Colin Canfield — Analyst, Cantor Fitzgerald
Hey, thank you for the question. Good morning.
John Mengucci — President and CEO, CACI International
Morning, gentlemen.
Colin Canfield — Analyst, Cantor Fitzgerald
Perhaps we could shed some light on early expectations for the FY 2027 request. I think we have kind of two camps forming up in terms of buy-side sentiment, one being that the step down from kind of reconciliation plus base implies, or it implies, a step down year on year. Another camp is that it's pretty insane to think that Congress would kind of imply a cut of defense budgets into a rising national security environment. If you can shed some light on where you'd expect high-level budgets to go.
John Mengucci — President and CEO, CACI International
Yeah, Colin, thanks. That's a meaty first question. Look, we're very, very focused strategically on critical national security priorities. We've always talked about those priorities having deep and enduring funding streams, and we have great bipartisan support. That bipartisan support is why we revectored this portfolio over the last decade to be 90% focused on national security. We've also said before that we're really focused on the top-line budget growing, but at the end of the day, we're a $9.3 billion company and a $280 billion total addressable market. We look at that telling us we have plenty of room to grow. Where's the money going? If you look across the areas like electromagnetic spectrum, software-defined tech, space, counter-UAS, border security, that's where current budget dollars and reconciliation dollars go. I think we're in the right spot.
We continue to have a great book-to-bill greater than one, and our software-defined tech continues to deliver growth for us. There's a lot of what-ifs as we get into 2026 and into 2027. The fact is, we're winning a lot of long-term business that really draws across a number of year budgets. With the level of backlog we have, with the duration of contracts we just put into backlog of right around six years, it does allow our company to endure and allows us to continue to grow regardless of what some of those top-line numbers are.
Colin Canfield — Analyst, Cantor Fitzgerald
Got it. Thank you for the color. In terms of counter-UAS, cyber, electronic warfare contracts, I think investors have traditionally been conditioned to large multi-year vehicles, but it seems like contracting offices are taking a more agile approach. Maybe if you can talk about how you expect those contracts to be awarded, as well as the level of agility that is rewarding within folks like yourselves, Applied Insight, AeroVironment, folks that have commercially developed solutions in that domain. Thanks.
John Mengucci — President and CEO, CACI International
Yeah, thanks. I think it's safe to say that the U.S. government has been buying capabilities in very different ways as of late. It was about three years back we started to hear about OTAs. Within the last year we heard about how advantageous it is to be a commercial company. We've doubled the amount of OTA work that we've done in the last two years from the last five. We're a company that is both CAS compliant, which means we have a rates-based business like traditional government vendors, but we also have a portion of our business that's truly commercial, as commercial accounting and commercial practices. That sort of lays that groundwork that should tell everybody CACI is a unique company within our space and that we're very well positioned to address how the government buys.
Most of our software-defined technology work has actually been purchased over the last few years in a very different manner. It is true that some of our technology is funded by large multi-year programs, but it's also more the norm that we receive our awards on purchase orders in a very commercial-like manner. You can now buy from CACI just about anything across the electromagnetic spectrum, whether it's SIGINT or it's EW. It allows us to provide an item number, a part number, and a price. We're very used to supporting those types of ordering vehicles. At the end of the day, it's also what moves our financials around, right? I mean, if we're sitting here getting purchase orders that come in in quarter one and we turn that around in the first quarter, that's going to move our financials around. True that the government's buying different.
Love the fact that the government's buying different. Love the fact that we saw that coming seven to eight years back. We've positioned this company very well. I'll sort of end, Colin, with TLS Manpack is a perfect example. That went from an OTA to a program of record where that customer continues to buy 250, 300, 500 units. Better for us to put a program in place and then allow our customer to buy in a manner that supports their budgets.
Colin Canfield — Analyst, Cantor Fitzgerald
Got it. Appreciate the color. Thank you.
John Mengucci — President and CEO, CACI International
Thanks, Colin.
Scott Mikus — Equity Research Associate, Melius Research
Morning, John and Jeff. It's a very nice result.
John Mengucci — President and CEO, CACI International
Morning.
