile software development processes combined with our six decades of mission focus. These examples highlight how CACI's differentiated software-based capabilities, commercial processes, and exceptional execution are helping our customers address critical and enduring national security priorities, and they're helping CECI continue to win, grow, and deliver value to our shareholders. Slide seven, please. In summary, our strategy and business remain resilient, as underscored by our continued strong financial performance. It's the reason we are again able to increase our fiscal year 25 guidance and remain confident in achieving our three-year financial targets. We remain positive, given increasing budgets and bipartisan support to the national security priorities that we focus on. We are executing our strategy that purpose-built our business for this environment, and that continues to position us well to drive long-term growth, increasing free cash flow per share, and additional shareholder value. With that, I'll turn the call over to Jeff.

Thank you, John. Good morning, everyone. Please turn to slide eight. In the third quarter, we generated revenue of $2.2 billion, representing 11.8% reported growth, of which 5.6% is organic. As John mentioned, our strategy that differentiates CACI from traditional competitors and our superior execution are evident in our strong results. Third quarter EBITDA margin of 11.7% represents a year-over-year increase of 40 basis points. Similar to last quarter, EBITDA margin is above our previously stated expectations, primarily due to the timing of certain software-defined technology deliveries occurring in the third quarter. Excluding these items, third quarter EBITDA margin would have been in line with our comments last quarter. Adjusted diluted earnings per share of $6.23 were 9% higher than a year ago. Greater operating income and our recent share repurchases more than offset higher interest expense and a higher income tax provision. Third quarter operating cash flow, excluding our accounts receivable purchase facility, was $204 million, reflecting strong profitability and effective management of working capital. Days sales outstanding, or GSO, were 55 days. Free cash flow for the third quarter was $188 million, representing strong sequential and year-over-year increases, Slide nine, please. During the quarter, we announced that we would be initiating an open market repurchase program utilizing our existing share repurchase authority. Through the end of the quarter, we bought 436,000 shares at an average price of about $344 per share. After completion of these latest repurchases, we have approximately $187 million remaining in our current authorization. Including this latest activity, we have repurchased approximately 15% of our outstanding shares since FY21, while also completing 12 acquisitions during the same time period. This track record is a testament to our flexible and opportunistic capital deployment approach. Third quarter net debt to trailing 12-month EBITDA was 2.9 times on a pro forma basis. following the acquisitions of Applied Insight and Azure Summit, and reflecting the capital used this quarter for the share repurchases. We remain well positioned to deploy capital in a flexible and opportunistic manner to drive long-term growth in free cash flow per share and shareholder value. Slide 10, please. We are pleased to again raise our FY25 guidance as a result of our strong business performance heading into the fourth quarter. We're raising the low end of our revenue guidance with a new range of $8.55 to $8.65 billion, driven by stronger organic growth. This represents total growth of 14.5% to 16% on an underlying basis, which includes about six points of growth from acquisitions. We continue to expect fiscal 25 EBITDA margin to be in the low 11% range. And in light of our Q3 margin overperformance that was driven by the acceleration of the software-defined technology deliveries from Q4, we now expect Q4 EBITDA margin to also be in the low 11% range. As a result of our higher revenue outlook, combined with a slightly lower effective tax rate and interest expense, we're also raising the low end of our adjusted net income guidance by with a new range of $543 million to $557 million. This, along with our reduced share count, yields an attendant increase in adjusted earnings per share to be between 2424 and 2487 per share, representing growth of 15% to 18% compared with last year. And finally, as we're always focused on the efficient use of our capital, we're increasing our free cash flow guidance to be at least $465 million, driven by a reduction in our CapEx forecast. About half of the CapEx reduction is related to capital efficiencies from using existing Azure capacity, with the balance coming from other program efficiencies and the timing of program ramp-ups. As we've said before, we see free cash flow per share as the ultimate value creation metric, and our FY25 guidance now implies 22% growth in free cash flow per share. Slide 11, please. Turning to forward indicators, our trailing 12-months book-to-bill ratio of 1.5 times reflects strong performance in the marketplace. Our backlog of $31 billion increased 10% from a year ago and continues to represent almost four years of annual revenue. These metrics provide good long-term visibility into the strength of our business. Entering the fourth quarter, more than 97% of our FY25 revenue is expected to come from existing programs, with about 2% coming from re-competes and less than 1% from new business. Progress on these metrics reflects our strong operational performance and underpins our confidence in our updated expectations for the year. In terms of our pipeline, we have $17 billion of bids under evaluation, nearly 80% of which are for new business to CACI. The significant sequential increase in bids under evaluation reflects our strong business development performance and the sometimes lumpy timing of RFP issuance, proposal submission, and award decisions. We expect to submit another $10 billion in bids over the next two quarters, with more than 75% of that being for new business. In summary, we continue to deliver successful results in an uncertain environment, underscoring the resilience and durability of our business. We are seeing healthy demand from our customers as we help them address critical national security priorities. And we continue to win and execute high-value, enduring work that supports long-term growth, increasing free cash flow per share, and additional shareholder value. And with that, I'll turn the call back over to John.