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Ladies and gentlemen, thank you for standing by. Welcome to the CACI International Fourth Quarter Fiscal Year 2025 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] At this time, I would like to turn the conference call over to George Price, Senior Vice President of Investor Relations for CACI International. Please go ahead, sir.

Thanks, Amy, and good morning, everyone. I'm George Price, Senior Vice President of Investor Relations for CACI International. Thank you for joining us this morning. We are providing presentation slides, so let's move to Slide 2. 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 our 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 filings. Our safe harbor statement is included on this exhibit and should be incorporated as any part of 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 3, please. To open our discussion this morning, here is John Mengucci, President and Chief Executive Officer of CACI International. John?

Thanks, George, and good morning, everyone. Thank you for joining us to discuss our fourth quarter and fiscal year '25 results as well as our fiscal '26 guidance. With me this morning is Jeff MacLauchlan, our Chief Financial Officer. Slide 4, please. Before we begin, I'd like to take a moment to acknowledge the recent passing of our Chairman, Mike Daniels. Mike was an exceptional leader, mentor and friend. His vision, experience and dedication greatly enriched CACI and the broader technology, government and corporate communities. Mike's unique perspective and governance was based on many valuable lessons and experiences throughout his renowned professional career, his critical government advisory roles and his humble life story. He contributed greatly to the growth and success of many organizations, including CACI, where he was a steadfast supporter of our strategy. We extend our deepest condolences to Mike's family and are grateful for his invaluable contributions to our company. Slide 5, please. CACI's strong fourth quarter performance closes out another great year and underscores the strength, differentiation and resilience of our business. For the full year of fiscal '25, we delivered revenue growth of 16% on an underlying basis, EBITDA margin of 11.2%, free cash flow of $442 million and free cash flow per share growth of over 16%. We deployed capital to acquire 3 strategic assets while also repurchasing $150 million of shares. And we won $10 billion of contract awards, representing a book-to- bill of 1.1x. As we've discussed many times, we undertook a strategy years ago to become a more focused and differentiated company that was positioned to drive long-term growth and shareholder value in any environment. Our exceptional results demonstrate the successful execution of that strategy. Slide 6, please. The market trends you're increasingly seeing and hearing about today, speed, efficiency, lethality, software- based capabilities, modernization. These are all the result of the rapidly evolving environment around us. Government budgets and procurement actions are adapting to reflect this reality, but we anticipated these changes years ago and invested ahead of need accordingly. We are a leader in the use of software and investing ahead of customer need to develop and deliver high-value capabilities faster, more efficiently and with greater flexibility. And we are strategically positioned in enduring and well-funded areas that align with our nation's most important national security priorities. That is why CACI is so resilient, so well positioned and already able to deliver in accordance with buying methods, the government has only recently started to more formally implement. Among the many examples I could share, here are 4. First, the electromagnetic spectrum is a critical domain for national security and modern warfare. CACI today delivers differentiated software- defined, commercially developed and commercially sold technology to multiple customers who demand best-in-class capabilities. Our investments ahead of customer need led to the development of the TLS Manpack, which integrates signals intelligence and electronic warfare, collection, processing, exploitation and effects into a single software-defined system for the dismounted soldier. It is one of the first successful rapid-fielding mid-tier acquisitions for the Army because of CACI's ability to rapidly prototype and deliver a cutting-edge solution in record time. The recent ceiling increase to $500 million supports the Army's decision to deploy our technology as the primary SIGINT/EW system for all brigade combat teams. Additionally, the Army announced plans to enhance our TLS Manpack to field a vehicle-mounted option, demonstrating the versatility of our technology. Second, our software-defined counter-UAS technology is addressing the increased demand for protection against drones. We were recently awarded a contract by the Canadian government to deliver counter-UAS vehicle-mounted systems, which follows a previous award from Canada for our backpackable counter-UAS systems last year. We're also seeing increasing demand for our technology in support of U.S. border protection and is a key component of Golden Dome. Our technology leverages decades of experience and actual mission results delivered by our sensors and operation globally. In addition, the significant reconciliation funding associated with this critical administration priority will enable procurements looking for proven ready now technology that can defend across the electromagnetic spectrum with no or low collateral defeats. CACI checks every box and more to defeat all levels of potentially threatening UASs. Next, enterprise software modernization is another area where CACI is both well aligned to administration's priorities and where we have demonstrated clear industry leadership. Recently, the Army issued a memo highlighting the imperative for significant system consolidation across the service to enhance security, reduce costs and improve efficiency as well as request enterprise systems to be commercial-based with limited enhancement and integrations to other systems as required. Our initial IPPS-Army Army implementation consolidated 50 legacy systems into one modern commercial-based enterprise system. Our performance on IPPS-Army puts CACI in a strong position to consolidate an additional 40 systems that the Army has identified. And it also positions CACI as the partner of choice for other DoD and intelligence customer -- community customers as they execute similar modernization and consolidation initiatives. Finally, in fiscal '25, we also began executing on our NASA NCAPS program, where we are deploying a commercial agent scale delivery model to standardize and centralize software development across NASA, enhancing efficiency, quality and speed of delivery, a key customer and administration priority. Since November, our NCAPS team has met all key metrics related to system availability and is currently supporting nearly 900 applications and platforms. These examples of how CACI's software-based capabilities, commercial tools and processes and investment ahead of customer need are enabling critical national security priorities to be addressed faster and more efficiently to drive reduced customer cost and propel the growth of CACI. In other words, we are extremely well aligned to the environment we see today. We don't need to transform. We're already here. Slide 7, please. Turning to the macro environment. We continue to see healthy customer demand and a strong pipeline of opportunities in our markets. Demand is being driven by today's global geopolitical realities as well as the administration's priorities, including peace through strength, securing our borders and an increasing use of software to enhance efficiency, speed and lethality. As I've discussed, these are all areas where CACI continues to be extremely well positioned. And this positive customer demand is now supported by the reconciliation funding contained in the One Big Beautiful Bill Act, which provides over $150 billion for defense, of which $25 billion is to fund Golden Dome and also provides approximately $170 billion for border security. This is a favorable development for our business, which generates 90% of its revenue from national security customers, solving the toughest challenges of the DoD, the intelligence community and the Department of Homeland Security. Looking forward, we are closely monitoring the government fiscal year '26 budget process. Should the new year start with a CR as most years do, we are comfortable operating in that environment and typically do not see a material impact to our business, though it can sometimes influence the quarter-to-quarter timing of shorter-cycle revenue like our software-defined technology. But as you know, we are focused on the long term, and we continue to see significant opportunities across our large and growing addressable market. Slide 8, please. Looking ahead, our proven strategy, differentiation, execution and resilience set the foundation for CACI to deliver another strong year. With that in mind, in fiscal '26, we expect revenue growth of nearly 8% at the midpoint, EBITDA margin in the mid-11% range and free cash flow per share growth of over 60%. Jeff will provide additional details on our guidance shortly. Our '26 guidance reflects our continued business momentum, our robust pipeline and the constructive macro environment, including passage of the reconciliation funding. It is consistent with the 3-year financial targets we discussed at our Investor Day last November, which we remain highly confident in achieving. And it is aligned with our objectives of driving long-term growth in free cash flow per share and shareholder value. With that, I'll turn the call over to Jeff.

