Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
CACI International Inc (NYSE: CACI) Q3 2026 Earnings Call dated Apr. 23, 2026
Corporate Participants:
Unidentified Speaker
George Price — Senior Vice President of Investor Relations
John Mengucci — President and Chief Executive Officer
Jeffrey MacLauchlan — Chief Financial Officer
Analysts:
Jonathan Siegmann — Analyst
Gavin Parsons — Analyst
Unidentified Participant
Unidentified Participant
Rocco Barbero — Analyst
Tobey Sommer — Analyst
Unidentified Participant
Sheila Kahyaoglu — Analyst
Unidentified Participant
Jan-Frans Engelbrecht — Analyst
Presentation:
Operator
Ladies and gentlemen, thank you for standing by. Welcome to the CACI International third quarter fiscal year 2026 earnings conference call. Today’s call is being recorded at this time. All lines are in a listen only mode.
Unidentified Speaker
Later
Operator
We will announce the opportunity for questions and instructions will be given at that time. If you should need 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.
George Price — Senior Vice President of Investor Relations
Thanks, Jeannie. 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 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 measures prepared in accordance with GAAP. Let’s turn to Slide 3, please.
To open our discussion this morning, here’s John Menguchi, President and Chief Executive Officer of CACI International. John.
John Mengucci — President and Chief Executive Officer
Thanks, George. And good morning everyone. Thank you for joining us to discuss our third quarter fiscal year 2026 results as well as our updated fiscal 2026 guidance. With me this morning is Jeff McLaughlin, our Chief Financial Officer. Move to Slide 4, please. Before turning to our results, I want to start by reminding everyone the CACI is a fundamentally different company than it was 10 or even five years ago. This evolution is the result of a clear and consistent strategy, intentional leadership and disciplined execution over many years.
It did not happen by accident. The key elements of our strategy are. First, we operate in seven markets where we possess decades of deep mission knowledge. We know and understand what our customers need. Second, we focus on enduring priorities. We are a national security company that targets narrow, deep funding streams. Third, we’re a software defined technology leader. We differentiate ourselves by using software, excuse me, to address critical needs with the speed, agility and efficiency our customers demand.
Fourth, we invest ahead of customer need to show the art of the possible. We’re not waiting for requirements and fifth, we deploy capital in a flexible and opportunistic manner to create value for our customers and our shareholders. Executing this strategy has enabled us to expand our portfolio, increase free cash flow per share and generate additional shareholder value. Slide 5 Please Turning to our third quarter results, we delivered another quarter of outstanding performance on our way to another exceptional year.
Revenue for the quarter was 2.4 billion, up 8.5% year over year. We also generated a strong ebitda margin of 12.3% and robust free cash flow of 221 million. In addition, we won $2.2 billion of awards which represents a book to bill a 0.9 times for the quarter and 1.2 times on a trailing 12 month basis. These awards were driven by our exceptionally strong recompete performance, an important indicator of customer confidence and a key enabler of long term growth. While award activity improved in the quarter, it is not yet fully recovered from the multiple government shutdowns and acquisition organization changes.
As we said before, quarterly awards can be lumpy, but we continue to have excellent visibility, a strong pipeline and see a very constructive macro environment. Our results continue to reinforce the CACI is differentiated and well positioned. With that said, we’re raising our fiscal 26 revenue and EBITDA margin guidance driven by the addition of ARCA and the strength of our organic margin performance. Slide 6 please on that note, let’s discuss our recent acquisition in a bit more detail. During the third quarter we closed the acquisition of arca, a leading technology company focused on national security missions in the space domain.
ARCA brings exquisite space based imaging sensor technology with high technical barriers to entry, agentic AI based ground processing software and deep customer relationships built over decades of strong performance. ARCA is a powerful addition to caci. We now have sensors deployed across all domains. We can provide multi source actionable intelligence and bring operationalized agentic AI capabilities to classified customers across the national security apparatus. In fact, we already have agentic AI efforts underway with our shared customer footprint and we see significant additional cross selling opportunities.
ARCA positions us for opportunities including Golden Dome, Indo paytime support, future ground architecture and space superiority missions. To fully leverage our combined capabilities, we have integrated ARCA and ceci’s existing space portfolio under leadership of arca’s former CEO. ARCA exemplifies the type of acquisition that investors should want us to make wide competitive moat, unique capabilities and technology, exceptional execution history and strong financial performance and all in one of the most strategically important domains in national security.
It’s our flexible and opportunistic Capital Deployment Strategy in action Positioning CACI to drive long term growth and free cash flow per share and and additional shareholder value. Slide 7 Please CACI is a national security company that focus continues to be a powerful differentiator in the marketplace. We have more than 1400 people embedded in mission spaces across all combatant commands performing planning, intelligence, analysis, cyber and operational support. We are involved in every operational headline you read as well as the many operations you will never read about.
This proximity to mission gives us an advantage that is hard to replicate. We understand the mission and the threats because we see them every day. This creates a feedback loop that sharpens our business development, strengthens our reputation for execution and informs on decision making allowing us to confidently invest ahead of customer need. These are meaningful discriminators that create competitive advantage and help drive our financial performance. For example, CACI recently received multi year extensions on several contracts in critical mission focused areas as a direct result of our exceptional delivery.