Scott Mikus — Equity Research Associate, Melius Research
John, CACI was ahead of the game when it came to investing in counter-UAS solutions, but we've seen in Ukraine both sides are now using fiber optic cables to prevent their drones from being jammed. How are you thinking about that challenge when it comes to developing more counter-UAS offerings? Is it an opportunity for you? Just wanted to get your thoughts on that.
John Mengucci — President and CEO, CACI International
Yeah, thanks a lot, Scott. Look, I'm going to sort of step back on this whole counter-UAS story. First of all, we've been doing it for a really long time, a couple of decades. I've covered a lot of the basis of some of my prepared remarks with the creation of Merlin that frankly allows us to quickly bring different phenomenology in so we can better find drones. The drone threat is really unique in some ways, but very much the same in other ways. You know, time is going to be the differentiator for this threat. Most other solutions that are out there look at simple drones within a one to three kilometer range. Merlin and other of our systems detect out to 75km away. What that does is it gives the operator time.
In some instances, up to 15 minutes of time versus about eight seconds of time by those who are looking at Group 1 or maybe Group 2 drones within a one to three kilometer space. We're already in the U.S. government inventory. We're already pushing at scale, already battle-hardened with hundreds of confirmed kills. It's true that there are drones that are, you know, trailing fiber. There are drones that are operating in the cellular infrastructure. If you look at what the homeland fight is going to be, we may have drones from people who are not our friends flying their drones on our networks. At the end of the day, I think we have an outstanding solution. I know we have an outstanding solution. I'm also going to end with, you know, to most companies, counter-UAS is like the new AI, right? Everybody does it now that it's popular.
The difference between the AI stockpile hype and the counter-UAS stockpile hype is if you have a counter-UAS solution, you say it does and it does so much and it doesn't, at the end of the day, somebody dies. If you've only deployed your kit at demos around the AUSA floor, it's very telling. We've been on this market for a couple of decades with a great installed base, hundreds of systems, thousands of sensors. I would expect this threat to continually change. That's why our solutions are software-based. That's why our Merlin system brings different phenomenology in. We're able to more than adequately not only defend this nation, but other nations out there. Thanks.
Scott Mikus — Equity Research Associate, Melius Research
Okay. I had one for Jeff. Jeff, what really surprised me was your Fed civilian agency sales were up 17% year-over-year. Just wondering if you could maybe parse that out between organic versus inorganic, and then perhaps what was DHS up versus non-DHS?
Jeff MacLauchlan — CFO, CACI International
Yeah. About 10% of that percentage basis of content is DHS. The growth there, Scott, is in DHS, and it's in the ramping on NASA NCAPS, which is ramping up nicely and moving with our plan. It's really all organic. I don't think there's any inorganic in there. Because I think about Azure and Applied Insight, none of those are going to be ineffective.
Scott Mikus — Equity Research Associate, Melius Research
All right. Thank you.
John Mengucci — President and CEO, CACI International
Great.
Gavin Parsons — Analyst, UBS
Thank you. Good morning.
John Mengucci — President and CEO, CACI International
Morning, Gavin.
Jeff MacLauchlan — CFO, CACI International
Hi, Gavin.
Gavin Parsons — Analyst, UBS
John, I know you always remind us bookings are super lumpy, but obviously a pretty strong booking quarter here. That gets to the two-part question. The submitted pipeline is down, but obviously we're back with those strong bookings. First part of the question, does the simple math imply a very strong win rate on that conversion? Second question, should we expect bookings to maybe take a breather over the next few quarters given that the submitted pipeline is down a bit?
John Mengucci — President and CEO, CACI International
Yes, and potentially. Look, I'm actually quite happy that the transparent information that we share is exactly what should lead to questions like this. Look, we really pride ourselves in giving you all the information we have as we run this company. We do our best to talk about bids that are going to be awarded at some time. We look at what our pipeline of submittals are, and we talk about what we end up winning. Yeah, there's going to be different movement of numbers out there. Very proud of our first quarter end rate. Of course, I look at where we are at the end of the year, but winning $5 billion in the first quarter, which is half of the total we won last year, it really does position us well.