Thank you, John. Good morning, everyone. Please turn to Slide 9. As John mentioned, we're very pleased with both our fourth quarter and fiscal year '25 performance. Not only does the continued strong performance underscore the deliberate positioning of the portfolio, it's also very much in line with what we communicated to you throughout the year. In the fourth quarter, we generated revenue of $2.3 billion, representing 13% year-over-year growth with 5.3% of that being organic. EBITDA margin was 11.5% in the quarter, slightly above our expectations and in line with last year. Fourth quarter adjusted diluted earnings per share of $8.40 were 27% higher than a year ago. Greater operating income, a lower tax provision and a lower share count more than offset higher interest expense. Notably, the effective tax rate in the quarter reflects a $28 million tax benefit resulting from the favorable resolution of an outstanding IRS R&D tax credit audit. This results in both a current period benefit for open tax years, but also gives us confidence to reduce our estimated tax liabilities prospectively. I would also note that even without this tax benefit, we exceeded consensus estimates for the quarter. Free cash flow of $139 million for the quarter represents strong profitability and reflects days sales outstanding, or DSO of 56 days. As we've mentioned previously, Azure is currently a modest headwind to DSO due to the billing terms and milestones in legacy contracts and is currently impacting our DSO by about 4 days. We see an opportunity to lessen that impact over time as we migrate new business to our more standard terms. Slide 10, please. Turning to full year results. We delivered significant growth in revenue, EBITDA margin and free cash flow driven by strong customer demand for our differentiated technology and expertise and by the exceptional execution of our team. In fiscal year '25, we generated $8.6 billion of revenue, representing just under 16% total growth and 10% organic growth, both on an underlying basis. You may recall that when we provided our initial FY '25 guidance last year, we discussed a number of factors that could drive results toward the upper end of the range. Our outperformance of these factors, particularly in regard to the faster ramp-up of our awards, stronger on-contract growth and successfully defending our recompetes allowed us to finish the year well ahead of our initial expectations. EBITDA margin of 11.2% for the year was in line with our most recent guidance of low 11% range and represents an 80 basis point increase year-over-year. Fiscal '25 adjusted diluted earnings per share were $26.48, up 26% from the prior year despite an increase of $54 million in interest expense that was partially offset by a lower tax provision. Delivering 26% year-over-year growth despite this factor, underscores our robust operating execution while positioning for future opportunities. Operating cash flow for fiscal '25 also reflects strong profitability and cash collections, driving free cash flow of $442 million, which represents a 16% increase in free cash flow per share. I'll note that we did not receive the $40 million tax refund related to prior year tax method changes previously identified as a risk due to a delay associated with the extended negotiations on the IRS audit I mentioned. But I would point out that adjusting for the delayed refund, we delivered free cash flow ahead of our expectations. As is likely clear to you at this point, there are several moving pieces related to our tax position in both fiscal '25 results and fiscal '26 guidance. This is a result not only of the successful conclusion of our outstanding audit, but also the passage of the One Big Beautiful Bill Act. I'll note that we have included Slide 16 in the appendix to provide greater specificity about the expense and cash flow impacts in both years to assist in your analysis. Slide 11, please. The healthy long-term cash flow characteristics of our business, our modest leverage of 2.9x net debt to trailing 12-month EBITDA and our demonstrated access to capital provide us with significant optionality. During the year, not only did we complete 3 strategic acquisitions, we also opportunistically repurchased $150 million of shares at an average price of $344. We also took an important step in refreshing and diversifying our debt stack with a high-yield bond offering we executed during the quarter. CACI closed on a $1 billion offering of [ 6.75% ] senior unsecured notes in a transaction that was substantially oversubscribed, increasing our flexibility and underscoring our ready access to capital. We remain well positioned to continue to deploy capital in a flexible and opportunistic manner to drive long-term growth in free cash flow per share and shareholder value. Slide 12, please. Now I'll provide some additional details on our fiscal year '26 guidance. We expect revenue between $9.2 billion and $9.4 billion, which represents growth between 6.6% and 8.9%. EBITDA margin is expected to be in the mid-11% range, representing a 30 basis point increase at the midpoint. Adjusted net income is expected to be between $605 million and $625 million, which translates into adjusted diluted earnings per share of between $27.13 and $28.03. We expect free cash flow of at least $710 million, which equates to free cash flow per share of $31.84 based on our full year diluted share count assumption of 22.3 million shares. This implies free cash flow per share growth of more than 60%. I'd also like to point out that our free cash flow guidance adjusted for the tax-related cash benefits I mentioned earlier, means that our expected FY '26 free cash flow conversion is slightly above 100% of the adjusted net income midpoint. This implies accomplishing our goal of returning to a 100% free cash flow conversion rate by the end of our 3-year targets a year early. As we routinely say, we are focused on full year results rather than any particular quarter since a myriad of factors can skew quarterly trends. But to help you with your modeling, we provided additional details on the slide, including information regarding certain timing trends we expect in FY '26. And finally, I'd point out that our guidance does not contemplate any acquisitions or share repurchases that might occur during the year. Slide 13, please. Turning to our forward indicators. Our prospects continue to be strong. As John mentioned, fiscal year '25 awards were $10 billion with a healthy mix of new work and recompetes. Our trailing 12 months book-to-bill ratio of 1.1x reflects continued differentiation in the marketplace and our backlog of more than $31 billion represents about 3.5 years of annual revenue. The weighted average duration of awards that went into backlog in FY '25 continues to exceed 5 years. Together, these metrics provide good visibility into the long-term strength and cash generation potential of our business. As we enter fiscal year '26, we expect approximately 84% of our revenue to come from existing programs, 11% from recompetes and 5% from new business. We continue to have a healthy pipeline of new opportunities. We have $16 billion of bids under evaluation, 80% of which are for new business to CACI. And we expect to submit another $11 billion in bids over the next 2 quarters with about 75% of that for new business. In summary, we delivered strong fourth quarter and fiscal year '25 results during an uncertain environment, highlighting the resilience of our business and the effectiveness of our strategy. As we look to fiscal '26, we expect another year of strong performance. We are winning and executing high-value enduring work that supports increased free cash flow per share, long-term growth and additional shareholder value. And with that, I'll turn the call back over to John.