Slide 8 please Our strategic investments informed by the mission proximity I just described that position CCI as a leader in software defined technology and key war fighting domains that are receiving significant attention and funding from our customers and these investments also demonstrate a repeatable strategy that will drive future growth and shareholder value. A great example is our Spectral program where we are developing the next generation of shipboard signals intelligence and electronic warfare capabilities for the Navy surface Combatant ships.
We initially invested ahead of customer need to show them the art of the possible and to demonstrate our differentiated solution during the bid phase. Now we are actively investing ahead of need during execution to accelerate delivery of capabilities to the field, a key ask of the current administration. During the quarter the program continued to progress as we achieved milestone C marking the start of Spectral’s low rate initial production and deployment phase. This is a defining step towards ramping up the program and delivering this critical EW technology to the fleet.
And because Spectral is built using software defined technology with open architectures, another key administration priority, we see significant additional opportunities across the Department of War and internationally. Another example is encountering UAS where we are seeing accelerating demand, increasing orders and a growing pipeline driven by Merlin, our commercially sold counter UAS system. Merlin leverages nearly two decades of our counter UAS investments and work across the Department of War to deliver a system to seize further detects more, provides more critical decision making time and delivers more effective low to no collateral damage capabilities than any other available system.
Merlin is a software defined system that can be rapidly updated and provides a nearly unlimited magazine of economically sustainable non kinetic effects including unique Cellular detection and defeat capabilities from concept to deployment in under a year. We are not only providing the Department of War with the capabilities they are asking for, we are also delivering them at the speed demanded. We are proving this in real time with the Merlin system that our customers deployed on the southern border.
A final example is our strong positioning for Golden Dome. CACI has been investing in developing and building many of the capabilities this mission requires across many critical layers. First are our counter UAS systems. Defending the homeland is not just about ballistic or hypersonic threats, it’s also increasingly about threats from unmanned aircraft systems. CCI’s technology is ideally suited for this mission where extended detection range provides critical time for decision making and low to no collateral damage effects are critically important for mission success.
Second are our exquisite left of launch capabilities. These include sensitive cyber activities as well as our worldwide set of embedded sensors which can detect and defeat threats before they are deployed. And third is our space based sensing. ARCA significantly expands our capabilities in the space domain, including technologies such as hyperspectral imaging for missile detection. Spectral Merlin and Golden Dome are three significant proof points of how CACI creates value for our customers and our shareholders.
They demonstrate where we identified an enduring need early, invested well ahead of award and have established differentiated positions through years of disciplined execution and continued innovation. Slide 9 please. Turning to the macro environment, we continue to see constructive budgets and demand signals. While the government fiscal year 27 budget is still evolving, the proposed spending looks very positive in many key areas for CACI including electronic warfare and counter UAS space, especially classified space and counter space programs, C5, ISR and IT modernization, including AI and the digital backbone.
We are in the right markets that are aligned to enduring well funded priorities. We’re providing the right capabilities to address our national security customers most pressing needs. And with that I’ll turn the call over to Jeff.
Jeffrey MacLauchlan — Chief Financial Officer
Thank you John. Good morning everyone. Please turn to Slide 10. As John mentioned, we’re very pleased with our third quarter performance despite some modest disruption from the ongoing DHS shutdown. Our revenue and awards reflect our strong market position in a recovering but still sluggish award environment, while our strong margins and cash flow demonstrate the high value differentiated characteristics of our offerings and our operational excellence. In the third quarter we generated revenue of $2.4 billion representing 8.5% year over year growth of which 6.8% was organic.
Despite the modest DHS impacts that I mentioned, we still saw the expected acceleration in organic growth moving into the second half of the year. EBITDA margin of 12.3% in the quarter represents a year over year increase of 60 basis points even after absorbing $17 million of ARCA transaction costs. Adjusting for these expenses, our strong third quarter profitability was driven primarily by overall mix and Strong program execution. Third quarter adjusted diluted earnings per share of $7.27 were 17% higher than a year ago.
Greater operating income along with a lower share count more than offset higher interest expense including $11 million related to ARCA, a higher income tax provision and the transaction costs I mentioned earlier. Finally, we delivered healthy free cash flow of $221 million in the quarter driven by strong profitability and good working capital management. Third quarter cash flow was reduced by approximately $20 million due to transaction costs and other acquisition related financing fees. Days sales outstanding or DSO were 55 days, 2 days lower than the prior quarter.
Slide 11 please turning to our balance sheet and capital structure, our pro forma leverage at the end of Q3 was 4.2 times net debt to trailing 12 month EBITDA, slightly better than the expectation we provided when we announced the ARCA acquisition. We continue to expect leverage to return to the low 3s within 6/4 based on the strong cash flow characteristics of our business. I’ll remind you again that we have a strong track record of successfully and quickly deleveraging after major acquisitions, which underscores our consistent financial performance, disciplined capital deployment and demonstrated access to capital.
As we have previously indicated, ARCA is accretive to both growth and margins. The acquisition of ARCA is just the latest example of our flexible and opportunistic capital deployment strategy and the evolution of our portfolio which positions CACI to deliver long term growth and free cash flow per share and additional shareholder value. Slide 12 Please we’re pleased to increase our fiscal 26 revenue and EBITDA margin guidance driven by the addition of ARCA and the strength of our organic margin performance.