I think you also have to look, Gavin, at the whole dataset because we obviously had a really good awards quarter. You would expect that to probably result in a dip in the awaiting decisions number, but you also have to look at the expected to submit piece, which is up. The adequacy of the pipeline is really a little bit like a balloon. At any one time, one piece of it may dip down and another piece dips up. That's inherent in the lumpiness, right? I think your second question was around, with everything going on, how could it potentially impact the second quarter? I think it's unrealistic to believe that the pace of awards, given we're in a shutdown mode, is going to continue to the level that we have. What that number ends up being is whatever that number ends up being.
I'm sure we'll talk about what the book-to-bill was at the end of the second quarter. I'm more excited about what the book-to-bill is at the end of the year and even more excited by having a trailing 12-month book-to-bill of 1.3x. We put a lot of awards in our $34 billion backlog. Funded backlog is up 26%. I think it really bodes well regardless of what gets thrown at us.
Gavin Parsons — Analyst, UBS
Great. Thank you. Definitely appreciate the transparency.
John Mengucci — President and CEO, CACI International
Thanks, Gavin.
Seth Seifman — Analyst, JPMorgan
Regarding the government shutdown, it appears some awards, especially funded, were accelerated ahead of the shutdown. Should that mitigate some of the near-term impact? Is there some sort of length of the shutdown that presents a risk to guidance?
Jeff MacLauchlan — CFO, CACI International
Certainly, it leaves us better positioned. I think it's important in the sense that it leaves us better positioned in terms of programs being funded, obviously. I think it also is sort of an expression of confidence and support by customers to position us to have minimal disruption from this. Certainly that's true. One of the reasons that we affirmed our guidance, despite the fact that you can kind of see some growing momentum in the business, is our approach to the guidance, which we've talked about with you before, and this left goalpost, right goalpost approach really encompasses sort of a range of outcomes. We really, at this point, don't see a reasonable outcome that isn't encompassed in the guidance range we've given you. Not only is there minimal disruption, the nature of much of the work is that we would expect to make it up within the year.
We really don't see it as being a disruptive factor. I don't know, John, I'm sure.
John Mengucci — President and CEO, CACI International
Yeah, Seth, I'd also just add to Jeff's comments. You know, given our significant intentional exposure to national security work, and as Jeff said, the level of technology work and the large level of funded backlog, and the fact that a lot of our work is essential and that which is not there says that we're able to make that work up. You may not see any Q2 impact in quarter two, but you'll definitely see that any short-term impact over the full year, because we have the full year to make those times up. I think we're in a really good position. Clearly, if it continues to linger for months and months, I think Jeff already covered that. It's well covered within our guidance that we have out there today.
Seth Seifman — Analyst, JPMorgan
Great. How does the hiring environment look over the last few months? Do shutdowns tend to impact the pool of applicants, whether there's more people coming from, say, a federal agency that are applying, or people are kind of scared off from the industry?
John Mengucci — President and CEO, CACI International
Yeah, Rocco, look, we're actually seeing applicant volume at an all-time high. Believe it or not, we had half a million applicants in fiscal year 2025. We have quite a large number of folks applying for jobs today. It does help that we're more a technology company. You know, if we were purely a pure-play government services company, when you see shutdowns that go on for 15, 20, 25, 30 days, that gives folks pause if they want to go do national security work on the expertise side. You know, we're still running 40% of our hires are coming from referrals. We've got well over a 300-person intern program that will be kicking off here shortly. You know, we haven't seen any slowdown in the number of applicants, and we sure haven't stopped hiring given the level of wins we had in the first quarter.
Seth Seifman — Analyst, JPMorgan
Great. Thanks, guys.
John Mengucci — President and CEO, CACI International
Yep.
Henry Roberts — Equity Research Associate, Truist Securities
Hi, Henry on for Tobey here. Thanks for taking the question.
John Mengucci — President and CEO, CACI International
Hi, Henry.
Henry Roberts — Equity Research Associate, Truist Securities
Maybe just to start, I'll go back to counter-UAS for a second. I'm just curious if you could roughly quantify the full opportunity set for that space over the next 12 months, let's say. How much of that could be related to Golden Dome on the non-competitive counter-UAS side? Thanks.
