CACI INTERNATIONAL INC DE

Previous wording

The Company provides distinctive Expertise and differentiated Technology to customers in support of national security and government modernization.

Current wording

The Company provides distinctive Expertise and differentiated Technology to customers in support of national security.

Previous wording

•Expertise – We deliver talent with the specific technical and functional knowledge to support internal agency operations. Examples include functional software development expertise, data and business analysis, and IT operations support. We deliver talent with technical and domain knowledge to support the execution of an agency’s mission. Examples include engineering expertise such as naval architecture, marine engineering, and life cycle support; and mission support expertise such as intelligence and special operations support, and network and exploitation analysis.

Current wording

•Expertise – CACI delivers talent with the specific technical and functional knowledge to support internal agency operations. Examples include functional software development expertise, data and business analysis, IT operations support, naval architecture, engineering, and life cycle support intelligence and special operations support, and network and exploitation analysis.

Previous wording

•Technology – CACI provides software development at scale using open modern architectures, DevSecOps, and agile methodologies; and advanced data platforms, data operations and analyst-centric analytics including application of Artificial Intelligence and multi-source analysis. We provide Network and IT modernization; Commercial Solutions for Classified (CSfC); the customization, implementation, and maintenance of commercial-off-the-shelf (COTS) and enterprise resource planning (ERP) systems including financial, human capital, and supply chain management systems; and cyber security active defense and zero trust architectures. We develop and deploy multi-domain offerings for signals intelligence, resilient communications, free space optical communications, electronic warfare including Counter-UAS, cyber operations, and Radio Frequency (RF) spectrum awareness, agility and usage. CACI invests ahead of customer need with research and development to generate unique intellectual property and differentiated technology addressing critical national security and government modernization needs.

Current wording

•Technology – CACI provides technology that addresses our customer's most challenging needs. This includes agile software development using open modern architectures and DevSecOps; advanced data platforms and applications augmented by Artificial Intelligence (AI), Enterprise Resource Planning (ERP) systems, Electromagnetic Spectrum (EMS) capabilities, photonics and network modernization. CACI invests ahead of customer need with research and development to generate unique intellectual property and differentiated technology addressing critical national security needs.

Previous wording

We carefully follow federal budget, legislative and contracting trends and activities and evolve our strategies to take these into consideration. For the government fiscal year (GFY) ending September 30, 2023 (GFY23), defense and nondefense funding levels represented increases of approximately 10% and 6%, respectively, over GFY22 enacted levels. On June 3, 2023, the President signed into law legislation that suspended the federal debt limit until January 2025 and capped discretionary spending in GFY24 and GFY25. Specifically, GFY24 defense spending is capped at $886 billion, an increase of 3% and in-line with the President’s GFY24 budget request, and GFY24 nondefense spending is capped at levels similar to GFY22 (though after various adjustments would essentially be flat with GFY23 levels). For GFY25, discretionary spending growth (both defense and nondefense) is capped at 1%. On March 23, 2024, the President signed into law an appropriations bill that funds the federal government for GFY24, generally consistent with the terms set forth in the debt limit legislation signed in June 2023. Earlier in March, the President released his GFY25 budget request that was also generally consistent with the terms set forth in the debt limit legislation signed in June 2023. While future levels of defense and nondefense spending are difficult to project, particularly given ongoing budget negotiations in Congress, we believe that there continues to be bipartisan support for defense and national security-related spending, particularly given the heightened current global threat environment.

