CACI INTERNATIONAL INC /DE/ (CACI) FY 2026 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations is provided to enhance the understanding of, and should be read together with, our consolidated financial statements, and the Notes to those statements that appear elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Unless otherwise specifically noted, all years refer to our fiscal year which ends on June 30.

In this section, we discuss our financial condition, changes in financial condition, and results of our operations for fiscal 2026 compared to fiscal 2025. For a discussion and analysis comparing our results for fiscal 2025 to fiscal 2024, see our Annual Report on Form 10-K for fiscal 2025, filed with the SEC on August 7, 2025, under Part II, Item 7.

Overview

We are a leading provider of Technology and Expertise to customers in support of national security in the intelligence, defense, and federal civilian sectors, both domestically and internationally. The demand for our Technology and Expertise is largely driven by the evolving national security and geopolitical environment, the increasingly complex network, systems, and information environments in which governments and businesses operate, and the ongoing need to stay current with emerging technologies.

Some of our key initiatives include the following:

•Continue to grow organic revenues across our large, addressable market;

•Deliver strong profitability and robust cash flow;

•Differentiate ourselves through our investments, including our strategic mergers and acquisition program, allowing us to enhance our current capabilities and create new customer access points;

•Recruit, hire, train, and retain a world class workforce to execute on our growing backlog; and

•Continue our unwavering commitment to our customers while supporting the communities in which we work and live.

Budgetary Environment

We closely monitor U.S. federal budget, legislative, and contracting developments, and we adjust our business strategies to account for these trends. Although future levels of defense and non-defense spending are difficult to predict, we believe there continues to be bipartisan support for defense and national security programs, particularly given the heightened global threat environment.

While we view the current budget environment as constructive, the timing and passage of annual appropriations remain uncertain in any given government fiscal year (GFY). During periods when Congress has not enacted full-year appropriations, federal agencies operate under a CR. A CR typically authorizes agencies to continue operating at prior year funding levels and may restrict new program starts or delay contract awards.

The scope and duration of CRs can negatively affect our business by delaying new programs, contract awards, or other customer decisions. If a CR expires without the enactment of full-year appropriations or an extension via a new CR, the federal government must cease non-essential operations (a “government shutdown”), except where continuing activities are authorized by law. We evaluate our portfolio on an ongoing basis to identify areas potentially at risk from CRs or shutdowns and to develop appropriate contingency plans.

On May 2, 2025, the President submitted the GFY26 Presidential Budget Request (PBR), which proposed holding defense spending at the GFY25 enacted (full-year CR) level of $893 billion. On July 4, 2025, the President signed the One Big Beautiful Bill Act (OBBBA), a reconciliation bill providing additional mandatory funding outside the regular annual appropriations process. The OBBBA made immediately available approximately $156 billion in defense funding (including $25 billion for the Golden Dome initiative) and approximately $170 billion for border security and immigration. Because these funds were authorized through the reconciliation process, they remain available in GFY26 and beyond regardless of whether Congress enacts full-year appropriations, passes a CR, or enters a government shutdown.

On October 1, 2025, the federal government entered a shutdown. On November 12, 2025, the President signed a CR that ended the shutdown and restored government operations, extending funding for most agencies at GFY25 levels through January 30, 2026. Following the expiration of that CR, a partial shutdown occurred. On February 3, 2026, the President signed five of the six remaining GFY26 full-year appropriations bills, alongside a two-week CR for the Department of Homeland Security (DHS). The enacted defense appropriations bill provided full-year funding for the DoW with a topline of $838.7 billion, approximately $8.4 billion above the GFY26 PBR.

On February 14, 2026, the temporary funding for DHS expired, and the department entered a shutdown. Portions of DHS operations continued due to the availability of mandatory OBBBA funding. On April 30, 2026, Congress passed full-year GFY26 funding for DHS, excluding funding for Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP), both of which continued to rely on OBBBA funding. On June 9, 2026, Congress passed the Secure America Act (Reconciliation 2.0), providing $70 billion primarily allocated to ICE and CBP. Because this funding was enacted through reconciliation, it remains available through September 30, 2029.

