Ladies and gentlemen, thank you for standing by. Welcome to the CACI International Second Quarter Fiscal Year 2026 Earnings Conference Call. Today's call is being recorded. At this time, all lines are in a listen-only mode. Later, we will announce the opportunity for questions, and instructions will be given at that time. If you should need any assistance during this call, please press star zero, and someone will help you. 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, Rob, and good morning, everyone. I'm George Price, Senior Vice President of Investor Relations for CACI International. Thanks for joining us this morning. We're 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 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 part of any transcript of this call. I would also like to point out that our presentation will include a 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 go to slide three, please. To open our discussion this morning, here's John Mengucci, President and Chief Executive Officer of CACI International. John. Thanks, George. Good morning, everyone. Thank you for joining us to discuss our second quarter fiscal year 2026 results, as well as our updated fiscal 2026 guidance. With me this morning is Jeff MacLauchlan, our Chief Financial Officer. Slide four, please. I'd like to start the call by reiterating our strategy, why CACI is a company that no longer fits within traditional industry labels, and how we are expanding the limits of national security. You've heard us say many times that strategy is a place we come from. Our strategy defines where we are going, what we are building, and how we are executing with discipline and consistency. We serve seven markets where we possess decades of mission knowledge, so we truly understand what our customers need. Within these markets, we focus on enduring national security priorities with narrow, deep funding streams. We differentiate ourselves by delivering cyber-defying technology to address critical needs with the speed, agility, and efficiency our customers demand. We invest ahead of customer need to show them the hour of the possible, exactly what the current administration is asking for. We've been doing this for years. The market is coming to where we already are. Through deliberate actions, informed investments, and flexible and opportunistic capital deployment, we have expanded our technology portfolio to nearly 60% of total revenue. Over the long term, we expect technology to continue to increase as a percentage of revenue and support margin expansion. I will share some additional information about two areas of our technology portfolio later in my remarks. Our results and accomplishments clearly demonstrate that CACI is not the company we were 10 years or even five years ago. We are continuing to evolve. It's why you see us competing and winning against a wider range of competitors, including defense primes and defense-type companies. It's why we're delivering consistent financial performance despite a dynamic and sometimes uncertain environment. And it's why we are confident we will continue to drive long-term shareholder value. Slide five, please. Speaking of performance, our strong second quarter results are another example of the success of our strategy and execution. We delivered free cash flow of $138 million, which was driven by revenue growth of 6% and EBITDA margin of 11.8%. We won $1.4 billion of awards, representing a book-to-bill of 0.65 times for the quarter, 1.4 times for the first half, and 1.3 times on a trailing 12-month basis. As a result of our strong first-half performance, increased visibility, and the continued momentum of the business, we are raising our fiscal 2026 guidance. Slide six, please. Within technology, we have built a leading position in electronic warfare, which alone represents about $2 billion in revenue. We have also established CACI as an industry leader in agile software development and software modernization, part of our enterprise technology portfolio. And we recently announced a fantastic acquisition, ARKA, which represents the latest step in our technology-driven portfolio evolution and the execution of our space market strategy. These are all areas of significant and enduring investment by our customers, which support long-term growth for CACI. I'll spend some time talking about EW and enterprise technology. Our software-defined capabilities in electronic warfare illustrate how our strategy and technology-driven evolution are driving our performance. It's a critical warfighting domain in an area where we position CACI as a leader by investing ahead of need and delivering differentiated software-defined technology. We've known for years that virtually everything with a power button emits a signal, and today, we are seeing the significance of this in conflicts around the globe and how it's impacting our customers' priorities and their budgets. We have developed and deployed proven technology that allows warfighters to sense, identify, locate, and defeat these signals, whether through targeted non-kinetic effects or by tipping and queuing other systems for kinetical ones. Our software-defined approach provides increased speed, flexibility, lethality, and the ability to adapt as threats evolve, exactly what's needed on the battlefields abroad and in defense of the homeland. We've won a number of programs of record with the Army and the Navy, rapidly developing, delivering, and fielding our EW technology, and based on that success, we see growing demand for other services, including the Air Force. An important benefit of our software-defined approach to EW is our ability to quickly adapt to new mission requirements, accelerate delivery of new capabilities, and sell commercially through alternative acquisition models such as OTAs. We've previously highlighted Merlin and RMT, our latest counter-UAS and counter-space systems, as two examples of this concept. And customers are responding positively to these proactive investments, deploying a Merlin demo unit to the southern border and placing the first production order for RMT. We've been saying for years that software would be the enabler of greater speed, agility, efficiency, and lethality, and we are proving it by rapidly addressing an expanding set of missions. This is a repeatable process. These successes are a clear validation of our strategy and differentiation, and they position us well for additional