John Mengucci — President and CEO, CACI International
Yeah, Henry, thanks. Look, you know, I think that the government, given the different funding buckets, is still sorting through that. I'm not going to give you a direct answer on the amount of counter-UAS sales we expect in the next 12 months. I will share that our portfolio of EW technologies includes counter-UAS. It includes a number of systems. If you remember, the hardware form factor is different for us, but the software baseline is the same. Okay, as we build systems, whether they're manpacked, whether they're handheld, whether they're mobile, whether they're fixed, the beauty, not by accident, of our solution is that software base allows us to continually modify these with a common software baseline. Our portfolio of EW technology generates about $2 billion of revenue each and every year. We expect with newer requirements on counter-UAS that we'll experience continued growth.
Some of that growth you all see on a quarterly basis when we talk about where our technology portfolio is growing in relationship to our expertise. The administration priorities are very much focused on defense of the homeland, border security, world events, use of drones in modern warfare. European and allies are all up. You know, we're going to have additional funding through reconciliation. Some of that growth is planned in our current FY 2026 plan. We gave you a low and a high end to our guidance range. We are very well positioned for other upcoming counter-UAS opportunities, which do include Golden Dome.
Henry Roberts — Equity Research Associate, Truist Securities
Thanks, I appreciate the color there. Maybe just to follow up, you know, the contracts awarded in this past quarter, how much, if any, of those were due to reconciliation bill funding at this point? I'll throw out a question looking ahead. You know, is reconciliation bill funding kind of one of the key difference makers that you're seeing in terms of funding priorities, you know, as a shutdown moves along that differentiates you all from competitors? Thank you.
John Mengucci — President and CEO, CACI International
Yeah, I'll try to take the last comment first, and I'm sure Jeff will have some comments here as well. The Golden Dome funding and the reconciliation funding, we haven't seen that begin to be spent. That sort of gives us a backstop to what we're going through and we're experiencing now, perhaps.
Jeff MacLauchlan — CFO, CACI International
Yeah, that's right. We're seeing it in a planning sense. We're starting to see opportunities, meetings about developing alternatives, things like that. We're starting to be able to see a little bit of where it's going to land, we believe. Of course, the heavy DHS content, along with the portions of the DOD reconciliation funding that are focused on the areas that are in our sweet spot, give us some confidence about that. None of the performance in the first quarter or the funded backlog that we talked about, we'd identify directly to reconciliation funding.
Henry Roberts — Equity Research Associate, Truist Securities
Thanks, Henry.
Jonathan Siegmann — Managing Director of Equity Research, Stifel
The margins were really impressive, especially in the context of your earlier outlook of lower margins to start the year. The incremental sales year-over-year were all technology, which implies the incremental margin year-over-year was over 20%. Can you comment a bit about the mix or any one-time benefits this quarter? It suggests the margins and technology maybe are trending higher than at least we were modeling. Thank you.
Jeff MacLauchlan — CFO, CACI International
Yeah, thank you, John. I'm not going to quibble with your math. The technology margins were strong in the quarter. I would remind you that the segment is not monolithic. There are pieces of the technology portfolio that have margins north of what you mentioned, and there obviously are some that are less. When we talk about mix, it's both a mix of technology and expertise, but it's also a mix within the technology segment sector.
I would also note that it did not change our view of the year. I would encourage you to think about that as sort of de-risking what you've seen historically as our customary first half, second half margin step up. We now see that increase in the second half as being a little smaller than it has been in some recent years. You've done the math. You've done the math the right way.
Jonathan Siegmann — Managing Director of Equity Research, Stifel
That's great. Maybe just to follow up on what John said about loving the fact the government is buying differently, is it more the impact of these changes being more customers are embracing some of these more progressive ways to buy software and agile software, or is it the same customers just buying more? Thank you very much.
Jeff MacLauchlan — CFO, CACI International
It's a little bit of both.
John will want to add to this, but certainly there's been a tremendous increase in OTAs, both in their use by people that have been using them, but also customers that haven't used them before. I think also, I would go back and underscore the answer to one of the first or second questions where John talked about the fact that we really are positioned deliberately by design to be able to sell commercially, to be able to sell in a traditional FAR CAS disclosed environment. Literally, there is no way that customers buy that we don't sell. I think that can't be overemphasized.
