CACI INTERNATIONAL INC /DE/

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 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.

Current wording

We carefully follow federal budget, legislative and contracting trends and activities and evolve our strategies to take these into consideration. 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 was capped at $886 billion, an increase of 3% and in-line with the President’s GFY24 budget request, and GFY24 nondefense spending was capped at levels essentially flat with GFY23 levels. For GFY25, discretionary spending growth (both defense and nondefense) was 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. In March 2024, 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.

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. On September 27, 2024 the President signed a CR for GFY25 that extends funding for all 12 spending bills through December 20, 2024.

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 extended government funding through December 20, 2024. On December 21, 2024 the President signed a CR for GFY25 that extends government funding through until March 14, 2025.

Previous wording

We believe that our customers’ use of lowest price/technically acceptable (LPTA) procurements, which contributed to pricing pressures in past years, has moderated, though price still remains an important factor in procurements. We also continue to see protests of major contract awards and delays in USG procurement activities. In addition, many of our federal government contracts require us to employ personnel with security clearances, specific levels of education and specific past work experience. Depending on the level of clearance, security clearances can be difficult and time-consuming to obtain and competition for skilled personnel in the information technology services industry is intense. Additional factors that could affect USG spending in our addressable market include changes in set-asides for small businesses, changes in budget priorities, and budgetary priorities limiting or delaying federal government spending in general.

Current wording

We believe that our customers’ use of lowest price/technically acceptable (LPTA) procurements, which contributed to pricing pressures in past years, has moderated, though price still remains an important factor in procurements. We also continue to see protests of major contract awards and delays in USG procurement activities. In addition, many of our federal government contracts require us to employ personnel with security clearances, specific levels of education and specific past work experience. Depending on the level of clearance, security clearances can be difficult and time-consuming to obtain and competition for skilled personnel in the information technology services industry is intense. Additional factors that could affect USG spending in our addressable market include changes in set-asides for small businesses, changes in budget priorities, and budgetary priorities (including efficiency initiatives like the Department of Government Efficiency) limiting or delaying federal government spending in general.

Previous wording

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

Current wording

Results of Operations for the Three and Six Months Ended December 31, 2024 and 2023

Previous 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.

Current wording

Revenues. The increase in revenues for the three and six months ended December 31, 2024, as compared to the three and six months ended December 31, 2023, was primarily attributable to new contract awards and growth on existing programs, and the two acquisitions completed during fiscal 2025.

Previous 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):

Current wording

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

Previous 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.

Current wording

Direct Costs. The increase in direct costs for the three and six months ended December 31, 2024, as compared to the prior year period, was primarily attributable to direct labor, materials costs, and subcontractor costs from organic growth on existing programs and costs related to the acquisitions completed during fiscal 2025. As a percentage of revenue, direct costs were 66.8% and 67.8% for the three and six months ended December 31, 2024, respectively, and 68.4% and 68.6% for the three and six months ended December 31, 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 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.

Current wording

Indirect Costs and Selling Expenses. As a percentage of revenue, indirect costs and selling expenses were 22.2% and 21.5% for the three and six months ended December 31, 2024, respectively, and 22.3% and 22.1% for the three and six months ended December 31, 2023, respectively, driven by cost efficiencies across the Company. The increase in indirect costs and selling expenses for the three and six months ended December 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 and costs related to the acquisitions completed during fiscal 2025.

Previous 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.

Current wording

Interest Expense and Other, Net. The increase in interest expense and other, net for the three and six months ended December 31, 2024, as compared to the prior year period, was primarily attributable to higher outstanding debt balances primarily related to acquisitions completed during fiscal 2025.

Previous 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.

Current wording

Income Tax Expense. The Company’s effective income tax rate was 19.9% and 21.5% for the three and six months ended December 31, 2024, respectively, and 20.7% and 21.9% for the three and six months ended December 31, 2023, respectively. The effective tax rates for the three and six months ended December 31, 2024, and 2023 differ from the statutory rate of 21.0% primarily due to research and development tax credits and stock-based compensation.

Previous 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.

Current wording

As of December 31, 2024, the Company had total backlog of $31.8 billion, compared with $26.9 billion a year ago, an increase of 18.2%. Funded backlog as of December 31, 2024 was $4.1 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 September 30, 2024, we had $710.0 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 December 31, 2024, we had $1,220.0 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 September 30, 2024, $1,117.8 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 December 31, 2024, $1,102.5 million was outstanding under the Term Loan.

Previous 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).

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. No amounts were funded pursuant to the Commitment Letter.

Previous wording

Net cash provided by operating activities decreased $35.4 million for the three months ended September 30, 2024, when compared to the three months ended September 30, 2023, primarily due to $75.1 million in net unfavorable changes in working capital driven by increased vendor disbursements, offset by lower days sales outstanding. These activities were partially offset by $39.7 million of higher earnings after adding back non-cash adjustments.

Current wording

Net cash provided by operating activities increased $18.9 million for the six months ended December 31, 2024, when compared to the six months ended December 31, 2023, primarily due to $94.2 million of higher earnings after adding back non-cash adjustments and a $58.5 million increase in cash received from the Company's MARPA, partially offset by $133.9 million of net unfavorable changes in working capital driven by increased vendor disbursements.

Previous 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.

Current wording

Net cash used in investing activities increased by $1,550.1 million for the six months ended December 31, 2024, when compared to the six months ended December 31, 2023, primarily due to cash used in acquisitions.

Previous 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.

Current wording

Net cash provided by financing activities increased $1,564.1 million for the six months ended December 31, 2024, when compared to the six months ended December 31, 2023, primarily as a result of a $1,445.7 million increase in net borrowings under our Credit Facility and Term Loan B Facility and a $145.4 million decrease in repurchases of our common stock.