opportunities and growth in the coming years. Slide seven, please. Enterprise technology is another area where CACI is strategically positioned well ahead of market demand. The current administration has made modernization a clear priority to drive efficiency, transparency, and operational improvement, as well as enhanced security. We've been focused on this for many years, investing in commercial agile software development methodologies and building differentiated capabilities that are driving measurable results and significant value for our customers. That's why we've won the three largest agile software development programs in the federal government. A great example is our work with Customs and Border Protection. We're not just modernizing software. We're delivering transformational efficiency, nearly 200% increase in software releases over the last five years, like-for-like cost reduction, and exceptional software quality. We're also bringing new AI software capabilities to CBP to help secure our borders, including AI-based object tracking technology that we initially developed for the intelligence community. This cross-pollination of innovation is a direct result of our strategic focus and investment approach. Slide eight, please. We continue to see a constructive macro environment and good demand signals from our customers. While post-shutdown activity is still a bit uneven in the near term, our strategy has positioned CACI exceptionally well to outperform in this environment. As you know, 90% of our revenue comes from national security customers, and we are seeing reconciliation funds starting to flow to several areas of our business. As a result of our strong performance and continued business momentum, we are raising our fiscal year 2026 guidance. We now expect free cash flow of at least $725 million, revenue growth of nearly 8%-10%, and EBITDA margin in the 11.7%-11.8% range. Finally, looking at our three-year financial targets, we expect to exceed the $1.6 billion free cash flow target, even after normalizing for the benefit from the changes to R&D capitalization from the one big beautiful bill. As for our revenue and EBITDA margin targets, we are highly confident in our ability to hit the high end, if not exceed them. And I should note that none of our projections include any benefit from our planned acquisition of ARKA. With that, I'll turn the call over to Jeff. Thank you, John. And good morning, everyone. Please turn to slide nine. As John mentioned, we're pleased with our second quarter performance despite the lengthy government shutdown. Our revenue and awards generally reflect the modest shutdown disruption we expected, while our strong margin and cash flow highlight the enduring differentiated elements of our business enabled by our strategy and the deliberate actions that we've taken. In the second quarter, we generated revenue of $2.2 billion, representing 5.7% year-over-year growth, of which 4.5% was organic. While we saw some lingering impacts from the shutdown that impacted program timing and delayed some government material purchases in Q2, our confidence in raising our fiscal 2026 guidance reinforces the broader strength that we're seeing. EBITDA margin of 11.8% in the quarter represents a year-over-year increase of 70 basis points. This performance was driven primarily by strong program execution, timing of some higher margin software-defined technology deliveries, and overall mix. Second quarter adjusted diluted earnings per share of $6.81 were 14% higher than a year ago. Greater operating income, along with a lower share count, more than offset higher interest expense and a higher income tax provision. Finally, free cash flow was $138 million for the quarter, driven by our strong profitability and increasing cash generation from working capital management. Days sales outstanding, or DSO, were 57 days. Slide 10, please. Our leverage at the end of Q2 is 2.4 times net debt to trailing 12-month EBITDA. We intentionally allowed leverage to drift slightly below our target range in anticipation of the acquisition of ARCA. As we announced in the call a month ago, we expect leverage to increase to 4.3 times once the acquisition closes. I'll remind you, though, as I did on that call, that we have a strong track record of successfully and quickly delevering after major acquisitions, which is illustrated by our historical leverage we provide in the appendix. This underscores our consistent financial performance, disciplined approach to capital deployment, and our demonstrated access to capital. In fact, we expect leverage to return to the low threes within six quarters of closing ARCA, based on the strong cash flow characteristics of the combined business. The acquisition of ARCA is just the latest example of our flexible and opportunistic capital deployment strategy and the evolution of our technology portfolio, which positions CACI to deliver long-term growth and free cash flow per share and additional shareholder value. Slide 11, please. We're pleased to be increasing our fiscal 2026 guidance across all metrics. We now expect revenue to be between $9.3 and $9.5 billion. This represents total growth of 7.8%-10.1%, which includes slightly less than two points of growth from acquisitions. We're increasing our fiscal 2026 EBITDA margin to be in the 11.7%-11.8% range, underscoring our strong execution and continued evolving portfolio. As a result of our higher revenue and EBITDA margin outlook, we are also increasing our FY26 adjusted net income guidance to be between $630 and $645 million. This yields an attendant increase in adjusted EPS to between $28.25 and $28.92 per share, representing growth of 7%-9% despite last year's unusually low tax rate. Finally, we're increasing our free cash flow guidance to at least $725 million. As we consistently say, we see free cash flow per share as the ultimate value creation metric, and our FY26 guidance now implies a 65% growth in free cash flow per share. To assist you with your modeling, I'll note that for Q3 revenue, we're comfortable with the current consensus estimate, and we expect second-half EBITDA margin to be consistent with what we saw in the first half. As John mentioned, our guidance does not include any assumptions for ARCA. The increase is solely due to the continued strength and momentum of our current portfolio. Slide 12, please. Turning to forward indicators, all metrics provide good long-term visibility