Thank you, Jeff. Let's go to Slide 14, please. In closing, I want to emphasize that our strong performance is the result of intentional, purposeful actions taken over many years through the successful implementation of our strategy. It's not by accident. A strategy we put in place years ago because we anticipated what we are seeing today. Our customers need to move faster, and we're helping them do just that with software-defined technology, investing ahead of needs and 6 decades of superior performance and mission insights. This is how we built CACI to be resilient. This is how we're able to deliver strong '25 results, issue robust fiscal '26 guidance, express confidence in achieving our 3-year financial targets and continue to drive growth in free cash flow per share and shareholder value. As is always the case, our success is driven by our employees' talent, their innovation and their commitment. To everyone on the CACI team, I am proud of what you do each and every day for our company and for our nation. Thank you. And to our shareholders, I want to thank you for your continued support of CACI. With that, Amy, let's open the call for questions.

[Operator Instructions] Your first call comes from the line of Scott Mikus with Melius Research.

Nice guidance. One of your peers this quarter mentioned they see a $70 billion pipeline over the next 12 months with about 3/4 of that being takeaway work. And when I think of government services companies pursuing takeaway work, it kind of makes me nervous because to unseat the incumbent, you have to have a better solution or bid really aggressively on price. You highlighted a $16 billion pipeline of submitted bids and that 80% is for new business. But how much of that is new programs launched by your customers versus takeaways from an incumbent?