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On April 3, 2026, while the GFY26 appropriations process was still being finalized, the President submitted the GFY27 Presidential Budget Request (PBR). The GFY27 PBR proposes $1.15 trillion in discretionary defense spending, $350 billion in mandatory defense spending through a separate reconciliation bill, and $63 billion in discretionary spending for homeland security. Congress is currently evaluating the proposal through the annual congressional appropriations process.

See “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K for additional discussion of how changes in the federal budget and appropriations process may affect our operations.

Market Environment

We provide Technology and Expertise 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. 78% of our revenue comes from DoW and IC customers, with additional revenue coming from federal civilian agencies and commercial and other customers.

We continue to align the Company’s capabilities with well-funded budget priorities and take steps to maintain a competitive cost structure in line with our expectations of future business opportunities. In light of these actions, as well as the budgetary environment discussed above, we believe we are well positioned to continue to win new business in our large addressable market. We believe that the following trends will influence the U.S. government’s spending in our addressable market:

•A stable-to-higher U.S. government budget environment, particularly in national security-related areas (defense, intelligence, and border security);

•Increased focus on cyber, space, and the electromagnetic spectrum as key domains for national security;

•Increasing focus on application of technologies to defend the homeland, such as counter missile and drone defense;

•Increased investments in advanced technologies, particularly software-based technologies, including AI;

•Increased spend on network and application modernization and enhancements to cyber security posture;

•Increasing focus on near-peer competitors and other nation state threats;

•Continued focus on counterterrorism, counterintelligence, and counter proliferation as key U.S. security concerns; and

•Increased demand for innovation and speed of delivery.

We believe that our customers’ use of lowest price/technically acceptable 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 U.S. government 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 industry is intense. Additional factors that could affect U.S. government spending in our addressable market include changes in set-asides for small businesses and budgetary priorities.

Results of Operations

Our results of operations were as follows (dollars in thousands):

Revenues. The increase in revenues was primarily attributable to organic growth of 7.2%, including new contract awards and growth on existing programs.

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Revenues by customer type with related percentages of revenues were as follows (dollars in thousands):

•DoW revenues include Technology and Expertise provided to various DoW customers, excluding those defined as part of the IC.

•IC revenues include Technology and Expertise provided to the 18 intelligence customers defined as the IC by the Office of the Director of National Intelligence.

•Federal civilian agencies revenues include Technology and Expertise provided to non-DoW and non-IC agencies and departments of the U.S. federal government, including the Departments of Homeland Security, Justice, Agriculture, Health and Human Services, and State.

•Commercial and other revenues primarily include Technology and Expertise provided to U.S. state and local governments, commercial customers, and certain foreign governments and agencies through our international reportable segment.

Direct Costs. Direct costs include direct labor, subcontractor costs, materials, and other direct costs. The increase in direct costs was primarily attributable to the increase in revenues. As a percentage of revenues, total direct costs were 66.8% and 67.6% for fiscal 2026 and 2025, respectively.

Indirect Costs and Selling Expenses. The increase in indirect costs and selling expenses was primarily attributable to an increase in fringe benefit expenses and overhead costs associated with a larger labor base and an increase in acquisition related expenses. As a percentage of revenues, indirect costs and selling expenses were 21.0% and 21.2% for fiscal 2026 and 2025, respectively.

Depreciation and Amortization. The increase in depreciation and amortization was due to the amortization of intangible assets acquired in fiscal 2026 and the timing of intangible assets acquired in fiscal 2025.

Interest Expense and Other, Net. The increase in interest expense and other, net was primarily due to higher outstanding debt balances in the current year resulting from borrowings used to finance acquisitions.