into the strength of our business. Our second quarter book-to-bill of 0.65 times and our trailing 12-month book-to-bill of 1.3 times reflect good performance in the marketplace, even with the protracted government shutdown and slow rebound in award decisions. The weighted average duration of our awards in Q2 was over six years. Our backlog of $33 billion increased 3% from a year ago, and our funded backlog increased 7% for the same period. For fiscal year 2026, we now expect 95% of our revenue to come from existing programs, with 3% coming from recompetes and 2% from new business. Progress on these metrics reflects our successful business development and operational performance and yields confidence in our higher expectations for the year. In terms of pipeline, we have $6 billion of bids under evaluation, over 70% of which are for new business to CACI. We expect to submit another $20 billion in bids over the next two quarters, with over 70% of those being for new business. In summary, we delivered strong results in the second quarter and continue to demonstrate our differentiated position in the marketplace. We are winning and executing high-value, enduring work that supports long-term growth, increased free cash flow per share, and additional shareholder value. And with that, I'll turn the call back over to John. Thank you, Jeff. Let's go to slide 13, please. In closing, I want to emphasize that our continued strong results are not by accident, but rather the direct result of our deliberate strategy and execution. We built CACI to be resilient and differentiated, delivering strong performance despite the sometimes challenging macro dynamics. That's what happens when you focus on expanding the limits of national security. For us, this isn't just a phrase. It describes our relentless focus on anticipating tomorrow's challenges and developing solutions to stay ahead of our customers' needs, not just meet them. What truly differentiates CACI is our ability to shape the future rather than simply respond to it. We don't wait for RFPs. We proactively show our customers what's possible through strategic investments and innovation. This approach allows us to be disciplined in our shop selection, shaping opportunities where we know we can win. As we look ahead, we remain confident in our ability to execute our strategy and deliver on our financial commitments. The momentum of our business, our healthy pipeline, and our strong first-half performance enable us to raise our fiscal 2026 guidance across all metrics. And with the pending addition of ARCA, we're further enhancing our position in the critical space domain, which will drive additional growth and shareholder value. As is always the case, our success is driven by our 26,000 employees who are ever vigilant in expanding the limits of national security. To everyone on the CACI team, I'm extremely proud of what you do every day for our company and our nation. And to shareholders, I thank you for your continued support of CACI. With that, Rob, let's open the call for questions. Thank you. We will now begin the question-and-answer session. If you'd like to ask a question, please press star one in your telephone keypad. If you would like to withdraw your question, simply press star one again. We ask that you please limit yourself to one question and one follow-up. Your first question comes from a line of Gavin Parsons from UBS. Your line is open. Good morning, guys. You have maximum leverage. Morning, Gavin. Good morning. Yeah, so in light of recent developments around the world, I wanted to ask higher level what higher U.S. military OPTEMPO means for CACI specifically and how that changes the opportunity set in front of you. Yeah, thanks. Terrific opening question. Look, today's OPTEMPO is extremely good for CACI because it requires much of what traditional companies, frankly, don't traditionally do. Our customers are demanding mission technology at the speed of mission. So we can talk about exquisite EW, differentiating rogue drones from friendly ones and mitigating risk. I like to say, "Welcome to EW." Enemy changes their tactics and their technological footprint, "Welcome to EW." Getting 20 helos in and out of a country without any issue, "Welcome to EW." We, frankly, do EW better and more strategically and more surgically than anyone. So what does the OPTEMPO demand? A few things. One would be resiliency. I look at our solutions. They're software-defined. They share a common baseline with a multitude of other sensors. What that really means is when one sensor anywhere detects a new signal, all of its features and how to mitigate that signal is sent across a broad network of already deployed sensors. The OPTEMPO demands speed. We've been really clear that we build enhancements and mitigations almost instantaneously. It demands optionality. So whether you're looking at handhelds, backpack, mobile, fixed, short-range, long-range solutions, they all come with a common software baseline. And what the customer absolutely demands is it has to have some type of optionality that allows them to acquire commercially under FAR Part 12. So to us, think of your OPTEMPO, quick response, build and delivery, provide your customers your best tech, provide investors with increased shareholder value, commercial terms, commercial investment model, commercial margins. At the end of the day, we're doing a lot of what commercial companies do, and we deliver EBITDA as well. Great. Thank you very much. And then it looks like the pipeline of submitted bids remains a little low exiting the quarter, but the expected bid number filled up pretty nicely in the quarter. Can you talk a little bit about how you're expecting things to flow through that pipeline and what the cadence of conversion might look like as we move through the rest of the year? Yeah, you're connecting those dots the same way we do, Gavin. One of the implications of the protracted shutdown that is a little less obvious, you could see the awards, obviously, but what you can't see is sort of the slower level of activity in ramping back up. And I think the length of the shutdown, combined with the ending of it leading into the holidays, put some amount of acquisition processes sort of behind the curve. We do see that filling back up. We feel that getting back on pace, and that's visible, I think, in the pipeline when you see what we plan to submit over the next 180 days. We, obviously, for competitive