Yes, Scott, thanks. I'll start on this one. I guess, first of all, I don't look at us here at CACI as being a traditional government services company. And that's why when I hear numbers of $80 billion or $90 billion, it's nothing that frightens us, and it's nothing that we aspire to. Frankly, we've got over $250 billion addressable market. We serve 7 markets. We're very, very focused, and we retool the entire company around understanding what is a value bid and what is not value bid. The only way we deliver $1.6 billion of free cash flow over the next 3 years is that we're out there bidding things that matter in markets that matter, areas that we can differentiate in, where we're going to drive single -- high single-digit top line growth and achieve mid- to higher 11% margins. As for our pipeline, there is -- the majority of that would be new work to CACI and well over half of that is going to be new customer work as well. We are going to talk about the level of recompetes we have. I think this year, I think Jeff shared we're around 11% of this year's revenue plan at the midpoint. And we're very confident on that. I also would say that the recompete work that we have because the government is going through a number of personnel reductions and the contracting officer ranks continue to shrink. We're looking at achieving additional follow-on option year work where the customer will push the recompetes down another 1 to 2 years. So -- there's an awful lot there to unpack, but I would boil it back to absolute focus. Our pipeline supports the growth rates we have in our FY '26 plan and in our 3-year '25 through '27 plan. So nothing in those comments give us pause.

I would add to that. We've talked to many of you recently about the fact that an important part of our strategy is the idea of bidding less and winning more. We are focused on areas where we can bring differentiated capabilities to a position to provide compelling value. And the size of the pipeline is important in as much as it supports our growth plans, but we're not on a path to sort of bid everything that we can get.

Okay. And then if I could ask a quick one on EITaaS. There was news that the ceiling had been reduced, I think, by about $700 million, but your book-to-bill was really good. So I just want to make sure there wasn't any sort of price reduction, no potential impact on margin booking rates or no debook of backlog. Just any color on that?

Yes, Scott, thanks. Look, EITaaS is a 10-year program, and the ceiling was reduced from $5.7 billion to $5 billion. It doesn't change a thing for this company. Our work is going to continue on this program. We continue to execute it extremely well. Given the efficiencies that I have spoken about that we've already brought to this program, customers most likely looking to bank those savings now, and you all should hear that as a positive thing. It's a ceiling reduction from an estimated cost of a 10-year program. But on a 10-year long program, the Air Force can always program additional ceiling during any of the next 8 years of execution as requirements change, which in this world, they inevitably will change. I'd also like folks to recall that when we won the EITaaS job, we announced in January of 2023, we booked $2 billion of total contract value. We didn't book $5.7 billion. The remainder of the ceiling, $5 billion over our projection still allows us for additional 150% growth over the 10-year period if it's fully spent. So there's no backlog adjustments. There's no debooks. There's no impact to guidance. There's no reduction in revenue. There's no reduction in margin or any of our 3-year targets. So we have programs and task order cancellations where revenue is impacted from our current work and other moves that DOGE has driven, but that still stays at $1 million of reductions of revenue. So taking ceiling down has nothing to do with our growth rates that we have published in our outstanding fiscal year '26 plan that we're looking forward to achieving.

Yes. I mean, you've covered it. There is 0 impact to anything.

Your next question comes from the line of Colin Canfield with Cantor.

The guidance outlook, it sounds like you're assuming DR in terms of the kind of midpoint of the guide. So if we assume that the Senate moves quick like they are and we get a budget in place faster, is it fair to assume that you can hit the top end of that organic growth guidance? And then as we think about next year, what are the sort of milestones and timing of those milestones that you need to see to sign on for increased Investor Day growth targets?

Okay. Colin, thanks. Let me cover the -- our '26 guidance range. Look, we intentionally put out low-end, high-end guidance. And as we've discussed many, many times, we have quite a robust -- robust process, looking at how we would post this current -- current guidance. Look, we strive to not be conservative and not be aggressive. We contemplate a multitude of different scenarios, and we do try to account for many factors that can come up, and that's why we have this low end and high end. My first part of my answer to you is I did the calculations last night. We actually have 92% of fiscal year '26 ahead of us. So -- and we're already talking about bursting through the [ high end ]. Look, if funding is slower and uneven and we have a full year CR, that mostly stakes us more towards the lower -- the lower end -- if the government fiscal year '26 CR is shorter and the budget gets passed sooner and funding remains steady, then we could see us towards the higher end. Now a multitude of things can come up and happen, as you all know, who have followed us for an extremely long time. But we feel comfortable that we can support the current guidance that we have. At the end of the day, we're going to focus on what we can control, but we're very confident in executing our strategy. We're going to talk about Golden Dome and other things I would imagine. The only thing we don't have covered, frankly, is that the government shut down for several months. But frankly, when the government shut down most recently, we had a negligible impact to our overall guide. Jeff, do you want to talk about the second part of that?