John Mengucci — President and CEO, CACI International
Yeah, John, I'll also add. Look, what customers want is FAR Part 12, FAR Part 15. They want to be able to use those when they believe that one of those supports their needs over the other. The days of large development programs where you write your requirements in 2025 and you get your first taste of the system in 2035 are not going to support how fast the threats are moving. As Jeff mentioned, about a decade ago, we positioned this company to be very agile in both, right? It's why when we invest ahead of customer need, what the government's asking everybody to do is, hey, how about invest ahead of need more on your dollar than on ours?
Explain to us how that fits into part of our solve, and then allow us to buy that, as I answered earlier, from a commercial price sheet that says if you want a mobile counter-UAS system or a handheld EW gadget, then give me the part number and let me start buying that. Our software wrapper around these things is that when you buy that, you're going to find different uses for it. There should be a quick upgrade path either from a licensing yearly fee that gets that customer additional upgrades and updates to it. Again, at the end of the day, I've been saying this for a decade. This is not the old way where if you want a new capability, buy the new device. You're continuously throwing devices away.
They're looking for agility, and what they're saying is they want to be able to buy the way commercial companies buy and not be locked to long-term development contracts. As Jeff said, we can support either in both and, you know, any other ways.
Jonathan Siegmann — Managing Director of Equity Research, Stifel
Thanks, John.
John Mengucci — President and CEO, CACI International
Thank you.
John Kernan — Managing Director, TD Cowen
Great results, guys.
John Mengucci — President and CEO, CACI International
Thank you.
John Kernan — Managing Director, TD Cowen
I wanted to ask two questions to follow up on some earlier ones. First, has there been any impact to the business from the shutdown with respect to either revenue, cash, or unusually soft awards in the first month of the quarter? I have a follow-up.
Jeff MacLauchlan — CFO, CACI International
Yeah, I can start with some of that. John will want to add to this, I'm certain. There's been a slight amount of cash collections disruption that's primarily related to staff that's available for invoice approval and things like that. We're feeling a little bit of administrative sluggishness, I'll call it, related to that. It's not tremendous. Collections may be 10% or 15% off. It's small but noticeable. Similarly, I would say in terms of revenue, we have pockets of places where we have attenuated levels of activity. It's really de minimis. I'm going to say it's kind of single-digit millions revenue. It's activities that we expect to recover during the year. It doesn't really affect our view of the year. It's detectable but small and manageable.
John Kernan — Managing Director, TD Cowen
Okay. Just wanted to ask, given the environment may be tougher for some of the "peers" in the space relative to CACI, have you seen any intensifying price competition? Maybe talk about the bits that you didn't prevail on. Is that typically a price shootout or anything you've changed that you've seen in terms of competitor behavior, if any?
John Mengucci — President and CEO, CACI International
Yeah, I'm glad I'm thinking, John. I can't answer for everybody else out there. I can tell you that if we've ever lost on price, it's not because we're in a price shootout, because we gave up that part of the ecosystem about seven to eight years back. I would imagine people are going to do whatever they need to do to continue to win business. We've seen a little uptick in the number of protests which are out there. That to me, being in this marketplace for a few decades, is usually that early sign. If you win, you win. If you don't, you protest. I think we'll continue to watch the level of protests which are out there. For us, I haven't seen pricing be an issue.
We believe that we are fairly priced and where we invest ahead of customer need, where we've gone out on risk to spend the company's money to help defend this nation in a better, better manner, we would expect to see higher margins. Thus far, that plan and that mode of running this business has served us very, very well. Thanks.
John Kernan — Managing Director, TD Cowen
Thank you.
Conor Walters — Equity Research Associate, Jefferies
Morning, guys. Congrats on a great start to the year. Thanks for taking my question. Maybe just to start, it seems like the unchanged top-line growth of 7% to 9%, but stronger organic and perhaps around $40 million in lower acquired revenue. Curious first if I'm reading that correctly, but also if you could provide an update on the acquisition integration process.
Jeff MacLauchlan — CFO, CACI International
Yeah, the acquisitions of Azure and AI are largely complete. In fact, you know, we're finding what we've always found, which is when it's done well, it's increasingly difficult to tell them apart. There is some Azure timing. John may want to comment some more on this related to some of the activities between the Azure legacy programs and Spectral. No, they're very definitely meeting expectations, and we remain convinced of their strategic and financial value. They're terrific fits, both of them.