reasons, aren't going to comment on any particular opportunities or make any predictions about win rate or anything like that. But you can look at our historical performance on those metrics that we provide regularly on a consistent basis over a number of years, and you can draw your own conclusions from that. Great. Thank you all. Thanks. You bet. Your next question comes from a line of Peter Arment from Baird. Your line is open. Yeah, good morning, John and Jeff, George. Nice results. Thanks. John, could you maybe give us an update? You recently had a protest that you won. I think it was last Friday. It was a big award that you won in August. How should we think about kind of the timing of that and just maybe any color you want to give around the protest? Thanks. Yeah, sure. So as you mentioned, the JTMS protest was officially denied last week. So we are in the process of starting to ramp up on that program. We've already had very detailed meetings with our customer during the protest period. You would imagine we were ready for go as soon as this was announced. It is a longer-term technology program, so that's going to ramp up over an extended period of time. So I think it would be more of a benefit to growth in 2027, 2028, but clearly, given the timing of the protest decision, that's going to help us drive our fourth quarter revenue number, which I know you'll all be watching. It's a 10-year, $1.6 billion job. It's going to be task order-based, which is very, very standard. And look, we're extremely pleased. We're going to take the off-the-shelf software platform. We're going to use SAP, which is a strong OEM. We're going to take SaaS-based solutions. We're going to use our Agile software, our Agile Solution Factory, and our Agile software development processes. And I would expect, Peter, that JTMS is going to consolidate a large number of disparate legacy systems, which falls directly in line with some of the EOs that we've read. And we have a couple of other protests out there still. We're looking for them to resolve by the end of this month, and we'll be sure to advise all of our investors when that happens. That's a great call. Thanks, John. And just as a quick follow-up, you talked about reconciliation funding starting to flow. Could you just maybe, and there's been a lot of activity behind the scenes on Golden Dome, how do you see that kind of impacting as you think about the second half of this year, but also the setup for 2027? Yeah, thanks, Peter. Look, we have our eyes on reconciliation funding, and I know there was a lot of talk. Is it going to be early in 2026, late in 2026? Is it built over into 2027? I think at the end of the day, the answer is yes to all three. For us, we're seeing border security programs being positively impacted by seeing reconciliation funds starting. I did share something in my prepared remarks about taking some Intel AI-based technology that was a "plus-up" using our reconciliation funds. You're going to see a lot of that hit in the counter-UAS area where we've already seen indications of that. Space programs, we've been called on to look at modernizing a lot of the critical Space Force infrastructure, so we're working on that. I believe there was an EO out around modernization of Department of Defense financial and logistics systems that ties directly to that EO. We are seeing reconciliation funds show up there, and then, as it sort of relates to Golden Dome, we are seeing a number of intelligence programs receive additional funding around left of launch because that provides the ultimate situational awareness when you're looking to protect this nation in a Golden Dome scenario, so we have included a range of outcomes in our updated guidance. Left goalpost, clearly a smaller amount of funding. The right goalpost, more funding. But look, at the end of the day, anytime somebody wants to add $150 billion to a market that this company is doing extremely well in, it's a constructive macro environment overall and really just doubles down on the strong demand signals that a company like us can make great use of. So thank you for those questions. Appreciate the call. Thanks. Your next question comes from a line of Colin Canfield from Cantor. Your line is open. Hey, thank you for the questions. We're maybe starting out with the Federal Acquisition Regulation. You mentioned it before, John. Just talk us through kind of where are we at in terms of the reform of the FAR, and how should we expect both the magnitude and timing in terms of impact on any kind of, we'll call it CACI, cost-plus exposure? Yeah. I mean, we're pretty much in line with the acquisition reform. There's a large number of EOs out there, and there's a large amount of print around driving from cost-plus to firm fixed price. And are we going to completely move from FAR Part 15 to FAR Part 12, or are we going to tuck elements of 12 into 15? We're just going to go 12. I mean, there's a whole bunch of different avenues. What I like about what has come out and what's great for this company is that there's a new record recognition and understanding of exactly what FAR Part 12 is, right? I mean, I think you're seeing that tied to OTAs. Look, at the end of the day, I think in items that are not highly specific but could be borne by our own corporate investments and taken to the government in an 80% solution manner, and then do some development work, co-development with government funds and our funds, then offer that into a long run of production. I mean, I think that's the ultimate best way. We're seeing other long-term cost-plus programs, right, Colin? Those are trying to be moved into some different investment models, which is great. We don't possess any of those. So we're still doing some cost-plus work, but make no mistake, this company was intentionally built to have a FAR Part 12 commercial part of our business and a FAR Part 15. We're able to provide customers either and/or both. And it's really driven the $2 billion of electronic warfare that we've been talking about. So we are very well poised to support where the government's going. TLS-BCT Manpack, outstanding example. Even RMT, even though it wasn't a specific OTA, they had a lot of investment on our part that then led to a larger production order. So I think we're probably the third or fourth inning of acquisition reform. But for this company, I believe that our results have shown that we're well aligned, and we're going