Yes. I would -- I'd only comment that, as John described, there's 10 or so factors that go into the upper end of the range and a quicker budget and faster funding is certainly one of those. And we have a lot of the year ahead of us.

Got it. And then as you think about the implied margin progression to the Investor Day targets, I think folks are probably assuming 10 to 20 bps a year of expansion onwards to that mid 11%. But obviously, the delta this year is probably more like 30-ish bps. So not to track that whole history, but as you think about kind of the pathway of this company to mid-teens margins, how do we think about kind of the long-term potential there? And where do you think about the levers between expertise and technology to get to those types of longer-term margins?

Yes. Let's unpack that a little. There's 2 or 3 questions I heard in there. The first one is I'd refer you to the guidance slide in the deck where we talk about the progression in the year. Over time, over the last several years, several of our more impactful customers and programs have fallen into a rhythm that gives us slightly attenuated margins in the first half of the year and then they move up through the year. You'll notice though that the revenue is a little bit more evenly distributed, meaning, of course, then that you have lower margins in the first half, higher in the second. So we see in our current view of the year a very similar distribution to that. And you see a similar distribution in cash flow as well, where it's very back-end loaded. We have a disproportionate amount of our outflows in the early part of the year, compensation expense, prepaid expenses associated with certain programs, a number of things that just sort of structurally give us heavier second half cash flow. So I think -- did I cover your whole question? Did I miss anything?

I think that's fair. We're probably going to wait till later in the year to follow up on kind of the algorithm on longer-term mid-teens potential. But I appreciate the color as always.

Your next question comes from the line of Gavin Parsons with UBS.

John, I think you mentioned maybe fewer contracting officers. I was hoping you could just talk a bit more about the award environment and if things are generally still moving more slowly than usual.

Yes. Gavin, thanks. Look, we have talked a lot about this the last couple of quarters. My comment was really around the fact that we've seen some modest impacts, but nothing major. We have talked about some award decisions that are taking a little bit longer. Jeff mentioned that things that used to take 1 to 2 days are taking 3 to 4 days around slower invoice payment and processing. But I'd also couch that with -- remember that awards are lumpy. And in any environment, we're not a business that I'd like to say we don't live hand to mouth. We don't have to book an award by a certain day to badge flip 200 people to meet next quarter's revenue numbers. We know how to operate in this environment, and we've seen it in the past. But as I mentioned earlier, I think as the procurement bandwidth gets a little tighter, we believe that could result in a few other outcomes, one being that the current work we have gets extended. So there's folks out there with an $80 billion pipeline that are looking for our work to come up on our recompete soon. I think the odds of that are more in us holding on to that work longer. And then second, what I talked about in my prepared remarks around systems consolidation, you can look at that as also being code for contract consolidation as well, right? If we're able to take 40 systems offline in the United States Army, one, at the enterprise level, that's going to save them hundreds of millions of dollars. Two, it brings additional work and scope here, which would mean less contracts to keep those 40 or so systems up. So all in all, we're very much prepared for fiscal year '26. And should those -- that workforce continue to shrink, I believe that we have that covered within our current guidance.

I appreciate the color. And obviously, you pointed out it's lumpy, but given you had 2 quarters now of a record pipeline, any thoughts on what you could do for a book-to-bill for the year?

Well, we always strive to finish the year at something greater than 1. I like what history tells us. And I'll actually sort of tag back to one of the earlier questions. We are very judicious before we talk to a customer, 1 or 2 or 3 years before they're looking to get a system online as to whether we're going to bid that job or not. Do we have a differentiated solution? And then do we have the right business model, which is going to involve period point investments and then the types of margins that we would expect for doing that type of work. So I honestly believe that we're in the right place. And we put so much time left of the RFP coming out that we have a pretty good idea as to how this work will unfold. So I hate to be predictive, but my expectation of our entire team here is that we continue to grow backlog. And especially, as Jeff's comments mentioned, 11% growth of funded backlog is really, really crucial for us to achieve our '26 plan.

Your next question comes from the line of Peter Arment with Baird.

Nice results. John, you've always talked to us about investing ahead of need. So can you maybe give us a little update on what's going on in space, optical terminals? There's just been so much talk around Golden Dome and other areas with FDA and you guys have been investing there a lot. Maybe if you could just give us an update there.