You’ll notice on the right hand side of the chart we provided a breakdown of costs associated with the acquisition. For transparency and your modeling purposes, we now expect revenue to be between 9.5 and $9.6 billion. This represents total growth of 10.1% to 11.3% which includes about 3.5 of growth from acquisitions including $150 million from ARCA. We’re increasing our fiscal 26 EBITDA margin to the 11.8% to 11.9% range, underscoring our strong execution and evolving portfolio as well as contributions from arca.
Our full year margin outlook includes the impact of approximately $22 million of transaction costs related to the acquisition. Our updated FY26 adjusted net income guidance is between 615 and $630 million. Adjusted net income reflects the after tax impact of approximately $60 million of pre tax transaction costs and higher interest expense largely offset by stronger organic margin and arca’s earnings contribution. This yields full year adjusted eps guidance of between 2,770 and 2838 per share which represents growth of 5 to 7% even as we absorb these costs.
And finally, we are reaffirming our free Cash flow guidance of at least $725 million even after absorbing nearly $50 million of transaction costs, interest expense and an increased investment in capital expenditures. As we consistently say, we see free cash flow per share as the ultimate value creation Metric and our FY26 guidance represents 65% growth in free cash flow per share over FY25. Slide 13 please turning to forward indicators all metrics continue to provide good long term visibility into the strength of our business.
Our third quarter book to bill of 0.9 times and our trailing twelve month book to bill of 1.2 times reflect good performance in the marketplace. Even with the multiple shutdowns and slow rebound in award decisions. The trailing 12 month weighted average duration of our awards in Q3 continued to be just over six years. Our total backlog of $33.4 billion increased 6% year over year while our funded backlog increased 19% over the same period. Both metrics reflect healthy organic growth even when normalizing for Arca’s contribution of $835 million to total backlog and 422 million to funded backlog.
Additionally, Arca has another $2 billion of non competitive franchise programs from which we expect to recognize revenue over time but that don’t yet meet the regulatory criteria to be added to backlog for fiscal year 26. We now expect 98% of our revenue to come from existing programs with 1% each from recompetes and new business. Progress on these metrics reflects our continued strong operational performance and yields increased confidence in our outlook as we close out the year. In terms of our pipeline, we have more than $4 billion of bids under evaluation, over 80% of which are for new business to CACI.
We expect to submit another $22 billion in bids over the next two quarters with over 75% of those being for new business. We continue to have excellent visibility, are well positioned in a very constructed macro environment and remain very comfortable with our outlook including our three year targets. In summary, we delivered Another quarter of strong results. Our performance continues to demonstrate our differentiated position in the marketplace, which is further enhanced by our acquisition of arca.
Our ongoing investment ahead of customer need enables us to win and execute high value, enduring work that drives 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.
John Mengucci — President and Chief Executive Officer
Thank you, Jeff. Let’s go to Slide 14, please. In closing, I want to emphasize what truly differentiates caci. Well, let’s talk about adjusting to the changing market already delivering the anticipated years ago when speed, cyber defined solutions and mission proximity would define success for the long term in national security. We position the company accordingly through deliberate investments and disciplined execution of our strategy. This is all about expanding the limits of national security.
It isn’t about chasing trends, understanding where threats are evolving, where a customer’s hardest problems will be, and building the capabilities to address them before they ask. That’s what’s allowed us to compete and win against a broader set of competitors. Our third quarter fiscal 26 results to date demonstrate this differentiation in action. Strong organic growth, expanding margins, robust cash generation, and the strategic addition of arca. To further strengthen our position in the space domain, we’re executing our strategy, delivering for our customers and driving long term shareholder value.
Before I turn the call over for questions, I want to congratulate NASA and the Artemis II crew on their historic achievement. I also want to recognize that both CCI and ARCA contributed critical technology that exemplifies the caliber and mission impact of our offerings. CCI’s optical communications technology enabled high definition video and data transmission throughout the entire mission. ARCA provided essential sensing technology on the SLS rocket to ensure a safe crew ascent to both teams. Thank you for your exceptional work on this landmark achievement for our nation’s space program.
As is always the case, our success is driven by our now 27,000 employees who were ever vigilant in expanding the limits of national security. To everyone on the CACI team. I am proud of what you do every day for our company and for our nation and to our shareholders. I thank you for your continued support of caci. With that, Jeanne, let’s open the call for questions.
Questions and Answers:
Operator
At this time, in order to ask a question, press Star, then the number one on your telephone keypad. If you would like to withdraw your question, press star one again. For today’s call, we do ask you that you limit yourself to one question and one follow up. Thank you. Your first question comes from the line of John Siegman with Stifel Please go ahead.
Jonathan Siegmann
Good morning John and Jeff and George, thanks for taking my question. Congratulations on closing the transaction. Just a real quick one just with arca maybe can you. And now that it’s all integrated into one leadership, can you scale how big your space exposure is today?
John Mengucci
Yeah, John. John, thanks. Well, it’s, it’s definitely, it’s definitely gotten larger and you know, not just in size, but frankly in scale and just the absolute eye watering capabilities that national asset brings in. Look, we don’t just use that national asset term loosely. You know, they’re a 62 year old company. They’ve been at the forefront of technology developments since the Cold War. An outstanding track record of existence execution. We’ve talked to the majority of the satellite primes that utilize what ARCA provides in space and just outstanding feedback.