John Mengucci — President and CEO, CACI International
I don't have anything else to add.
Conor Walters — Equity Research Associate, Jefferies
That's good, John. Thanks.
Perfect. That's helpful. Maybe just want to follow up. You guys discussed the upside you're seeing from reconciliation funding for Golden Dome. You mentioned the EW potential there. Curious if there's any other areas you would call out as considerable opportunities in your portfolio tied to that, and then how you're thinking about the bid process and timeline now that you're starting to see that money actually being spent.
John Mengucci — President and CEO, CACI International
Yeah, I'll talk a little bit about Golden Dome. Out in the public domain, you're going to hear a lot about sensors and effectors and command and control. It's not just a ballistic threat. It's also threats from unmanned systems as well. We're making it very clear that the Golden Dome concept is going to be completely reliant on early indications and warnings, meaning, as I mentioned earlier, knowing far in advance when a threat is imminent and then giving folks who have to defend against those minutes and hours of time. We've actually coined that as left of launch. It's sort of our contribution to the entire Golden Dome effort. There has not been money spent on this yet. General Gutlein is taking our FEV responses.
We've submitted our credentials on a few related proposals, but we're really looking at taking all of our sensitive activities work and all of our worldwide set of embedded sensors, which are in the thousands, to give a common operating picture. From there, let's go work on that non-kinetic low collateral defeat of those threats. Clearly, taking a hypersonic missile and using that to knock down a drone or other missiles over the continental United States has a high collateral issue. We're looking at non-kinetic low ones. We would expect funding to begin to ramp up. I think we'll know better as we get to the end of the second quarter, early third. We're very excited to be looking at that $150 billion initial spend, purely focused on defending this country.
Conor Walters — Equity Research Associate, Jefferies
That's perfect. Thanks so much, guys.
John Mengucci — President and CEO, CACI International
Yeah, thank you.
Conor Walters — Equity Research Associate, Jefferies
Yeah.
John Mengucci — President and CEO, CACI International
Louis, are you there?
Louie DiPalma — Analyst, William Blair
Yes, can you hear me?
John Mengucci — President and CEO, CACI International
Yes, we hear you now. Good morning.
Louie DiPalma — Analyst, William Blair
Good morning. Following the positive TLS Manpack developments, is CACI also well-positioned for the U.S. Army's modular mission payload plan for small drones with your Spectral SIF and Kickflip? Related to this, how does the modular mission payload differ from how the Army is currently using Spectral SIF on Puma or C-100 drones? Thanks.
John Mengucci — President and CEO, CACI International
Yeah, Louis, thanks. Look, a large portion of our EW portfolio really is modular mission payloads, right? For the rest of the audience, that's really taking common software capabilities and putting that on different form factors. It could be looking for wireless signals. It could be looking for land-based signals. It could be looking at missile signals. There's a plethora of RF out there around the globe. The program that Louis mentions is we already deliver a number of modular mission payloads to counter-UAS vendors, folks who build drones, and they're looking for an overall package. They have a drone that's size X that can carry weight Y. What kind of features do we have? What type of devices can we put into those unmanned systems? We have delivered those.
We have delivered to the Puma and a number of other ones, either directly to the United States Army and other DOD agencies, or we've gone directly to a drone builder. I believe that market will only continue to grow. It's the reason why we got into this market a number of years back. It's the reason why we positioned this company to be able to deliver either under a FAR Part 12 or FAR Part 15. It allows not only the U.S. government, but OEMs of drones and the like to easily be able to buy our systems and have them ready and also allow us to modify those as the threat changes. That's what we've been up to.
Louie DiPalma — Analyst, William Blair
That makes sense. How has the Navy Spectral program been progressing?
John Mengucci — President and CEO, CACI International
Navy Spectral program is going very well. Jeff talked about Azure. Azure has the precursor program, and we worked very, very closely with the Navy to make certain that we could time some of the Azure deliveries in a manner that then support the Spectral delivery. On the Azure front, there were some deliveries that have been pushed out so that can be more closely integrated with the Spectral ones. The next phase for Spectral is a January-February timeframe where that program will get through its milestone C, and that will freeze the design. We'll be able to begin deliveries, as we've always mentioned, during calendar year 2026. Thanks, Louis.
