Q1 2024 CACI International Inc Earnings Call

October 26, 2023

Today's call is being recorded at this time all lines are in a listen only mode.

Later, we will announce the opportunity for questions and instructions will be given at that time.

If you should need any assistance during this call. Please press star zero and someone who will help you.

At this time I would like to turn the call over to George price.

Thanks, Breanna and good morning, everyone I'm, George price Senior Vice President of Investor Relations for CACI International. Thank you for joining US this morning, we.

We are providing presentation slides, so let's move to slide two.

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.

Today's call is being recorded at this time all lines are in a listen only mode.

Later, we will announce the opportunity for questions and instructions will be given at that time.

If you should need any assistance during this call. Please press star zero and someone will help you.

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.

At this time I would like to turn the call over to George price.

Thanks, Breanna and good morning, everyone I'm, George price Senior Vice President of Investor Relations for CACI International. Thank you for joining us this morning.

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, whereas a substitute for performance measures prepared in accordance with GAAP, but.

We are providing presentation slides, so let's move to slide two.

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.

Let's turn to slide three please.

To open our discussion this morning, Here's John Man, Gucci, President and Chief Executive Officer of CACI International.

John.

Thanks, George and good morning, everyone.

Thank you for joining us to discuss our first quarter fiscal year 'twenty four results.

As well as our fiscal 'twenty four guidance with me with me. This morning is Chuck Mclaughlin, our Chief Financial Officer.

Before we get started and as I previously informed many of you.

Price now leads Investor relations for CACI, replacing Dan Legwork was taken in an executive role elsewhere in the company.

To open our discussion this morning, Here's John Man, Gucci, President and Chief Executive Officer of CACI International.

My Thanks to Dan for the Fine job you did it.

My congratulations to George.

Got it.

Brings us four years is a definitely to Dan and he has significant experience.

Thanks, George and good morning, everyone.

Both the sell side analyst and Investor Relations executive for the position.

Thank you for joining us to discuss our first quarter of fiscal year 'twenty for results.

So with that let's move to our first quarter results.

As well as our fiscal 'twenty four guidance with meeting with me. This morning is Chuck Mclaughlin, our Chief Financial Officer.

Sure.

Slide four please.

Last night, we released our first quarter results for fiscal year, 'twenty, four and I'm pleased to say that our actions and results in the first quarter were directly aligned with our value creation model.

Before we get started and as I previously on for many of you Smart price now leads the Investor relations for CACI, replacing Dan Legwork was taken in an executive role elsewhere in the company.

My Thanks to Dan for the fine job he did.

As we've discussed that value creation model is one that is built to drive growth and free cash flow per share by utilizing a combination of long term predictable organic revenue growth.

Congratulations to George bring.

He brings his four years is a Japanese Dan and his significant experience.

Both the sell side analysts.

The efficient management of working capital and Capex.

Investor Relations executive to the physician.

Profitability supportive of continued investment.

So with that let's move to our first quarter results.

And prudent opportunistic value, creating capital deployment.

Slide four please.

Against those elements, we delivered 15% organic revenue growth.

$174 million of EBIDTA.

Free cash flow that exceeded our expectations.

As we've discussed that value creation model is one that is built to drive growth and free cash flow per share by utilizing a combination of long term predictable organic revenue growth the.

We executed a $150 million share repurchase program.

In addition, the $103 $1 billion of contract awards, which represents a one seven times book to Bill for the quarter at one four times on a trailing 12 months basis.

The efficient management of working capital and Capex.

Profitability supportive of continued investment.

And prudent opportunistic value, creating capital deployment.

More than half of our awards were for new work to CACI, We had strong performance on our re competes as well.

Against those elements, we delivered 15% organic revenue growth.

Our first quarter performance provides us the opportunity to raise elements of our fiscal year 'twenty for guidance and Jeff will provide the financial details shortly.

$174 million of EBITDA.

Free cash flow that exceeded our expectations.

We executed a $150 million share repurchase program.

Slide five please.

We've talked about network monetization being a critical need for our government and a significant long term opportunity for CACI.

In addition, the one $3 $1 billion of contract awards.

Represents a one seven times book to Bill for the quarter at one four times on a trailing 12 months basis.

Secure modernized networks are the required foundation for many priorities, including AI cyber ingesting too.

More than half of our awards were for new work to CACI, We had strong performance on our re competes as well.

We are investing to develop innovative network modernization capabilities, both organically and via the acquisitions of Lgs and <unk> technologies.

Our first quarter performance provides us the opportunity to raise elements of our fiscal year 'twenty for guidance and Jeff will provide the financial details shortly.

As a result, we were awarded an eight year contract valued at up to $1 $3 billion to modernize the network of our major Dod and intelligence community customer to support critical intelligence missions around the world.

Slide five please.

We've talked about network monetization being a critical need for our government and a significant long term opportunity for CACI.

Secure modernized networks are the required foundation for many priorities, including AI cyber and <unk>.