A consistent partner, consistently delivering on schedule and within cost, you know. So what drives the growth of space business further? Definitely golden, golden, golden dome. Some of the backlog numbers that Jeff mentioned earlier, you know, just to have an asset that has another $2 billion of non competitive sole source franchise programs from which we’re going to continue to expect revenue from, you know, really does drive future, future growth. All in all, today, look in the space, you know, you’re looking at greater than a billion dollars worth of total business with future growth that we see coming forward when we get talking about fiscal year 27.
Jonathan Siegmann
Appreciate that. And maybe I’ll just ask one, Jeff, on margins, because that was pretty impressive for the quarter. Previously you made statements quantifying the difference between tech and expertise, which was helpful for us now that you’ve added the Super A’s, ARCA and Asia, or is there any framework that we can think about of the relative margin differences between those two segments and any lumpiness or seasonality to keep in mind. Thank you very much.
Jeffrey MacLauchlan
Yeah, thanks John. Look, you, I mean you hit at an item that we’re probably not going to provide a lot more specificity about around at least at this point. But clearly the addition of these significant technology franchises is important in the evolution of the portfolio we’ve been talking about for some time and the attendant margin expansion that comes with that. So I mean, you put your finger on something that we’re not quite ready to quantify, but the condition that you observe is clearly the case.
I would add relative to the second part of your question, that does come with a certain amount of lumpiness in terms of margin. And you can see that a little bit when you do the algebra around the fourth quarter margin where we have particularly strong margins this year or this quarter. We’re increasing our margin performance for the year. And you will quickly figure out, you know, that that probably means some lumpiness in the fourth quarter that goes the other way, the way this quarter went the right way.
So you know, this is a little bit of a, there is some, there is some variability around that that you’ve noted overall, however, we clearly are embarked, have embarked on this strategy with the expectation that margin continues to go up and to the right despite an occasional quarterly, you know, bounce.
John Mengucci
Yeah. And John, let me also add on the revenue side, you know, the expected financial contribution over the next 12 months that we shared with you all in December is still accretive to revenue growth and margin. But on the revenue side, revenue is not going to be linear, folks. It’s a technology business. You make deliveries, you book revenue and you book profit. So you know, unfortunately or fortunately, program schedules are really not congruent with quarter endpoints. So you know, we can’t apologize for that.
It’s very much like the rest of our technology business. So we’ll do our best to estimate quarter to quarter. But this is a full year business. We’ve said that a lot. And you know, ARCA is a fantastic growth addition for us as we move forward.
Unidentified Participant
Right.
Operator
Your next question comes from the line of John Godin with Citigroup. Please go ahead,
George Price
John. John, you there, Operator. Let’s move on to the next question.
Operator
Your next question comes from the line of Gavin Parsons with ubs. Please go ahead.
Gavin Parsons
Thank you. Morning,
John Mengucci
Gavin.
Gavin Parsons
Tony, you talked about this a bit, but maybe it’s kind of a two part question. On the booking environment. It seems like the submits are building really nicely, but that’s not converting to the pipeline. So I guess what are you seeing there? And then second on kind of funding. I think if I exclude arca, your funded backlog was up high single digits. So is the funding environment still behaving better even if the award environment maybe isn’t? Thanks.
John Mengucci
Yeah, Gavin, thanks. So let’s unpack that look. We continue to see excellent visibility, a strong pipeline. We see a really constructive macro for forecast as we look forward. Let me just start with we’re in the right places, we’re investing ahead of need and the right capabilities. You know, we’re able to deliver them faster and more efficient, efficiently. That’s exactly what the administration wants. But it’s safe to say, you know, we’re on a short term hand to mile for business. We’ve got a large and growing backlog as you mentioned nearly 34 billion which I’ll add is up 7% year over year, funded backlog up 19% year over year and a healthy trailing 12 month book to build on 22.
So and the last thing I’d like to share is because I enjoy this statistic. A weighted average duration of backlogs on a rolling basis are greater than six years as we get through Q3. So funding trends, you know, customer demand and a potential $1.5 trillion GFY27 budget which includes reconciliation funding that definitely continues to support what we’re looking at going forward. You know, so we’ve, we’ve talked about the fact that there’s a number of short term factors behind the slower reward decision making and you know, we could spend the rest of the day and probably be 50, 50 on you know, reason, reasons why, you know, there’s a lot of money in budget that does mean there’s an awful lot of planning.
Reconciliation funds are multi year money. But at the end of the day I can sum all that up by saying awards are lumpy. You know, I like what our plan is, I like the pipeline, I like the bids submitted and you know, over the next couple quarters I fully believe that the government will go back to the days of you know, awarding Most programs within 100 or 300 days of when they plan, plan to and you know, we’ll continue to move forward but at the end of the day we, we’re not a hand to mouth business.
We are growing just fine and we will continue to grow and we’ll get through this awards trough and we’ll continue to deliver. Jeff
Jeffrey MacLauchlan
Gavin, I would add to that you noted the funded backlog increase, the organic piece of that is 10%. I would also note that the sluggishness that we’ve seen in the acquisition and award structure, and this is underscored by the backlog statistic we just used. We have not experienced in the administrative, administrative part of the contract administration. So the government is, you know, by and large funding programs. They’re paying bills, they’re processing invoices, payment offices are working.
The sluggishness in the awards mechanism has not translated into that side of that side of the government.
Jonathan Siegmann
Okay,
Gavin Parsons
Thanks guys. And a long shot here but you know, guidance implies growth accelerates in 4q got some pretty easy comps this year. So any early thoughts on if kind of the exit growth rate can continue into next year?