Yes. Thanks, Peter. Look, we're having great success with the technology. As you mentioned, there's a lot of strong demand from -- across government. Our technology is the most mature. We are through the design and the producibility items. We have had to work through a supply chain and manufacturing issues that led to slower production than we would have anticipated. But it's not an underlying technology issue. We know we have best-in-class terminals. We know we are U.S. designed, developed and manufactured. We have a full U.S. bill of material. So there's a lot of positive things there. We've also announced that we're on Tranche 0, 1 and 2. We have a lot of terminals on Tranche 3. But part of our overall photonics model is to really grow beyond that as well. You may have read that we were selected as one of the few vendors to move on to Phase 2 for the enterprise space terminal. This is an addressable market for up to 3 vendors where the customer is looking to spend about $200 million, $300 million per year, which also, to your reference, does not include any of the projected increase to United States Space Force and the constellations that they'll have to launch due to the Golden Dome initiative. So I like what we're doing there. I like what we're doing at the LEO layer. And then we've got a lot of programs we're looking at beyond LEO as we work -- as we continue to work with the Space Force. So I like where we are today. I would clearly wish that we are producing more terminals in volume, but we are moving up that curve well and the investments that we're making in that part of our business are on track. We are now investing less, and we are delivering more.

I appreciate that color. And then just as a quick follow-on. We see some changes with some of the government-wide IP acquisition contracts transitioning to individual agencies from to the GSA. Just any impact the way to you guys? I know that you're certainly more in the higher end of things in IT and maybe that doesn't impact you, but just any color there would be helpful.

Yes, Peter, if you look at our large IT programs, things that are bringing network modernization and better efficiencies, what would transfer to GSA are more on the catalog pricing and IT services. But major defense department and intelligence community IT programs are going to stay exactly where those are. We're already delivering great efficiencies there. So there's a lot of language and there's a lot of nuance reports. At the end of the day, our large enterprise IT programs are here to stay. And we spent a lot of time looking at different variations of that across the DoD and our Intel community. And we are delivering at a very high tempo. We are delivering savings to customers in the United States Army, the United States Air Force and other areas. So I don't see any impact, small to no impact of some of that press around IT going to GSA. Thanks, Peter.

Your next question comes from the line of Seth Seifman with JPMorgan.

First, I wanted to ask just about the cadence of revenue and growth through the year. It looks like the organic growth will start out kind of low and then move to above the midpoint in the second half of the year. Are there particular items that you're looking at that will accelerate the organic growth in the second half?

No, I think you're connecting the dots, Seth, the right way. We continue to have accelerating growth on the major programs that we've been talking about both technology and expertise. But Focus Fox, BAGL, EITaaS are all continuing to ramp. And you'll see that as in the condition that you identify and as Azure and Applied Insight anniversary here in the first half of the year also.

Okay. Okay. Excellent. And then maybe, John, you talked a little bit earlier about work with the Army and C2. The NGC2 initiative that's underway, do you see that as providing any specific opportunities for the companies or any risks?

Yes. So if you're talking about the next-generation C2 program, we have a number of programs across the United States Army. We work on kinetics and control. We're still looking through what type of strategy we want there. It's going to be highly competitive. So I'm probably not going to share too much as to what our plans are there, but we expect it just like everything else across the Army, are looking to do things faster, better, cheaper and drive reuse. We are fully supportive of what the Army is doing there, and I'm sure we'll have more to share as we move forward.

Your next question comes from the line of David Strauss with Barclays.

John, the 20% or so of your business that's Fed [indiscernible], can you just remind us your exposure there and what you're seeing in terms of the budget outlook?

Yes. Thanks. So how we look at our business is we look at it from DoD, Intel and DHS, and that's about 90%. So the residual in the federal civilian area is 6%, with a full 1% coming from our NASA NCAPS program. And you all heard during my prepared remarks, team is doing an outstanding job. We're off to a very strong start. That leaves about 5% of our overall revenue within the federal civilian space, and that is very specific and very tied to the flag pole work. There are background investigations. There's work we do with Department of Justice and the like. So it really doesn't leave us a lot to have to watch in the entire federal civilian space. That was an intentional strategic change that we embarked on in 2019 to really get our portfolio more driven towards defense and intel and slightly away from federal civilian. There's nothing wrong with the federal civilian work. But when we sat down and looked over the last 30 to 40 years of budgets, the defense department and folks who are engaged in national security, their budgets are unblemished by bipartisan support. And I can't say the same in the federal civilian area. I think you've seen a lot of the cost efficiency, those GSA actions really hitting the federal civilian area hard. But as the CEO of a publicly traded company who moved away from that market a number of years back, it really doesn't have any impact. So it doesn't really keep us up at night the kind of changes that are happening in that part of our business.

Okay. That's great color. And -- in terms of the cash flow outlook, when does the tax benefit that you're calling out, the $40 million, when do you expect that to hit in the year? And then the Section 174 benefit, does that stay with you beyond fiscal '26?

It does. Let me start first with the $40 million tax benefit refund. You ought to think about that in the second half of the year, I think probably our third quarter, but it could be the fourth, but certainly the second half. Administratively, at this point, all the issues are resolved. This is just now sort of working its way through the bureaucracy, but that takes a little bit of time, and there are a couple of wickets for a refund of that size, as you would imagine. For the second part of your question related to Section 174, there is a continuing benefit. We identified $50 million this year. It's a similar amount next year, and then it starts to drop off a little bit. It's about $200 million, a little over $200 million in total. Many of you will be aware of the fact that there are a couple of options on ways to treat this. For us, relative to the effect it has on the deductibility of other expenses, in particular, interest, this was the more advantageous way for us to treat it. But it's very much an artifact of each company's sort of personal tax situation. So others might very reasonably reach a conclusion that it makes sense to take it all at once. For us, looking across the whole tax strategy, it made sense to do it the way we're doing it. But you ought to think about $50 million this year, which we put in the guide, and it's essentially the same amount next year, and then it starts to step down a little bit over the next ensuing 3 or so years.