Current wording

We carefully follow federal budget, legislative and contracting trends and activities and evolve our strategies to take these into consideration. For the government fiscal year (GFY) ending September 30, 2023 (GFY23), defense and nondefense funding levels represented increases of approximately 10% and 6%, respectively, over GFY22 enacted levels. On June 3, 2023, the President signed into law legislation that suspended the federal debt limit until January 2025 and capped discretionary spending in GFY24 and GFY25. Specifically, GFY24 defense spending is capped at $886 billion, an increase of 3% and in-line with the President’s GFY24 budget request, and GFY24 nondefense spending is capped at levels similar to GFY22 (though after various adjustments would essentially be flat with GFY23 levels). For GFY25, discretionary spending growth (both defense and nondefense) is capped at 1%. On March 23, 2024, the President signed into law an appropriations bill that funds the federal government for GFY24, generally consistent with the terms set forth in the debt limit legislation signed in June 2023. Earlier in March, the President released his GFY25 budget request that was also generally consistent with the terms set forth in the debt limit legislation signed in June 2023. While future levels of defense and nondefense spending may vary and are difficult to project, we believe that there continues to be bipartisan support for defense and national security-related spending, particularly given the heightened current global threat environment, including the conflict in Ukraine.

Previous wording

While we view the budget environment as constructive and believe there is bipartisan support for continued investment in the areas of defense and national security, it is uncertain when in any particular GFY that appropriations bills will be passed. During those periods of time when appropriations bills have not been passed and signed into law, government agencies operate under a continuing resolution (CR), a temporary measure allowing the government to continue operations at prior year funding levels.

Current wording

While we view the budget environment as constructive and believe there is bipartisan support for continued investment in the areas of defense and national security, it is uncertain when in any particular GFY that appropriations bills will be passed. During those periods of time when appropriations bills have not been passed and signed into law, government agencies operate under a continuing resolution (CR), a temporary measure allowing the government to continue operations at prior year funding levels. On September 27, 2024 the President signed a CR for GFY25 that extends funding for all 12 spending bills through December 20, 2024.

Previous wording

Depending on their scope, duration, and other factors, CRs can negatively impact our business due to delays in new program starts, delays in contract award decisions, and other factors. When a CR expires, unless appropriations bills have been passed by Congress and signed by the President, or a new CR is passed and signed into law, the government must cease operations, or shutdown, except in certain emergency situations or when the law authorizes continued activity. Were a shutdown to occur, it could have adverse consequences to our business and our industry. We continuously review our operations in an attempt to identify programs potentially at risk from CRs and shutdowns so that we can consider appropriate contingency plans.

Current wording

Depending on their scope, duration, and other factors, CRs can negatively impact our business due to delays in new program starts, delays in contract award decisions, and other factors. When a CR expires, unless appropriations bills have been passed by Congress and signed by the President, or a new CR is passed and signed into law, the government must cease operations, or shutdown, except in certain emergency situations or when the law authorizes continued activity. We continuously review our operations in an attempt to identify programs potentially at risk from CRs so that we can consider appropriate contingency plans.

Previous wording

We provide Expertise and Technology to government customers. We believe that the total addressable market for our offerings is sufficient to support the Company's plans and is expected to continue to grow over the next several years. Approximately 74% of our revenue comes from defense-related customers, including those in the Intelligence Community (IC), with additional revenue coming from non-defense IC, homeland security, and other federal civilian customers.

Current wording

We provide Expertise and Technology to government customers. We believe that the total addressable market for our offerings is sufficient to support the Company's plans and is expected to continue to grow over the next several years. Approximately 75% of our revenue comes from defense-related customers, including those in the Intelligence Community (IC), with additional revenue coming from non-defense IC, homeland security, and other federal civilian customers.

Previous wording

Results of Operations for the Three and Nine Months Ended March 31, 2024 and 2023

Current wording

Results of Operations for the Three Months Ended September 30, 2024 and 2023

Previous wording

Revenues. The increase in revenues for the three and nine months ended March 31, 2024, as compared to the three and nine months ended March 31, 2023, was primarily attributable to new contract awards and growth on existing programs.

Current wording

Revenues. The increase in revenues for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was primarily attributable to new contract awards and growth on existing programs.

Previous wording

The following table summarizes revenues by customer type with related percentages of revenues for the three and nine months ended March 31, 2024 and 2023, respectively(in thousands):

Current wording

The following table summarizes revenues by customer type with related percentages of revenues for the three months ended September 30, 2024 and 2023, respectively(in thousands):

Previous wording

Direct Costs. The increase in direct costs for the three and nine months ended March 31, 2024, as compared to the prior year period, was primarily attributable to direct labor and subcontractor costs from organic growth on existing programs and higher materials costs. As a percentage of revenue, direct costs were 66.6% and 67.9% for the three and nine months ended March 31, 2024, respectively, and 65.6% and 65.9% for the three and nine months ended March 31, 2023, respectively. Direct costs include direct labor, subcontractor costs, materials, and other direct costs.