Jeffrey MacLauchlan
Yeah, we do see growth accelerating in the fourth quarter, which has always been the plan. And when I referred to the Fact that we were seeing the growth acceleration we expected in the third, that was part of that. But I would also encourage you to keep John’s comments in mind relative to the fact that the business is managed really to the year and we have customers that have, you know, that have rhythmic buying patterns. Different times a year they buy differently. And we typically have strong fourth quarter, strong second half and particularly fourth quarter, which we see again this year.
But I would encourage you to not think about that as an exit rate for the year. If you look over time at the distribution of our margin and revenue growth, you’ll see that back end weighted trend and that, you know, don’t. I’d encourage you to not extend that into 27 as we close out 26.
John Mengucci
What if I added a comment about 27? I would encourage you to look forward to us continuing to deliver growth, driving revenue, driving margins, driving free cash flow. And again, we wouldn’t say that, but if we weren’t very comfortable with our three year targets.
Jeffrey MacLauchlan
Yeah, the momentum in the business that you see is real.
Operator
Your next question comes from the line of Gautam Khana with TD Cohen. Please go ahead.
Unidentified Participant
Good morning guys. How you doing?
Gavin Parsons
Morning.
Unidentified Participant
Good, good. I was just wanted to follow up on that last question. So I remember last quarter you kind of explained the Q4 sequential ramp that’s expected JTMS and some other programs. I’m curious though, why wouldn’t those continue to be at a very high rate, you know, exiting the June quarter into the September quarter? Is there anything one time with those specific contracts that are driving so much of the sequential growth that tapers off? And then I just wanted to get your broad perspectives on the fiscal 27 budget request and how that might benefit CACI in what parts of the business.
Jeffrey MacLauchlan
So why don’t I take the first part of that? Thanks, Quantum. And let John take the second part, the broader budget question. I would refer you back to the discussions that we’ve had about the different ramp profiles. And there are a couple things that are happening in the fourth quarter and the sequence from third to fourth. One is that we have a number of programs that ramp in, sort of have sort of a bimodal growth rate. And one of the, one of the patterns that I talked about is a lot of these large agile software programs have an initial phase that is planning the second phase.
And so there’s acceleration and then a leveling off and then a re acceleration. We’re working through those phases right now on ITAs and to a lesser extent NCAPs we very much are in that mode for JTMs. And the other thing I would point out is that we do have, in a number of the technology areas, we do have customer communities that are particularly heavier buyers at different times of year, often with increased activity in the fourth quarter of our fiscal year. And then the final variable is that we have a number of items.
We have a number of items where we’re in the early stages of activities that are driving investment for future growth. That is another variable in that mix. So the real answer is it’s a portfolio. And, and while MICS sometimes feels like a handy explanation, there really are three or four substantive conditions that are in play here, you know, and they come together from time to time with the outcomes that, you know, that we try to, we try to suggest to you to expect.
John Mengucci
The second part of your question around the 27 budget. Look, you know, larger budgets never hurt. We would have had larger budgets than shrinking ones. But as I’ve said many, many times, you know, we’re going to pay much more attention to where the funds are flowing under the surface. But, you know, what we see in the, in the, in the President’s budget request looks very positive. The J books, I think, came out earlier this week, so we’ll be able to garner much more details from those as we build our fiscal 27, 28 and 29 plans.
You know, we’re $300 billion TAM, and we’re roughly a $10 billion company, so there’s plenty of room for us to go grow. You know, we firmly believe that the electronic warfare in the counter UAS areas, both in Department of War and the dhs, show great promise for having all the right meetings and planning sessions and doing the right things we need to do and making the right investments in internally so that we can meet those, those market, market needs, space, you know, really good. And both the classified space programs, we are really, we are very strong in those future budgets, especially those are in the FY20, 27 plan, you know, C5ISR and then IT modernization, you know, both bringing in AI and doing network modernization.
So very supportive of where we’re going ahead. You know, as I always say, more importantly is where the money’s going. And we believe it’s all going in the right spots that will drive future growth for the company in 27 and beyond. Thanks so much, Quantum.
Unidentified Participant
Thank you.
Operator
Your next question comes from the line of three. Scott Mikas with Melius Research. Please go ahead.
Unidentified Participant
Good morning. This is Matt Muratolo on for Scott Mikus Good morning. Congrats on Mouse and C on Spectral. So as that program moves into LRIP and eventually into full rate production, are there any challenges that you foresee or investments that need to be made to support the production ramp and then how should margin benefit as it moves into production? Thank you.
John Mengucci
Yeah, thanks. So look, we’re extremely proud about where the Spectral program is. That was a long road for us to achieve victory there and done an outstanding setting job with it. So we did achieve and I’m sorry we did receive milestone C. We are just beginning the lrip portion of the in the October November timeframe, we’ll be looking at sort of delivery zero, which is what will begin delivering some of the systems. On the investment side, as my prepared remarks stated, we invested long ahead of the award of that program to make certain that the brains of that system which is looking at multiple antenna feeds and looking at all of the known threats and really providing a great AI baseline for naval combatant ships so that we performed those investments.