Your next question comes from the line of Jonathan Siegman with Stifel.

So it's been a few months since the DoD's directive on software acquisition, which you highlighted really as a positive development during your last call. And now the Army consolidation demonstrates a specific action at one military branch, which you're clear today on as an opportunity for the company. So just wondering just is this potentially benefiting this year? Because the question we get a lot is just how meaningful is these changes that are occurring at the government and how -- and the timing of these things? And do you anticipate similar types of consolidation in other military branches?

Yes, John, thanks. Look, every time I hear the word software, it puts a smile on my face, frankly. Look, threats are changing continuously. And there's a lot of things that platform hardware can absolutely do. But we've been focused for a number of years, almost a decade now on what software can do. And whether it's enterprise systems or it's mission systems, software has been very, very crucial to the growth model of this company. So I'm very much supportive of anything that the Army and other services do around software, software modernization and the like. Even our network business is all software-defined. How do you bring devices on and off of networks? How do you collapse networks so they can handle unclass, classified and TS -- and secret and top secret data. That's all going to be driven by software. We don't put new fiber in the ground. We actually find more creative ways to push protective bits and bites over those strands of fiber or over space. So I think the drive will be to consolidate software in a more rapid manner. But I'd also tell you the other side because there have been some announcements out there around consolidating contracts to be able to get enterprise-level agreements and the like. I think there was some of that ink out in the press earlier this week. The purpose of those type of agreements are really to consolidate contracts to get volume discounts, so licensed products. We're not so much on the license side, John. We actually believe that we should be developing software to support the mission, not have the mission conform to the software that I'm actually trying to deliver. So anywhere where the government is looking to do more with less on the enterprise side, on the mission side, I think the government should continue to look for more software solutions. They are faster, they are better, they are cheaper, and they're also able to be modified and changed much more quickly and lethally as the threats change.

Your next question comes from the line of Tobey Sommer with Truist.

I wanted to get your perspective on your pipeline and backlog from -- through a prism in which maybe you could characterize how much of it is new work to the market as opposed to new work to CACI only? And also the extent to which your initiative to kind of move towards outcome-based pricing where you're sort of spearheading something is represented within both of those buckets.

Yes, Tobey, thanks. I'll try to provide some color at a macro level, and I hate to guess on an open line call, but at least give you some level of guidance. Look, new work or somebody else's work, right? That's come up a couple of times here. If CACI is bidding it, it is work that maybe someone else has and we believe we can do faster, better and cheaper. And we've worked with that customer ahead of time, while somebody else is supporting that customer to make sure that we're setting the table in a much more cost-effective manner, and we're delivering much better solutions to that customer than that may be being delivered to them today. Look, as we look at things as counter-UAS building out, we look at the Golden Dome, we look at other things. That percentage of new, new work is going to continue to climb. Do we track that internally? No. Because to us, we're either bringing new, new solutions to a customer or we're bringing to our -- new solutions to our customer that's better than what they're currently struggling through today. So there's plenty of examples in the agile software development area where as customers take work they're doing with others and they want to modernize that and they want to move to an agile software development model, yes, that's going to be work taken from others, but it's a brand-new experience for our customer. And those are both getting equal funding. So we're all about taking software and actually moving our customers forward, whether it's contractually brand-new work that the customer thought of or it's concepts that we've worked them through by investing ahead of customer need because every time we see a customer who's buying "the old field way, " we get to walk in there and show them the art of the possible. So the fact that comes out as new work to us, it's the same. Having said that, today, it's probably -- it's probably, Tobey, 60-40, 70-30 around new, new work and then the 30%, 40% is on the "the old style takeaway work." But I think those terms, the fact that we're not a traditional government services company, we don't talk about direct labor and takeaways from others. This market has completely changed. And if the market hasn't, we sure [indiscernible] have because we're out there looking at ways that we're closer to the mission side, Jeff.

And that actually dovetails nicely into the second part of your question about outcome-based because generally, in the opportunities that John is referring to, we have an opportunity to work with a customer to design a successor program that fills a particular need in a different way, which lets us work through increasing the amount of outcome-based content and focusing less on their traditional contracts, as John described them. So those things actually kind of go together pretty nicely in our view.

Your next question comes from the line of Louie DiPalma with William Blair.

John, you discussed how the Army plans to deploy a mounted variant of TLS Manpack as opposed to the current dismounted version that's being fielded to the brigade. Is the mounted development and rollout included in the recent $400 million contract modification that you announced? And should we be on the lookout for another upsizing beyond the current $500 million contract? And related to this, how many vehicles is Manpack applicable for?