Current wording

Direct Costs. The increase in direct costs for the three months ended September 30, 2024, as compared to the prior year period, was primarily attributable to direct labor and materials costs from organic growth on existing programs. As a percentage of revenue, direct costs were 68.8% for the three months ended September 30, 2024 and 2023, respectively. Direct costs include direct labor, subcontractor costs, materials, and other direct costs.

Previous wording

Indirect Costs and Selling Expenses. As a percentage of revenue, indirect costs and selling expenses were 22.2% and 22.1% for the three and nine months ended March 31, 2024, respectively, and 23.5% and 23.6% for the three and nine months ended March 31, 2023, respectively, driven by cost efficiencies across the Company. The increase in indirect costs and selling expenses for the three and nine months ended March 31, 2024, as compared to the prior year periods, was primarily attributable to increased expenses due to a larger workforce, resulting in increased fringe benefits, as well as an increase in professional services.

Current wording

Indirect Costs and Selling Expenses. As a percentage of revenue, indirect costs and selling expenses were 20.8% and 21.9% for the three months ended September 30, 2024 and 2023, respectively, driven by cost efficiencies across the Company. The increase in indirect costs and selling expenses for the three months ended September 30, 2024, as compared to the prior year periods, was primarily attributable to increased expenses due to a larger workforce, resulting in increased fringe benefits.

Previous wording

Depreciation and Amortization. Depreciation and amortization for the three and nine months ended March 31, 2024 was consistent with the prior year periods.

Current wording

Depreciation and Amortization. Depreciation and amortization for the three months ended September 30, 2024 was consistent with the prior year periods.

Previous wording

Interest Expense and Other, Net. The increase in interest expense and other, net for the three and nine months ended March 31, 2024, as compared to the prior year period, was primarily attributable to higher interest rates and higher outstanding debt balances.

Current wording

Interest Expense and Other, Net. The decrease in interest expense and other, net for the three months ended September 30, 2024, as compared to the prior year period, was primarily attributable to lower outstanding debt balances.

Previous wording

Income Tax Expense. The Company’s effective income tax rate was 24.9% and 23.2% for the three and nine months ended March 31, 2024, respectively, and 23.4% and 22.8% for the three and nine months ended March 31, 2023, respectively. The effective tax rates for the three and nine months ended March 31, 2024, and 2023 were favorably impacted by research and development tax credits, partially offset by state income taxes.

Current wording

Income Tax Expense. The Company’s effective income tax rate was 22.9% and 23.0% for the three months ended September 30, 2024 and 2023, respectively. The effective tax rates for the three months ended September 30, 2024, and 2023 were reduced by research and development tax credits.

Previous wording

As of March 31, 2024, the Company had total backlog of $28.6 billion, compared with $25.3 billion a year ago, an increase of 13.0%. Funded backlog as of March 31, 2024 was $3.2 billion. The total backlog consists of remaining performance obligations (see Note 5) plus unexercised options.

Current wording

As of September 30, 2024, the Company had total backlog of $32.4 billion, compared with $26.7 billion a year ago, an increase of 21.3%. Funded backlog as of September 30, 2024 was $4.3 billion. The total backlog consists of remaining performance obligations (see Note 5) plus unexercised options.

Previous wording

The Company has a $3,200.0 million Credit Facility, which consists of a $1,975.0 million Revolving Facility and a $1,225.0 million Term Loan. The Revolving Facility is a secured facility that permits continuously renewable borrowings and has subfacilities of $100.0 million for same-day swing line borrowings and $25.0 million for stand-by letters of credit. As of March 31, 2024, we had $550.0 million outstanding under the Revolving Facility and no borrowings on the swing line.

