CACI International Ramps Up FY25 Outlook: Revenue and Free Cash Flow Guidance Signal Strategic Momentum

CACI International (NYSE: CACI), a leading provider of IT and cybersecurity solutions to U.S. defense and intelligence agencies, has bolstered its financial outlook for fiscal year 2025 (FY25), projecting revenue growth of $2.55 billion to $2.65 billion—up from its initial $2.5–2.6 billion range—and raising its free cash flow (FCF) guidance to a minimum of $435 million from the prior $425 million target. This upward revision underscores the company’s ability to capitalize on robust demand for national security technologies, while navigating tax complexities and strategic acquisitions.

Revenue Growth Driven by Backlog Strength and Contract Wins

CACI’s updated revenue guidance reflects its strong first-quarter performance and a record-breaking $32.4 billion total backlog, up 21.3% year-over-year. This backlog, which includes high-value contracts like an $805 million Navy engineering services award and a $314 million submarine warfare support deal, provides clear visibility for sustained revenue streams. The company’s organic revenue grew 11.2% YoY in Q1 FY25, fueled by its 9.9% organic sales growth, demonstrating resilience in a sector often constrained by government budget cycles.

The inclusion of the Applied Insight acquisition, completed post-Q1, further strengthens CACI’s cybersecurity and cloud capabilities, contributing to the revised revenue targets. However, the pending Azure Summit Technology deal, which would expand its AI and analytics portfolio, remains excluded from current guidance—a prudent move given regulatory uncertainties.

Free Cash Flow: Navigating Tax Headwinds and Capital Efficiency

While revenue trends are positive, CACI’s free cash flow guidance adjustment is particularly instructive. The $10 million increase to $435 million reflects disciplined management of tax obligations and capital expenditures:
- Tax Considerations: The guidance incorporates $55 million in Section 174 tax payments and a $40 million cash tax refund from prior method changes, illustrating the company’s ability to manage complex tax landscapes.
- Operational Leverage: Despite a 37.7% YoY decline in Q1 FCF to $49.4 million (due to working capital swings), adjusted EBITDA surged 23.9% to $215.9 million, with margins expanding 110 basis points to 10.5%. This profitability boost positions CACI to mitigate near-term cash flow volatility.
- Capital Allocation: CACI’s $80 million FY25 capex budget remains aligned with growth priorities, while its cash reserves swelled to $440.7 million—a threefold increase from Q4 2024—enhancing liquidity for future acquisitions or buybacks.

Risks and Strategic Considerations

While the updated guidance is encouraging, investors should note key risks:
1. Government Contract Dependencies: CACI’s reliance on U.S. defense and intelligence agencies exposes it to budget delays or policy shifts.
2. Debt Management: Total debt rose to $1.76 billion, though the company’s strong cash flow and access to credit facilities mitigate refinancing risks.
3. Acquisition Integration: Successfully integrating Applied Insight and Azure Summit (if finalized) will be critical to realizing synergies without disrupting cash flow.

Conclusion: A Bullish Outlook Anchored in Execution

CACI’s FY25 guidance upgrades, supported by a 21.3% backlog jump and 10.5% EBITDA margins, suggest the company is well-positioned to deliver on its long-term targets. The free cash flow improvement, despite headwinds, reflects management’s focus on capital discipline—a key differentiator in a sector often plagued by margin pressures.

With a stock price hovering near $290, CACI remains attractively valued at 18.5x trailing EBITDA, below its five-year average of 21x. While risks persist, the combination of backlog strength, tax-efficient cash management, and strategic acquisitions positions the company to outperform peers. Investors seeking exposure to U.S. defense modernization should view the FY25 guidance as a catalyst for sustained growth.

In summary, CACI’s ability to balance aggressive revenue targets with FCF discipline—despite macro challenges—validates its status as a best-in-class play on national security tech spending. The path forward hinges on execution, but the data suggests the company is on track to deliver.