to drive even greater growth as we go forward. Colin, I'd add to John's point. We really are finding our rhythm here on OTAs. We've seen two and a half times the level of OTA contracting in the last two years that we saw in the previous five years. So it's really a mechanism that we and our customers are well aware of and taking advantage of. Got it. No, I appreciate that, Color. And then moving over to ARCA, maybe talk through kind of how you think about the scalability of the related intelligence services that you might gain or kind of grow over time thanks to the acquisition of the Danbury Optics business. Essentially, beyond just manufacturing work, I think back to when you first bought SA Photonics and essentially utilizing the space-based hardware to inform the intelligence business. Maybe just talk through kind of how you think about that earnings algorithm and then the scalability of it and where there's any kind of roadblocks that we should think about in terms of data conflicts and the like. Okay. I'm going to unpack that one, Colin. Look, let me just start off by saying that I'll share what we can share. We're going to hold a lot of discussions around financials and backlog and the like until we get that across the finish line and we close. But it suffices to say that it's great for us to be able to share what we see in this company and in the business. They are a leading developer and supplier of sense and sense-making capabilities. Make no mistake, they are involved in just about every critical national security mission. What I liked about it, similar to this company, they're at the forefront of technology developments, and they've been there since the Cold War. So these capabilities are not new. How they have to deliver is not new. The architectures that ARCA delivers into literally have acquisition plans that go out as far as planning goes to around 2040. They are right in the middle of long-term growth funding streams for both DOD and classified and aerospace budgets. They're focused on the fastest-growing parts of the market. Their laser warning systems are equipment of record on every platform to which they deliver. And then talking about the Danbury business to your other set of questions, extremely high technical barriers to entry. It's an environment of constant capability and upgrades. Their contract portfolio, combined with their outstanding record of execution, even in fixed-price environments, does distinguish them with their customers. When I looked at this business, and we've been studying it for quite a long time, the folks at BlackRock continued to invest in this business. Blackstone, sorry. Continued to invest in this business. They continued to understand that the national security world needed an asset like ARCA, so they didn't hold it for five years. They grew it, and they invested in it. What I like about them is they invest ahead of need. They innovate and execute with agility. They deliver predictability given cost and schedule focus, so they are well set up to the earlier question around acquisition reform. They are well understanding of cost-plus versus firm-fixed-price. They do have a tremendous backlog that we'll be able to talk about when we get, hopefully, as we get to the end of our third quarter, and we shouldn't ignore the sense-making part of their business. That's a lot of work that they do similar to us in an Agile software development manner. They work on parts of the intelligence data. We work on other parts. They do some things that we don't do. We do some similar things. But they have differentiated capabilities. They have long-duration contracts. They're involved in very critical national security programs. Nothing speaks larger than this company doubling down again in the space market than this acquisition. I know it drives our leverage up to 4.3 and such. We have the right buy-down mechanism. At the end of the day, you make bold investments to drive bold growth. And that's what this acquisition is about. And this is why we're very involved in the space market and driving future growth there. Appreciate the questions. Thank you. Your next question comes from a line of Seth Seifman from JPMorgan Chase. Your line is open. Good morning. This is Rachel on for Seth. Morning, Rachel. Morning. Digging more on Peter's question, how are you thinking about CACI's addressable market from the reconciliation bill, both for CEOs in general and Merlin more specifically? And how are you thinking about that market growth in the coming years? Yeah. I knew as soon as I shared that we had a $2 billion slice of revenue in EW, we'll be all looking for growth rates. News flash, I'm probably not going to share what we see. But look, the reconciliation funding will do a lot in the EW area because, as you all know, we consider counter UAS being part of our EW market. It's probably worth spending just 20 seconds on why we answer questions like this, like that, okay? If we provide a cyber effect to mitigate a dangerous drone, is that cyber or is that counter UAS? The answer is it's all EW. So that's why we lump this in one area. Because we share software baselines, we share talent, we share technology solutions. So the reconciliation dollars is tens of billions of dollars to our addressable market. We continually assess that, as many on this call know. We're looking at about a $300 billion TAM. We're roughly a $9.4 billion company. Plenty more room to go grow. Even though that reconciliation funding is driving that, the world of counter UAS is going to completely explode beyond what the reconciliation funding needs. We're involved in our national marketplace. You mentioned Merlin. We've done some outstanding work there. It suffices to say in the counter UAS area, there's no less than about 25 acquisition organizations that have stood up. I actually brought some of my notes. There's eight within DOD, six within DHS. You've got DOT, the FAA, Department of Justice, Department of Energy, Department of State, and Department of Elemental Fee. There's a lot of folks out there. The acquisition infrastructure is just getting set. We're actively engaging to expand our presence specifically with Gietta 401, DHS, and then Golden Dome. So there's a great spend looking to be done here, and we are extremely well positioned. Great. Thanks. And then are there any specific items to call out in the civil business? News over the last year plus has been pretty negative about