Current wording

The Company has a $3,200.0 million Credit Facility, which consists of a $1,975.0 million Revolving Facility and a $1,225.0 million Term Loan. The Revolving Facility is a secured facility that permits continuously renewable borrowings and has subfacilities of $100.0 million for same-day swing line borrowings and $25.0 million for stand-by letters of credit. As of September 30, 2024, we had $710.0 million outstanding under the Revolving Facility and no borrowings on the swing line.

Previous wording

The Term Loan is a five-year secured facility under which principal payments are due in quarterly installments of $7.7 million through December 31, 2023 and $15.3 million thereafter until the balance is due in full on December 13, 2026. As of March 31, 2024, $1,148.4 million was outstanding under the Term Loan.

Current wording

The Term Loan is a five-year secured facility under which principal payments are due in quarterly installments of $7.7 million through December 31, 2023 and $15.3 million thereafter until the balance is due in full on December 13, 2026. As of September 30, 2024, $1,117.8 million was outstanding under the Term Loan.

Previous wording

During fiscal year 2023, a provision of the TCJA went into effect which eliminated the option to deduct domestic research and development costs in the year incurred and instead requires taxpayers to capitalize and amortize such costs over five years. This provision is expected to decrease fiscal year 2024 cash flows from operations by $75.3 million. Although it is possible that Congress amends this provision, potentially with retroactive effect, we have no assurance that Congress will take any action with respect to this provision. The future impact of this provision will depend on if and when this provision is deferred, modified, or repealed by Congress, including if retroactively, any guidance issued by the Treasury Department regarding the identification of appropriate costs for capitalization, and the amount of future research and development expenses paid or incurred (among other factors).

Current wording

To provide additional financial flexibility for the Company, in connection with the Azure Summit acquisition, the Company entered into a commitment letter (the “Commitment Letter”), dated September 10, 2024, with JPMorgan Chase Bank, N.A. (“JPMorgan”), pursuant to which JPMorgan committed to provide the entire principal amount of a senior secured bridge loan facility in an aggregate principal amount of up to $750.0 million. As of September 30, 2024, no amounts were funded pursuant to the Commitment Letter. During the second quarter of fiscal 2025 the Company expects to complete a new senior secured Term Loan B facility in an aggregate principal amount of $750.0 million, which will effectively terminate the Commitment Letter. The Term Loan B is a seven-year facility under which principal payments are due in quarterly installments of $1.9 million from March 2025 until the balance is due in full at maturity in October 2031. The interest rates applicable to the Term Loan B facility are floating interest rates that, at the Company’s option, equal a base rate or a term SOFR rate plus an applicable margin.During fiscal 2023, a provision of the TCJA went into effect that eliminated the option to deduct domestic research and development costs in the year incurred and instead requires taxpayers to capitalize and amortize such costs over five years. This provision is expected to decrease fiscal 2025 cash flows from operations by $52.7 million. The future impact of this provision will depend on any guidance issued by the Treasury Department regarding the identification of appropriate costs for capitalization, and the amount of future research and development expenses paid or incurred (among other factors).

Previous wording

Net cash used in investing activities increased by $81.5 million for the nine months ended March 31, 2024, when compared to the nine months ended March 31, 2023 primarily due to an $81.6 million increase in payments for business acquisitions.

Current wording

Net cash used in investing activities decreased by $0.6 million for the three months ended September 30, 2024, when compared to the three months ended September 30, 2023, primarily due to lower capital expenditures.

Previous wording

Net cash used in financing activities decreased $32.3 million for the nine months ended March 31, 2024, when compared to the nine months ended March 31, 2023, primarily as a result of a $112.0 million decrease in cash used to repurchase our common stock, partially offset by a $74.7 million increase in net repayments under our Credit Facility.

Current wording

Net cash provided by financing activities increased $324.9 million for the three months ended September 30, 2024, when compared to the three months ended September 30, 2023, primarily as a result of a $187.3 million increase in net borrowings under our Credit Facility and a $137.1 million decrease in repurchases of our common stock.