Income Taxes. The Company’s effective income tax rate was 23.9% and 17.4% for fiscal 2026 and 2025, respectively. The effective tax rates for fiscal 2026 and 2025 were primarily driven by state income taxes offset by R&D tax credits. Additionally, the effective tax rate for fiscal 2025 benefited from a reduction in unrecognized tax benefits following resolution of a federal income tax audit. See “Note 15 – Income Taxes” in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Contract Backlog

The Company’s backlog represents value on existing contracts that has the potential to be recognized into revenues as work is performed. The Company includes unexercised option years in its backlog and excludes the value of task orders that may be awarded under multiple award IDIQ vehicles until such task orders are issued.

The Company’s backlog as of period end is either funded or unfunded:

•Funded backlog represents contract value for which funding has been appropriated less revenues previously recognized on these contracts.

•Unfunded backlog represents estimated values that have the potential to be recognized into revenue from executed contracts for which funding has not been appropriated and unexercised contract options.

As of June 30, 2026, the Company had total backlog of $32.0 billion, compared with $31.4 billion a year ago, an increase of 1.9%. Funded backlog as of June 30, 2026 was $5.4 billion. The total backlog consists of remaining performance obligations plus unexercised options. See “Note 6 – Revenues” in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to remaining performance obligations.

There is no assurance that all funded or potential contract value will result in revenues being recognized. The Company continues to monitor backlog as it is subject to change from execution of new contracts, contract modifications or extensions, government deobligations, early terminations, or other factors. Based on this analysis, an adjustment to the period end balance may be required.

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Revenues by Contract Type

The Company generates revenues under three basic contract types:

•Cost-plus-fee contracts: This contract type provides for reimbursement of allowable direct expenses and allocable indirect expenses plus an additional negotiated fee. The fee component of the contract may include fixed fees, award fees, and incentive fees. Fixed fees are fees that are negotiated and fixed at the inception of the contract. In general, award fees are more subjective in performance criteria and are earned based on overall cost, schedule, and technical performance as measured against contractual requirements. Incentive fees have more objective cost or performance criteria and generally contain a formula based on the relationship of actual costs incurred to target costs.

•Fixed-price contracts: This contract type provides for a fixed-price for specified Technology and Expertise and is often used when there is more certainty regarding the estimated costs to complete the contractual statement of work. Since the contractor bears the risk of cost overruns, there is higher risk and generally potential profit associated with this contract type.

•Time-and-materials contracts: This contract type provides for a fixed hourly rate for defined contractual labor categories with reimbursement of billable material and other direct costs. For this contract type, the contractor bears the risk that its labor costs, and allocable indirect expenses are greater than the fixed hourly rate defined within the contract.

As discussed further in “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K, our earnings and margins may vary based on the mix of our contract types. We generated the following revenues by contract type for the periods presented (dollars in thousands):

Effects of Inflation

During fiscal 2026, 56.0% of our revenues were generated under cost-plus-fee contracts, which automatically adjust revenues to cover costs that are affected by inflation. 13.6% of our revenues were generated under time-and-materials contracts, where we adjust labor rates periodically, as permitted. The remaining portion of our business is fixed-price and may span multiple years. We generally have been able to price our time-and-materials and fixed-price contracts in a manner that accommodates the rates of inflation experienced in recent years.

Liquidity and Capital Resources

Existing cash and cash equivalents and cash generated by operations are our primary sources of liquidity, as well as sales of receivables under our Master Accounts Receivable Purchase Agreement (MARPA) and available borrowings under our revolving credit facility (the Revolving Facility), which permits renewable borrowings of up to $2,000.0 million. The Revolving Facility also has sub-facilities of $150.0 million for same-day swing line loan borrowings and $25.0 million for stand-by letters of credit.

The Company has a $3,250.0 million senior secured credit facility (the Credit Facility), which consists of the Revolving Facility and a $1,250.0 million term loan (the Term Loan). As of June 30, 2026, the Company had $1,340.0 million of undrawn capacity under the Revolving Facility and no borrowings on the swing line and stand-by letters of credit.