We have also continued capex investments in our production facility in Melbourne where we are rolling out both C Inc. F and the Spectral program. You know, we’ve, and we’ve continued to invest in this program driving frankly long lead item purchases slightly ahead of my milestone C so that we could take that timeline in between C and when we can deliver the first system down. You know, it is an absolute proof point for us on our focus on exit execution. It’s a new large type program for us, but a great partnership with the Navy coupled with the right, the right funding timing allows us to deliver to the, you know, well over 100 ships that are in the US Navy fleet today.
Unidentified Participant
Perfect. Thank you guys. I’ll stick to one question,
John Mengucci
Thank you. Thanks.
Operator
Your next question comes from the line of Seth Steven with JP Morgan. Please go ahead.
Rocco Barbero
Good morning guys, this is Rocco, one for Seth.
Jeffrey MacLauchlan
Morning, Rocco. Rocco,
Rocco Barbero
How should we think about ARCA impacting margins moving forwards? You mentioned that quarter to quarter margins can be lumpy from the technology side of the business. But is the 11.6 that’s implied for next quarter the right way to think about kind of the lower end of the new company margins post these deals?
Jeffrey MacLauchlan
Yeah, the ARCA contribution in the fourth quarter is pretty consistent with our expectations. You know, John mentioned the fact that this is a delivery and mix business and very much not linear. You know, we gave some indication of margin in the December 22 call, you know, but I would, I’d point out that, you know, within any particular quarter, you know, around that Average, you know, you may see we may, you know, we may see three or four point swings in any particular quarter. So I would, I don’t know if I’m getting exactly to the question that you asked the mark.
The ARCA expectation for the fourth quarter is, is well aligned with our expectation when we made that announcement. The organic business mix will be a softer quarter. When you do that math.
Rocco Barbero
Right, that makes sense. And then what type of directed energy capability does ARCA bring to CACI and have they been fielded at this point?
John Mengucci
They bring a portion of directed energy, things we can’t talk about on the line. Yes, it’s a new capability for us. We’re not in the directed energy business prior and I think we’ll be able to talk more on that in the quarters to come. I do want to touch back on your earlier question. Look, ARCA is a long term play for us. It’s probably one of the strongest acquisitions that we’ve done in terms of both doubling down on capabilities and customer relationships and frankly, us owning and growing a price based business in a market that’s going to see valuations of those with such a strong space portfolio grow in the years to come.
We’ve been able to do that all inside of a company that covered down on our transaction, our transition and our interest costs and still delivering $725 million free cash flow. So, you know, we’re in the very early innings. We just got through integration on April 1st. I think we’re still in the month of April. So in the first, you know, 20 or so days, we’ve gotten a lot, a lot done. And Andreas, who is running the combination of arca’s business and our space business, is already making a, a major impact as to how we can, we can continue to grow in space.
Operator
Your next question comes from the line of Toby Sommer with Truist Securities. Please go ahead.
Tobey Sommer
Thank you. If I think about the business from a really high level mission tech expertise, et cetera, it’s fair to think of mission techs in a mix shift of 2 to 3 points per year because of faster growth as well as generally speaking applying more capital on acquisitions in that direction.
Jeffrey MacLauchlan
Yeah, I think Toby, that’s, that’s broadly right. It’s, it’s a hard, it’s a hard thing to generalize. But the condition you observe is, is certainly true. And it’s, you know, you’re in the right, you’re on the right vector to be sure.
Tobey Sommer
And with respect to counter uas, I was wondering if you could Characterize what the, the experience in the war so far has meant to the opportunities that you see in front of you and maybe how that has impacted customer conversations and decision making.
John Mengucci
Yeah, Toby. Toby, thanks. So let’s start off with where we are in the Counter UAS market. You know, we’re, we’re already in the government inventory. We’ve done doing this for a couple of, couple of decades. Merlin is our family of counter UAS systems. You know, it is part of our broader $2 billion EW portfolio and we do continue to expect growth from Counter UAS in. The foundational part of this is that we’ve actually, we are able to sell it under two different vectors under FAR part 12, FAR part 15, so we can meet the administration’s priorities.
We’re in place for world events and the like. We are currently providing counter UAS to all four of the armed services for an active discussions and negotiations with 16 other agent agencies and organizations across the federal government. And we already have, as I talked about my prepared remarks, a system that’s already been fully deployed on the southern border. So as you all know, it’s our practice of anything competitive. We’re not going to provide details, but we will absolutely be more than willing to share those details on the next quarterly call and in incremental press releases as we go forward on the international front.
As an update, you know, since our last, last call, we are now very active working sales in theater through the US Army Task Force 59, Jata 401 and Centcom for mobile counter UAS units. We’re getting kids prepared to support testing against one way attack drones. And those are all the ones that have been in the news over the recent quarter. We have built established relationships with resellers to give us access into the Saudi, the Kuwait and the Qatari markets through their ministries of defense.
They’re all at various stages of the process, but you should expect those folks to be on board within 45 days. And we have to work through the exportability issues. So you know, we, we are very strong in this market. We’ve talked about this for quite a long time. Current events are driving stronger demand as well as the 17 countries who’ve already delivered EEW to so strong market well funded in the US through both direct reconciliation bills, adding billions to our TAM, which is, which is what moved us to the $300 billion level and really strong interest both domestically.
As you look at Counter Counter UAS for Counter UAS for Golden Golden Dome as well as other initiatives like the Eastern Eastern Flank drone, drone wall. So a lot of positive work here putting the right dollars of investments in. You saw the capex is up, you know, slightly. Half of that was to arca, half of that goes to our portfolio. And we are full speed ahead and how we want to, want to grow this market.