Louie DiPalma — Analyst, William Blair
Thanks, John.
Thanks, everyone.
Jon Illingworth — Analyst, Baird
Morning, John, Jeff, and George. Congrats on a strong set of results. I wanted to talk a little bit about just the international opportunity. I think it's not something that you maybe highlight a lot, but just given where the NATO budgets are going, you know, we know about the 3.5% of GDP, and then there's an additional 1.5% bonus on top of that. There's clearly capability gaps, you know, in the EU and in Europe and NATO as a whole. Is there anything you can highlight where maybe areas you guys are targeting in the next couple of years?
John Mengucci — President and CEO, CACI International
Yeah, John, thanks. Look, I've said many times that the world is a dangerous, dangerous place, and I think that Ukraine was a real wake-up call. It definitely raised the urgency level around defense and national security globally, mostly in the electronic warfare area. It won that market not by accident, but by very, very, very solid planning. As you mentioned, there are many allies that are going to be expanding their defense budgets. We deliver technology to a number of five countries today. I've been on this slow reveal of what we're doing on the international front solely because we want to be very cautious and very, very careful because you can spend a lot of money on the international front very, very quickly. Since we last talked, we've expanded our sales to 15 NATO countries, and we continue to assess demand signal in seven other countries.
Eastern Europe allies are increasingly interested in our SIG, our EW, and our counter-UAS tech. I will tell you that our initial focus was on technologies with existing U.S. government and DOD sales following the FMS path. A number of countries that we have added have now gone to direct, direct commercial sales. I'm tempering that only by the fact that it's true a lot of European nations are going to be spending far more money, but those same European nations are going to look to spend that money within their borders. Our next step is to understand what relationships we need so we either license or we co-produce some of our tech here and then add the applicable software baseline to those products.
Still a long way to go there, but it's a market that, over the last 90 days since we've last spoken, has truly opened up to us.
Jon Illingworth — Analyst, Baird
Thank you, John. Just a quick follow-up, if you could comment on, you know, the slide deck talks about the M&A pipeline expanding, just any areas that you think would sort of be a niche capability that you could fill. Any comments on M&A, just in the environment.
John Mengucci — President and CEO, CACI International
Yeah. John, as you know, we've talked many times before, and there's no departure from this. Our process and approach is very much gap-driven. The opportunities that we see in the pipeline are generally a little bit more technology than they are expertise, a little bit more focused on sensors as well as, not surprisingly, software applications that go around those sensors and things that kind of fit nicely into our sweet spot. We are seeing a little bit of life in the pipeline, and we look forward to developing a few of these ideas.
Very early stage at this point, but you know, it's an active area of interest for us.
Jon Illingworth — Analyst, Baird
Thanks for taking the question.
John Mengucci — President and CEO, CACI International
Operator, we have time for one more question.
John Mengucci — President and CEO, CACI International
Noah, are you there?
Noah Poponak — Analyst, Goldman Sachs
Hey, can you hear me now?
John Mengucci — President and CEO, CACI International
Yes, we can, Noah. Thanks.
Noah Poponak — Analyst, Goldman Sachs
Got to check the headset. John, you spoke about, or you alluded to kind of everyone at AUSA having counter-UAS, and it was like if you did 15 meetings, 12 had it and 10 led with it, which is pretty unusual. Is the funding coming down the pipeline that significant? Can it move the needle for companies much larger than yours? I know that you didn't want to quantify the forward on that, but can you give us the baseline of how much of the current revenue base is counter-drone?
John Mengucci — President and CEO, CACI International
Yeah, I'm going to stick with about $2 billion of our entire portfolio is in the EW place, which does include counter-drone. We deliver it to both DOD and the intelligence community, and as I shared, a large number of NATO countries. Back to the first part, yes, I think it's a burgeoning market. I think you have to look at two different streams of funding, Noah, right? One is the $150 billion on Golden Dome, some portion of that, and I would tell you it's multiples of billions that will be spent on a layered defense that's going to have to defend against unmanned systems. Frankly, uncrewed systems are a very different beast. Traditional radar is not going to find that. It's going to look like a bird. Okay?