Okay. Let me unpack that. Easy answer first. It is not part of the $500 million TLS Manpack program today. Just as the Canadians took delivery of a handheld solution last year as it pertains to counter-UAS and now they're looking at a mobile variant, the Army is doing that same as you look across the EW/SIGINT space. So this is based on a lot of the CACI commercial companies that we have and that we've purchased over the past number of years. It's software-defined capabilities that needed to be there to grow as the U.S. military requirements evolve. So it's a $500 million program, but actually started from a $1 million OTA, and I'll relate back to Tobey's question, if you really want to talk about quick reaction, performance-based that OTA was $1 million OTA with inside of a year. We put the prototype in place, took it out to the field, worked with the users, made all the software modifications and then began delivering that. So it is -- the TLS Manpack program is a stand-alone program. It is there purely to deliver Manpack solutions. Now the fact that we talk about that we're software-based, this is a perfect real-life example of why solutions that are software-based can be moved to other areas. There are current providers today looking at how do they provide SIGINT and EW at the platform level. So think tanks, think Apaches, think every other mobile asset that a customer has. We've been doing right along, invest ahead of customer need to show if I can put this software on a smaller form factor, I could probably put it in a rack-mounted version or a single chassis version and have that sit inside of an Apache, sit inside of a tank, sit inside of any other moving vehicle there. And I have to tell you, the minute that some of our early deliveries make it out to the field, everybody gets to the dismounted position by riding on something which is mounted, okay? So it's a pretty simple step and repeat to where we're going, that would be brand new work. So yes, we'll all be on the lookout for something that may come along in '26, maybe it's in the next budget cycle, but that is definitely a drive to the United States Army today, and I would be remiss if I didn't say that it's other services are looking at the same type of stuff and repeat.

Operator, I think we have time for one more question.

Your final question comes from Mariana Perez Mora with Bank of America.

So my question is going to be about -- and I know it's probably too early, but your fiscal '27 outlook that you gave for like 9 months ago. If I look at EBITDA margin, you are at the mid-11% a year earlier. You do have some tax benefits, both from like Section 174, but also from this like new ongoing benefit that you're going to have from like the taxes and the revenue growth is quite in line or even like exceeding your expectations. If I do that math, free cash flow should be like the cumulative free cash flow for the 3 years should be more like $1.8 billion versus the $1.6 billion break level that you gave us not so long ago. How are you thinking about that?

Yes. I'll start, and John may want to put a finishing flourish on this. But first of all, I'd point out that we gave 3-year targets. We didn't give FY '27 specifically. It's a 3-year number. And you correctly note that there are several positive developments that we were aware of when we developed the 3-year targets. We are specifically not undertaking to update them. We're happy to talk about it. But you mentioned several points that are positive developments since we developed them. And you would reasonably expect them to improve for things like -- like the Section 174. So we said that we're increasingly confident in our ability to deliver on the 3-year targets, and you're seeing some of that performance now. And I would encourage you to not infer from that, that there's some slowing in '27. We feel increasingly good about the targets and expect to deliver them.

Look, I'll also add, I think it's absolutely refreshing that on this call in 2025, we're talking about generating over a 3-year period, $1.6 billion of free cash flow, if not greater, with high single-digit top line growth and driving our margins to where they are today, if not higher. That has been the absolute focus of the leadership team in this company for a number of years is to make certain we're getting involved in markets that matter not only to our nation, but to our shareholders. And I could not be happier that we're sort of talking this 1.6, [ really ] 1.8 or is it 2 or is it 2.2. I put those 3-year targets out there as a marker to make absolutely certain that as we continue to explain the fact that the government services company that CACI was for the first 50 years is not the kind of services company we are for the next 50 years. In fact, we talk about us. We can use mission tech. We can talk about defense tech, wherever you want to go with that, but all of that drives better solutions for this nation. And at the same time, because we invest ahead of customer need and the contracting vehicles are changing, OTAs, CSOs, FFP that we believe and we are well positioned to do much more bottom line generating work that gives us just outstanding free cash flow and the optionality that comes with delivering more free cash flow as we return capital to our shareholders, we also return it to our customers in ways that invest ahead of customer need. So really appreciate that question.

And one final question coming from the line of Sheila with Jefferies.

[indiscernible]. We are one of the top 3 offensive cyber providers.

Yes, operator, I think we're ready to -- I don't hear anyone. I think we are ready to end the call.

Yes, that's a final question. So yes, I would like to turn the call back over to Mr. Mengucci. Please go ahead.

Thanks, Amy, and thank you for your help on today's call. We'd like to thank everyone who dialed in or listened to the webcast for their participation. We know that many of you will have follow-up questions. Jeff McLaughlin, George Price and Jim Sullivan are available after today's call. Stay healthy, and all my best to you and your families. This concludes our call. Thank you, and have a great day.