Unidentified Participant
Thank you very much.
John Mengucci
Thanks Toby. You bet.
Operator
Your next question comes from the line of Sheila Kayagolu with Jefferies. Please go ahead, Sheila.
Sheila Kahyaoglu
Hi, good morning guys. Just one question for me. Great stuff on the funded backlog growing, John, despite the environment, maybe just honing in on your civil business. Still solid growth there, up 7%. What are you seeing and how do we think about major program drivers within cibl into fiscal 27?
Jeffrey MacLauchlan
Yeah, there are a couple things going on in civil, Sheila. You can see the modest DHS headwinds, but you can also see the NASA NCAPS ramp. I mean those would be the principal drivers of the change that you see.
Sheila Kahyaoglu
Okay, great. Thank you,
George Price
Operator.
Operator
Your next question comes from the line of David Strauss with Wells Fargo. Please go ahead.
Unidentified Participant
Hi, good morning, this is Josh Corn on for David. Oh, hi. Wanted to follow up on the broader defense budget question. So I saw note in the slides that the reconciliation funding is starting to flow through. So I was wondering if there’s any way you could quantify, I guess to what extent your programs benefit from the base budget versus the reconciliation benefit from last year and then any thoughts on what that might look like for 2027? But
John Mengucci
Yeah, so the majority of what we do and what we have been able to grow to is in the base budget. It will continue to be in the base budget because we have selectively decided in our seven markets to go after areas that are traditionally funded within the, within the base. On the reconciliation funding we have seen those start to flow. They’re really going to be very prevalent in golden and Golden Dome as well as border security. We’ve seen some additional funding show up there. We’re doing a lot of AI based object tracking tech as well as additional spend in our power UAS area where we are currently modernizing the Space Force critical infrastructure through reconciliation funding.
Again, you can directly tie that to things in the Golden Dome area in the intelligent intelligence world where we continue to enhance what we do in the left of launch area around situational awareness and then in IT modernization. We have a lot of large enterprise systems that we’re looking to try to make common across the Department of War. So if the army has a picture perfect enterprise system doing X, we are pushing to have that same solution. Be used through the rest of the Department of War.
So, I mean, a lot of nice funding and whether it’s already T and E or in procurement versus O and M, it doesn’t quite matter to us. We’re always doing modernization through sustainment, which is a large use of O and M funding. And clearly as our business continues to evolve, we’ll see increasing amounts of RDT and E funding. So really well funded to close out 2026 and just as nicely funded as we go forward in fiscal year 27.
Unidentified Participant
Great, thank you.
John Mengucci
Thank you.
Operator
Your next question comes from the line of Mariana Perez Mora with Bank of America. Please go ahead.
Unidentified Participant
Hey guys, this is Alex Preston on from Ariana this morning. How are you? I just wanted to go back to NASA and the civil side real quick given the sort of budget fluctuations there in FY27. Right. Obviously the request called for again, pretty significant cuts year over year. But there’s also this shift towards exploration away from pure science. So there’s a bit of a dynamic there. I’m just curious if you had any sort of broad puts and takes on that budget request and where you see CACI and ARCA playing within that context.
Thanks.
John Mengucci
Yeah, so I guess we’re on both sides of that. Right, Alex, let’s start with NASA and CAPS first. You know, we continue to successfully ramp that program. We’re receiving very high price from our customer. So what we’re deploying there is a commercial agile scale delivery model to really standardize and centralize software development across NASA. So very similar to what we have done with Customs and Border Patrol on Beagle. So the way to think about that work in terms of budgets and administration priorities, we’re reducing software development times, we’re increasing efficiency, we’re bringing administrative systems across NASA into compliance with the plethora of federal reporting requirements.
And we’ve got all key metrics and we’re supporting, I think eight to 900 different applications and platforms. So there’s no work. I’m sorry, there’s no work for you. There’s no impact to the work that we are doing. But you should see that by driving commonality and moving NASA and their software development frameworks forward closer to the way that commercial companies do their software development practice as well as caci, it’s going to generate cost savings across the organization. A nice thing for us.
It supports the theme of NASEA wanting to reduce their reliance on outside headcount and push those dollars more into mission, which is fantastic for us as we look at our space business. So it is the organization that really is taking full advantage of what we’re doing on one part of our business, driving agile software development practices and putting that’s been saving the organization money. And the even sweeter news is we’re on the receiving end of that as you look at what we do in space, so very much aligned, not a funding threat to where we’re going on that caps on NCAPS and how that will continue to ramp to support 27 growth rates.
Unidentified Participant
Great, thank you. Really appreciate the color.
Operator
Your next question comes from line of John Godin with Citigroup. Please go ahead.
Unidentified Participant
Hi, this is Jeremy. Jason, I’m from John Godden. Thank you for squeezing me in. So I just wanted to ask, as we think about these complex sort of technical solutions transitioning from development to production like Spectral, I kind of wanted your take on what your outlook is for the scalability of these technologies across, you know, different customers and upcoming budget cycles. And could that in theory be sort of affected by a potential blue wave? Thanks.