the demand environment, and yet CACI has grown in the mid-teens on average over the period. Yeah. That's really dominated by our CBP work, DHS work, and the ramp-up on NASA and NCAPS. So it's a little different flavor of civil than you may see in some others, really driven by DHS and NASA. Great. Thank you. Yeah. Thanks, Rachel. Your next question comes from a line of Scott Mikus from Melius Research. Your line is open. Morning, John and Jeff. Morning. A quick question. With all the acquisitions you've made over the past 14 years and the announced deal of ARCA, I tend to find that you're shifting more away from services, and you're increasingly becoming defense electronics suppliers, in particular L3Harris. But just given that the government is actually taking an ownership stake in L3Harris's missile solutions business, do you think that puts CACI and L3Harris's other competitors at a disadvantage when competing for work with the Pentagon, given that the government will own a stake in L3Harris? Yeah. So awesome question. Look, we see what's going on, and we've read about all of those various engagements. But at the end of the day, we're seeing outstanding demand for our technology that we deliver. We're able to meet that demand. We continue to execute our business well. We continue to invest ahead of need and have access to capital should we need to enhance our delivery capabilities. See, what makes us different is that we got into the market at a time where we expected that because of one of the earlier questions, because of the OpTempo and because of the need to not only protect other countries and other nations and our interests abroad, but also defend our nation, that it was going to require the fact that we would ourselves begin to invest ahead of customer needs. So we are one of those companies. We have a NAICS, GICS, whatever code you want to call it that makes us a government services company. But it's been a number of years since you all asked me what my bench strength is. It's been a number of years since you asked me what my direct labor numbers were because we're not that company. So I enjoy being compared against others who are trying to make changes to adjust. Okay? Those are changes you make because change has been presented. We've actually built this company purpose-built in this last instantiation of CACI to be in seven markets with strong funding streams that drive shareholder value in year-over-year growth, regardless if the government shut down or not, regardless if reconciliation budgets are slightly behind plan. Okay? We're not a quarter-to-quarter company. We're a year-to-year, and we're going to be a decade-to-decade company. We are exactly driving this business and measuring ourselves to make sure we are providing eye-watering technology to the warfighting and intelligence community. That's what makes acquisitions like SA Photonics so important and LGS and Mastodon and ARCA and others that's driving where this company goes. I really appreciate that question. There's a lot of other things that are going on within this marketplace. We focus on what we can control, and we like to think that we've got an outstanding strategy that moves along with the times. I think if you've been a shareholder in this company the last 10-12 years, you've been quite excited by the way we have navigated different funding forces and moving this company from delivering people to delivering enterprise and mission tech. Thanks for that question. Okay. And then just a quick question. I wanted to follow up on Merlin. I don't know if I missed this earlier in the call. But are there any ITAR restrictions or obstacles that would prevent you from selling that internationally? No. The actual system itself, no. There's a software load which has different ways to mitigate specific threats. And as you would imagine, like any weapons system, there are software and hardware provisos of what the U.S. government allows all of us in the defense technology space to be able to deliver. So there will be some software provisos with that. But when it comes to defending this homeland, which is what Merlin was specifically built for, there are no issues of what we can do in the U.S. between finding and providing exquisite non-kinetic effects to remove this entire drone layer threat to the homeland. Okay. Got it. Thanks for taking the questions. Yeah. Thanks so much. Sure. Your next question comes from a line of Toby Sommer from Truist Securities. Your line is open. Thank you. I was wondering if you anticipate another strong year of defense spending growth in 2027. The president articulated a relatively large indication, and I'm wondering what your thoughts are on the matter. Yeah. Toby, thanks. Look, I did read the government fiscal year 2027 tweet of $1.5 trillion. A little extra color. I believe it's supported by SASC and HASC, but I'm not clear whether it has support of the appropriators. I think we've got a little bit of time to see this one play out, and I also think it's still early, so we'll have to wait and see what comes from the government fiscal year 2027. President's budget request, from what I understand, will be a little bit later this year because it usually tags along when the State of the Union announcement is, so we may see it a few weeks off. But look, I've often said this company where I don't focus on the budget top line. Either way, our $300 billion TAM for a $9.4 billion company, I think we have plenty of room to grow. We have shown that when budgets have decreased and when they've increased. I think we're in the right markets, the right capabilities, and the right customer sets, and at the end of the day, in the national security realm, if the threats present themselves, I've never seen this nation not invest to protect us either abroad or at home. Thanks, John. My follow-up would be of the large marquee contract wins that the company has won over the last maybe few or handful of years, how much incremental program ramp remains in front of the company to help support future growth? Yeah. That's no small amount. I mean, some of the recent contract programs that we've won, we've talked about the fact that the changing profile is such that the early phases of the program are really focused on designing and developing the balance of the program. In fact, we're still seeing growth in ITAS. Earlier in this call, we talked about the fact we pointed out the growing NASA and NCAPS