See “Note 7 – Sales of Receivables” and “Note 11 – Long-term Debt” in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

The following table summarizes cash flow information for the periods presented (in thousands):

Net cash provided by operating activities increased $339.7 million primarily due to higher net income, the deduction of domestic R&D costs pursuant to tax provisions enacted by the OBBBA, timing of customer collections, and other net favorable changes in other operating assets and liabilities.

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Net cash used in investing activities increased $975.3 million primarily due to higher cash used for acquisitions.

Net cash provided by financing activities increased $756.9 million primarily due to an increase in net borrowings under the Credit Facility, the Term Loan B-2, and the 2033 Notes-2 and a decrease in stock repurchase activity.

We believe that the combination of cash and cash equivalents, internally generated funds, and available bank borrowings will provide the required liquidity and capital resources necessary to fund on-going operations, customary capital expenditures, debt service obligations, and other working capital requirements over the next twelve months. We may in the future seek to borrow additional amounts under existing or new debt instruments. Over the longer term, our ability to generate sufficient cash flows from operations necessary to fulfill our long-term cash requirements will depend on our future financial performance. Our future financial performance will be affected by many factors outside of our control, including current worldwide economic conditions, financial market conditions, and regulatory factors.

Contractual Obligations

For a description of the Company’s contractual obligations related to debt, leases, and retirement plans refer to “Note 10 – Leases”, “Note 11 – Long-term Debt”, and “Note 17 – Retirement Plans” in Part II, Item 8 of this Annual Report on Form 10-K.

Commitments and Contingencies

We are subject to a number of reviews, investigations, claims, lawsuits, other uncertainties, and future obligations related to our business. For a discussion of these items, see “Note 19 – Legal Proceedings and Other Commitments and Contingencies” in Part II, Item 8 of this Annual Report on Form 10-K.

Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires us to make estimates and judgments that affect the amounts reported in those financial statements and accompanying notes. We consider the accounting policies and estimates addressed below to be the most important to our financial position and results of operations, either because of the significance of the financial statement item or because they require the exercise of significant judgment and/or use of significant estimates. Although we believe that the estimates are reasonable based on reasonably available facts, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods may differ.

We believe the following accounting policies require significant judgment due to the complex nature of the underlying transactions.

Revenue Recognition

The Company generates almost all of our revenues from three different types of contractual arrangements with the U.S. government: cost-plus-fee, fixed-price, and time-and-materials contracts. Our contracts with the U.S. government are generally subject to the Federal Acquisition Regulation (FAR) and are competitively priced based on estimated costs of providing the contractual goods or services.

We account for a contract when the parties have approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance, and collectability is probable. At contract inception, the Company determines whether the goods or services to be provided are to be accounted for as a single performance obligation or as multiple performance obligations. This evaluation requires professional judgment as it may affect the timing and pattern of revenue recognition. If multiple performance obligations are identified, we generally use the cost plus a margin approach to determine the relative standalone selling price of each performance obligation.

When determining the total transaction price, the Company identifies both fixed and variable considerations within the contract. Variable consideration includes any amount within the transaction price that is not fixed such as award or incentive fees, performance penalties, unfunded contract value, or other similar items. For our contracts with award or incentive fees, the Company estimates the total amount of award or incentive fee expected to be recognized into revenue. Throughout the performance period, we recognize as revenue a constrained amount of variable consideration only to the extent that it is probable that a significant reversal of the cumulative amount recognized to date will not be required in a subsequent period. Our estimate of variable consideration is periodically adjusted based on significant changes in relevant facts and circumstances. In the period in which we can calculate the final amount of award or incentive fee earned based on the receipt of the customers’ final performance score or the determination that more objective, contractually defined criteria have been fully satisfied, the Company will adjust our cumulative revenue recognized to date on the contract.