John Mengucci
Yeah, you know the nice thing, I’ll take your last comment first. The beautiful thing of being an investor in CCI is a number of years back when we set this company on its next course, we spent a lot of time looking strategically at the kind of markets we wanted to support and the parts of the federal government we were going to be very focused on. Mark my words. It’s no accident that we’re focused on national security, which is DoD, the intelligence community and DHS, all which are fully have bipartisan support.
Blue rays, ways, red waves, purple waves, doesn’t much matter to where we’re doing things. We’re in very critical areas that the government tomorrow morning will not decide to just turn off. So first and foremost, that’s where we’re at. So if we talk about systems that we’re out there doing counter uas, spectral work we’re doing in agentic AI, those are all things that scale wonderfully as we move forward our optical communication terminals beyond the 2 and 4 watt perforated LEO systems to very exquisite systems.
So spectral, its scale, scalability is to deliver the baseline we’ve agreed upon to, you know, over well over 100 combatant ships and then move into the FMS side of where Spectral goes. On top of the FMS work is all the top site antenna work that we and the army believe should be the next phase of Spectral, so we can secure even more signals from those topside antennas and be able to drive processing improvements that will protect ships not only from missiles, but also from drones in the country, US area we have been scaling up production capabilities in Sterling and Melbourne to be able to deliver Maryland.
It’s a tough supply chain right now. There’s a lot of people buying flat, flat panel radars. But what differentiates us there frankly and how we enhance it going forward is the software capability of that system. So it’s not so much of always having to update hardware and whether this is fly by wire, drones, one way, attack drones, cellular drones, you name it. We’ve already seen them all over the planet. So we are more than able to scale forward from that position as well. And we can talk a lot about optical communication terminals and everything else we’ve done in the tech area.
But they all follow that common theme, right? You need to understand mission so that you can deliver. We hear a lot about AI and how that’s going to move different parts of our business forward. Frankly, AI without mission is like a car without gas. It’s great to look at. You really can’t do much with it. So we’ve been able to scale AI use throughout a lot of what we do and we’re looking forward to driving growth further and fiscal year 27.
Operator
Your next question comes from the line of Jan Engelbrecht with Baird. Please go ahead.
Jan-Frans Engelbrecht
Good morning John, Jeff and George. Congrats on another good quarter. Just I wanted to talk about the ARCA and legacy CADI space portfolio and I was just wondering sort of is there, is there an ability sort of, I wouldn’t say sort of cross sell, but how do you combine those capabilities into a sort of a solution for the customer?
John Mengucci
Yeah, thanks Sean. Franz, you know, probably the most prolific revenue synergy we have is going to be on the ground processing side where ARCA already has authorizations to operate agentic AI solutions and a number of different found a number of different mission models that allow them to process and find different things in the geoint stream. We are just as adept on the SIGINT side but we have not moved to agentic AI on that, on that side we’re just beginning to have customer meetings given that we just got everything integrated.
So there are revenue synergies there that haven’t even begun that will allow us to move the intelligence community further down the path that we, that they want to move towards which is getting to higher level multi int solutions. The other area that we’re already connecting is hey, how do we go about building larger scale optical communication terminals? You know, larger ones or ones of the, of the same size that need to push you know, a terabyte of data through them there versus 2 to 2 to 4 mega.
You know, Arca is a 60 plus year space company. You know, we are a 6 plus year space company in the world of optics. So you know, there’s a lot of synergies already taking place there. We’re looking at different ways that we can get through production, we’re looking at different ways we can do engineering. So there’s just so much more we can be doing for the folks who build satellites and the customers who absolutely need information from those missions. So, really excited about what the future future brings for us.
Jan-Frans Engelbrecht
Thanks John, very helpful. And then a quick follow up if I, if I may. Just if we look at FY27 and you’ve obviously got great visibility in this business, it’s close to four years of annual annual revenue in the backlog. But any sort of large multi year contracts that you’ve bid on, sort of multi billion dollar contracts that you expect to be adjudicated in FY27 or any sort of notable recompense that we should look out for in the next 12 months.
John Mengucci
Yeah, I think on the, on the new business front, excuse me, you know, we’re always, we always have a number of multibillion dollar things that are rumbling around at different stages. You know, do we have some jobs that are over a billion dollars that can be awarded in the fiscal year 27? Absolutely. So you know, and frankly we were looking at some of those to be awarded towards the end of 2026. But you know, we clearly we’re not, we’re not there. But we’ll be able to report on how 26 wrapped up, how they go forward within 2027 on their eComp front.
This was, this, this year, 2026 has been a really large year for us. You know, as I think Jeff mentioned during his prepared remarks, we’re already greater than 90% on their eComp front. And what’s just as exciting is the fact that future recompetes that would have come up in the first quarter or so 27 have already been extended by 18 to 2024 months, which is really a great way to win a recompense, right. Just to never have to bid on them. You only get there when customers recognize the areas that we’re in, the importance of national security of the areas that we’re in and the level of performance we’ve had.
So thanks for following.
Operator
That concludes our Q and A session. I will now turn the conference back over to John Menguchi for closing remarks.
John Mengucci
Thanks Jeannie and thank you for your help on today’s call. We really want to thank everyone who dialed in or listened to the webcast for their participation. We know that many of you have follow up questions and Jeff McLaughlin and George Price and Jim Sullivan are available after today’s call. So please stay healthy and all my best to you and your families. This concludes our call. Thank you and have a fantastic day.
Operator
This concludes today’s conference call. Thank you all for joining. You may now disconnect.