activity, even though those wins were still a couple of years ago. So if you think back to the ramp profiles that I talked about in our investor day, I guess over a year ago now, there were three or four sort of standard profiles, and most of our longer-term wins have been the profile where we don't really sort of reach our max until we're a good three or four years into the program. We have wins from the last several years that are still ramping up. Yeah. Toby, I'd also add a perfect example of that would be Spectral, right? We're in our third year, I believe, on Spectral. We have just recently done all the paperwork and testing that we needed to submit that would lead to a Milestone C decision, and that is one that once we receive that, that allows us to get into low-grade initial production, which then starts to ramp Spectral. So just one of many examples. Yeah. Exactly. Right. Thank you very much. Bye. Your next question comes from a line of Jonathan Siegmann from Stifel. Your line is open. Good morning, John, Jeff, and George. Thanks for taking my question. Yeah. Good morning. Sure, Jon. Hey, so I thought margins were definitely good news for the quarter and the second time that it's really beaten your expectations. Maybe for you, Jeff, can you talk a little bit about what the drivers are? We noticed our indirect costs are third quarter in a row less than 21% of revenues. Just any one-time things to consider or how to think about the upside here? Thank you. Yeah. Thanks, John. There's a couple of things going on in here. We've talked a little bit about mix. We continue to see favorable acceleration in the technology part of the business, which clearly has positive margin implications. You also notice the indirect cost number. We're in our fourth year now of doing something that's pretty hard to do, which is reducing indirect cost as a percentage of running the business while we're in a strong growth mode. Organizations have a natural impulse to grow indirect cost in times of accelerating business activity, and we have been really hyper-focused on making sure that we don't do that. So in absolute dollars, while there is some modest occasional increase in spots that's consistent with what we talk about often, and John has a lot to say about investing at a need, and we're certainly not giving any of those things short shrift. We're investing where we need to invest, but at the same time, we're resisting the impulse to just sort of let the infrastructure grow as the top line grows. So both the technology revenue component acceleration and the management of the cost structure are both strong drivers of the margin performance that you see. Thank you. And then maybe if I could flip one more for John. Recently, we've seen some unexpected displeasure with dividends and buybacks by the government among the contractors. So the majority of the industry prioritizes that, but CACI has only done opportunistic buybacks and prioritized M&A. So the question is: the Pentagon clearly is not supportive of large-scale consolidation, but how does the Pentagon react to the acquisition scale that CACI does? Thank you. Yeah. I mean, I haven't heard a lot about any blocking us to continue to do smart acquisitions that support the national security infrastructure, which at the same time then, as a product of doing that, drives shareholder value. Look, we've read the EO, and we are supporting it. We believe we're in line with it. We have strong execution. We deliver where we're asked to deliver. We continue to invest ahead of need for probably seven years is where we've been on that model. There's been a lot of talk about some of the larger players divest us. Do we unwind the current DIB we have today? I don't see that reaching us on the unwind piece. Should that happen, we're a buyer of capability and customer relationships that continue to drive us forward in these seven markets. And if that were to happen and were to become much more specific, is that an opportunity for us to look at pieces of other businesses that may have a better fit here that allows them to transform the parts of their business that are strongly FAR Part 15 and get into more of an agile commercial model so we can address the nation's needs better? Then that would be additional M&A opportunities for us. But I don't see anything that we're doing today that's in conflict with that EO, and we'll continue to watch where that one goes. Thanks, Jon. Thank you. Thank you. Your next question comes from a line of Mariana Perez Mora from Bank of America. Your line is open. Thank you so much. Good morning, gentlemen. Good morning, Mariana. So my first question is going to be around the Department of Defense wanting to hire more technical talent. They telegraphed that in the past, but then through this Advana transformation memo they put out a couple of weeks ago, they also mentioned that they want to hire more technical talent. What does that mean for CACI? Do you see any pressure to any FTE type of roles, or how are you thinking about that? Yeah. Thanks, Mariana. Yeah. I think it's January 12th was when that one came out. When we look at the Advana program, I think it's in three different teams. And just like a warfighter data platform team, the applications for the warfighter data, and then a financial management team. We look at that as a great opportunity on the financial management team. If I read the language correctly, it has a lot to do with financial and acquisition readiness systems. And it's been this drive to drive a clean FY 2027 defense working capital fund and clean FY 2029 pan-agency audit. We're really big on financial modernization. We've got great examples with both the U.S. Air Force and the U.S. Marine Corps, and then we're already passing major audits. So for us, on that pillar, that one reads well. On the war data platform team and the apps, we already do that across the federal government today. On the hiring piece, it's not a risk to us. We actually deliver technology in those areas. We don't provide FTEs. There may be other government services companies that do, but we're not one of them. We're out there delivering outcomes to customers in those spaces, which is why we don't track just pure FTE deployment. And this isn't the first time the government's looked to "insource" or bring that kind of work in-house, but that's a good question for them to answer. But it just doesn't present. We don't see any threat from that