It takes new technology, and then on top of that, we're not in a war time in somebody else's zone where the U.S. is assisting. We'll be defending this nation. We're also going to have events like the World Cup. We're going to have the Olympics. We're going to have so many more things. That threat vector, Noah, is up materially. You can look at common news sources that the threat vector for other countries, potentially drug cartels and others, using drones. I think there's a market growth that we're all watching. It will be billions of dollars worth of Golden Dome funding. If you look at the DHS additional funding, that's going to work on the border security side. Today, there's one kilometer systems that find Group 1 drones.
Tomorrow's threats are going to be, we need 75 or 100km to give us minutes of time to go defeat against that. That's going to be class one through class five drones. Yes, I think that the rest of the industry is waking up to this market. My only earlier comment around this hype is, we went through a year and a half period of AI hype, and I feel as though we're going to go through another year and a half of counter-UAS hype. At the end of the day, the government's going to go with systems that have been deployed, where combatant commanders swear by the fact that they want one of what we have. It's just really allowing funding to catch up to that. Of course, you do well know, Noah, government shutdown is going to sort of slow that down as well.
I think it's a burgeoning market. We've been in it for a couple of decades. I think we understand it very, very well. We have the right partnerships. We're always looking for additional capabilities that we can add to our system. I'll end with, we built our latest system on our own nickel, right? We're not dependent on U.S. government, you know, IRAD dollars to advance what we have because I do think that the threat is that real. The government's asking us to look at this as harder. Very hard to do.
Noah Poponak — Analyst, Goldman Sachs
I appreciate the detail there. If I could just ask one more question, just hoping to better understand a little bit shutdown impact and shape of the year. Can you shed a little more light on how the government goes through deeming what is essential? The comments you made there at the beginning of the call are interesting. I thought it would have been more, you know, missed work in your 2Q that's just made up before the end of the year, but it sounds like that's not the case.
I think, historically, you've had a Q2 that's pretty often flat sequentially versus Q1, and then a back half that's up, you know, mid to high single digits versus the first half. Is that still the shape of your 2026?
Jeff MacLauchlan — CFO, CACI International
Yeah, broadly this is Jeff. It is, you know, with the caveat that I mentioned earlier about that step up will be between first half and second half. We expect to be less pronounced this year than it has been in prior years, given the strong first quarter, which largely was comprised of items that did not change our view of the year. That's kind of a qualitative way to say quantitatively the first half, second half step up will not be as pronounced as it has been in the past.
John Mengucci — President and CEO, CACI International
Yeah, no, I'll also throw in there, if you look at the last shutdown, right, it was 2018-2019. If I remember right, some of that was December to January, right? You had a lower level of folks because you were around Christmas time. What's different for our company between the 2018-2019 shutdown and where we are now is we've got far more long-term tech programs that are being developed. We have far more programs that we're investing ahead of customer need, and we're putting enhancements into that software baseline. We're selling them on a purchase order, so that has a very different buying schedule to it. It doesn't take folks to sit around and do a down select. They can buy these things off of a GSA-approved price list. There are a lot of differences that lead to this sort of de minimis impact.
You also closed up with, you know, we can make a lot of these hours up. If we're at a help desk and nobody needs help now, they're not going to need more help later. Clearly that doesn't get made up. That's your traditional government services work, but the vast amount of this is work that will have to be done. Every agency, back to your initial comment, every agency is going through their own process. I wish I had that rubric that told us what was mission essential and not. Frankly, if I'm sitting in the government side, that sort of changes too, right? Whether we have defense of the homeland different than other things that are out there going. All in all, really good book of business right now with Jeff. Jeff and I look at the impacts and how we can get those covered.
We believe we're right at the quarter one point to having an outstanding year.
John Mengucci — President and CEO, CACI International
Thank you, Tina, and thank you for your help on today's call. We'd like to thank everyone who dialed in or listened to the webcast for their participation. We know that many of you will have follow-up questions, so Jeff MacLauchlan, George Price, and Jim Sullivan are available after today's call. Please stay healthy, and all my best to you and your families. This concludes our call. Thank you and have a great day.