We generally recognize revenues over time throughout the performance period as the customer simultaneously receives and consumes the benefits provided on our services-type revenue arrangements. This continuous transfer of control for our U.S. government contracts is supported by the unilateral right of our customer to terminate the contract for a variety of reasons without having to provide justification for its decision. For our services-type revenue arrangements in which there are a repetitive amount of services that are substantially the same from one month to the next, the Company applies the series guidance. We use a variety of input and output methods that approximate the progress towards complete satisfaction of the performance obligation, including costs incurred, labor hours expended, and time-elapsed measures for our fixed-price stand ready obligations. For certain contracts, primarily our cost-plus-fee and time-and-materials services-type revenue arrangements, we apply the right-to-invoice practical expedient in which revenues are recognized in direct proportion to our present right to consideration for progress towards the complete satisfaction of the performance obligation.

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When a performance obligation has a significant degree of interrelation or interdependence between one month’s activities and the next, when there is an award or incentive fee, or when there is a significant degree of customization or modification, the Company generally records revenue using a percentage of completion method. For these revenue arrangements, substantially all revenues are recognized over time using a cost-to-cost input method based on the ratio of costs incurred to date to total estimated costs at completion. When estimates of total costs to be incurred on a contract exceed total revenues, a provision for the entire loss on the contract is recorded in the period in which the loss is determined.

Contract modifications are reviewed to determine whether they should be accounted for as part of the original performance obligation or as a separate contract. Contract modifications that add distinct goods or services, resulting in an increase to the contract value that reflects the standalone selling price of those additions, are accounted for as separate contracts. When contract modifications include goods or services that are not distinct from those already provided, the Company records a cumulative adjustment to revenues based on a remeasurement of progress towards the complete satisfaction of the not yet fully delivered performance obligation.

Based on the critical nature of our contractual performance obligations, the Company may proceed with work based on customer direction prior to the completion and signing of formal contract documents. The Company has a formal review process for approving any such work that considers previous experiences with the customer, communications with the customer regarding funding status, and our knowledge of available funding for the contract or program.

Business Combinations

We record all tangible and intangible assets acquired and liabilities assumed in a business combination at fair value as of the acquisition date, with any excess purchase consideration recorded as goodwill. For contingent purchase consideration, a liability is recognized at fair value as of the acquisition date with subsequent fair value adjustments recorded in operations. The Company uses various valuation methods of income approach, including the relief-from-royalty method and the multi-period excess earnings method, to determine the fair value of acquired assets and liabilities assumed. The use of these methods requires management to make significant judgments which may include, among others, projections about future revenues, expenses, and cash flows, weighted-average cost of capital, discount rates, royalty rates, and expected long-term growth rates. During the measurement period, not to exceed one year from the acquisition date, we may adjust provisional amounts recorded to reflect new information subsequently obtained regarding facts and circumstances that existed as of the acquisition date.

Goodwill and Intangible Assets

Goodwill represents the excess of the fair value of consideration paid for an acquisition over the fair value of the net assets acquired as of the acquisition date. We recognize purchased intangible assets in connection with our business acquisitions at fair value on the acquisition date. Goodwill and intangible assets, net represent 72.4% and 70.7% of our total assets as of June 30, 2026 and June 30, 2025, respectively.

We evaluate goodwill for both of our reporting units for impairment at least annually on the first day of the fiscal fourth quarter, or whenever events or circumstances indicate that the carrying value may not be recoverable. The evaluation includes comparing the fair value of the relevant reporting unit to its respective carrying value, including goodwill, and utilizes both income and market approaches. The analysis relies on significant judgments and assumptions about expected future cash flows, weighted-average cost of capital, discount rates, expected long-term growth rates, and financial measures derived from observable market data of comparable public companies. During the fourth quarter of fiscal 2026, we completed our annual goodwill assessment and determined that each reporting unit’s fair value significantly exceeded its carrying value.

Intangible assets with finite lives are amortized using the method that best reflects how their economic benefits are utilized or, if a pattern of economic benefits cannot be reliably determined, on a straight-line basis over their estimated useful lives, which is generally over periods ranging from one to twenty-six years. Intangible assets with finite lives are assessed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable at the asset group level.

Recently Adopted and Issued Accounting Pronouncements

See “Note 3 – Recent Accounting Pronouncements” in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

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