EO. Thank you so much. And one more trying to assess potential risks. And I think you have done, through the prepared remarks and the questions, a really good job explaining why you're well-positioned to commercial terms, fixed price, OTA. But on the other side, do you see any risk for any of your existing early-stage programs to get canceled or stop work order or anything kind of like a stop and realign, redesign in order to have that contract or that program be more commercial in terms of 80% type of capability, but also being able to be higher volumes, ramp up faster, or even cheaper? Do you see that risk in any early-stage programs? Yeah. No. I mean, I don't see any risk. In fact, I like the opportunity of what the government's taken a look at. One example. You have two examples. One would be Customs and Border Protection, our BEAGLE program, and one might be TLS Manpack. If you look at BEAGLE, we approach the customer and ask them, "Why are you buying 400 FTEs when you should be paying a fixed rate for every new upgrade to every app that you have?" So we were ahead of government thinking on that and worked with a tremendously creative acquisition folks at DHS within Customs and Border Protection to actually put that program in place, and that's driven two other customers, NASA and NCAPS, Transcom, JTMS. They're not buying people. They're actually putting task forces in place to actually deliver outcomes. On the TLS-BCT Manpack one, look, that was a job that was owned by a major defense contractor. And we went and we approached the Army with a concept of, "Let's put an OTA in place. Let's do some development work. And then let's take our 80% solution and see where you can go with that." So those are both examples of not the government coming to us and asking us to change what we're currently doing. We actually approached them or we were in concert with them on TLS-BCT Manpack. So the OTA model does work. You have to be willing to invest upfront. You have to have mission knowledge, and you have to have something that the government absolutely needs and wants. And that differentiates us every day, including Sundays. The one thing we need to understand about OTAs that we're going to see as the government moves more towards that, you're going to see smaller initial awards for the development work, but it's going to lead to a faster, larger production value of awards. So when I think about and I wouldn't call it risk, Mariana, but when I think about how we look at businesses like ours, we're used to nailing down multi-billion dollar awards. In the pure technology areas where a customer is going to do FAR Part 12, the initial awards are going to be $1 million to $5 million or to $7 million. But much sooner than that, we'll see that actual full-scale production award come out. And that's what you saw with TLS-BCT Manpack, a $1 million initial award and a $500 million production contract. Yeah. The size will not correlate with the strategic significance. Thanks, Mariana. Thank you so much, for the Color. Yeah. You bet. Your next question comes from a line of John Godin from Citigroup. Your line is open. Morning, John. Hey, guys. Thanks for fitting me in here. I wanted to ask about margins. The margin performance has been very strong. Of course, there's been some mix in there. This isn't about sort of new multi-year guidance, and obviously ARCA kind of will change the margin outcome, but this bigger picture wanted to dialogue about where margins could go. If we look at recent incremental margins, they would suggest it could go a lot higher. What are some of the puts and takes as we think about margins from here? You've done a tremendous job the last few years getting margins higher. I'm just curious if that trend can continue. Yeah. John, I think you may have heard us talk about this before, but this is really, for us, maybe somewhat not intuitively, a free cash flow question. The decisions that we make, our North Star is free cash flow. So if we have the opportunity to invest in a way that accelerates the top line and maintains margin, we'll generally select that over expanding the margin because we're generating free cash flow. So it's really about dollars and free cash flow generation. And we're in the happy position of seeing a pretty opportunity-rich environment and plenty of opportunities to invest. And I think as we're starting to see the fruits of the accelerating technology content along with the management of the cost structure that I talked about a few questions ago, I think we actually have plenty of opportunities to invest and maintain or modestly expand the margin, but more importantly, and more excitingly, have opportunities to further accelerate our free cash flow generation. Perfect. That gives me a great sense. Appreciate it. You bet. Thanks, John. And your last question today comes from the line of Sheila Kahyaoglu from Jefferies. Your line is open. Good morning, guys, and great quarter. Thanks, Sheila. Thanks, John. Expand upon John's last question. As we think about margins, Jeff, you just gave a bunch of long-term thoughts. That's super helpful. Maybe a little bit more on the long term. Do you think this is the new margin range for CACI, and how much further can it go? And then maybe short term, you mentioned some disruption to material purchases due to the shutdown. How do we think about that mix factoring into the second half margin? The material purchases are not, I mean, they're a fact, obviously. We saw them, and it was a contributor. Not as big an issue as the mix in terms of weighting. You will see some growth. We do expect to see some growth in the material content year over half over half, but it won't significantly impact. It's considered in our guidance. It won't significantly impact the margin expectations that we've communicated to you, if that gets to your question. Yep. Perfect. Thank you so much. You bet. That concludes our question and answer session. I will now turn the call back over to John Mengucci for some final closing remarks. All right. Well, thanks, Rob, and thank you for your help on today's call. We want 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 and George Price and Jim Sullivan are available after today's call. Please stay healthy, and all my best to you and your families. This concludes our call. Thank you, and have a great day. This concludes today's conference call. Thank you for your participation. You may now disconnect.