We had the highest rate of technical proposal.

We displaced a long entrenched incumbents.

We established a new beachhead for network modernization windows customer.

We are investing to develop innovative network modernization capabilities, both organically and via the acquisitions of Lgs Niu technologies.

And we increased our visibility and access across the broader intelligence community.

In addition, we are.

Just notified of a $200 million JV network modernization win this one specifically leveraging our commercial solutions for classified or TSMC technology.

As a result, we were awarded an eight year contract valued at up to $1 $3 billion to modernize the network of our major DVD intelligence community customer to support critical intelligence missions around the world.

We continued to see healthy demand for network modernization and a strong pipeline of additional opportunities.

We had the highest rated technical proposal.

No.

We displaced a long entrenched incumbents.

You've heard us discuss the importance of software as an enabler for customer missions and their software is our superpower.

We established a new beachhead for network modernization with this customer.

And we increased our visibility and access across the broader intelligence community.

CCI has continued to demonstrate that we have the most mature advanced software development capabilities building open systems and software defined offerings in the market today.

In addition, we are.

Just notified of a $200 million JV network modernization win this one specifically leveraging our commercial solutions for classified or TSMC technology.

These capabilities led to the award of a five year contract.

With a maximum ceiling value of $917 million to continue providing software and systems engineering to support Battlespace awareness for the United States Air Force.

We continue to see healthy demand for network modernization and a strong pipeline of additional opportunities.

Thank you.

You've heard us discuss the importance of software as an enabler for customer emissions and their software is our superpower.

In addition, our unique software defined capabilities, coupled with our deep understanding of signals in the electromagnetic spectrum continues to differentiate CCI in the marketplace.

CACI has continued to demonstrate that we have the most mature advanced software development capabilities building open systems and software defined offerings in the market today.

We are seeing increased market adoption of our software defined technology, particularly in the areas of signals intelligence and electronic warfare.

These capabilities led to the award of a five year contract.

This is evidenced by being selected to supply our technology offerings to an army program of record as well as the evaluation of the same offerings for another army program that enables dismounted soldiers to quickly detect identify geo locate and defeat signals of interest.

With a maximum ceiling value of $917 million to continue providing software and systems engineering to support Battlespace awareness in the United States Air Force.

In addition, our unique software defined capabilities, coupled with our deep understanding of signals and the electromagnetic spectrum continues to differentiate CCI in the marketplace.

These successes are great examples of our ability to deliver software defined innovation and a fast agile manner to support critical and enduring national security priorities.

We are seeing increased market adoption of our software defined technology, particularly in the areas of signals intelligence electronic warfare.

Slide six please.

In addition to winning enduring new work.

We're executing and performing with excellence on the three large awards, we announced in our last fiscal year let.

Let me provide you with an update.

First our air Force enterprise it as a service or <unk> contract is ramping up as planned.

We are on track to stand up our enterprise service desk before year end.

These successes are great examples of our ability to deliver software defined innovation and a fast agile manner to support critical and enduring national security priorities.

And assumed day to day operations of existing systems with additional program milestones on track for the second half of the fiscal year.

Both of these actions accelerates support to our customer and support our financial goals for FY 'twenty four.

Slide six please.

In addition to winning enduring new work.

We're executing and performing with excellence on the three large awards, we announced in our last fiscal year let.

Next the transition of our large MSA Intel and Cyber award is also progressing well.

Let me provide you with an update.

We continue to show the value of our technically superior proposal.

First our air Force enterprise it as a service or <unk> contract is ramping up as planned.

And we are receiving positive feedback from our customer executives.

We are on track to stand up our enterprise service desk before year end.

Finally, our Navy spectral program is off to a great start.

And assuming day to day operations of the existing systems with additional program milestones on track for the second half of the fiscal year.

Even with an extremely complex environment and technical requirements.

The ground running because we invested ahead of customer need.

We have a great partnership with the Navy and our customer is pleased with our performance.

Both of these actions accelerates support to our customer and support our financial goals for FY 'twenty four.

With the ever evolving threats and the Indo Paykan theater spectral is the type of program built with an open or so open software architecture, the brakes vendor lock and provides capabilities at the speed of the fight that the Navy requires.

Next the transition of our large MSA Intel and Cyber award is also progressing well.

We continue to show the value of our technically superior proposal.

And we are receiving positive feedback from our customer executives.

Slide seven please.

Finally, our Navy spectral program is off to a great start.

Turning to the macro environment, we continue to monitor the government fiscal year 'twenty for budget process closely.

Even with an extremely complex environment and technical requirements.

We're prepared for a number of scenarios most of which we believe we are most of which we believe are addressed within our guidance range.

Hit the ground running because we invested ahead of customer need.

We have a great partnership with the Navy and our customer is pleased with our performance.

As we've said many times the world is a dangerous place and recent events have only confirm that view.

With the ever evolving threats and the Endo Paykan theater spectral is the type of program built with an open are open software architecture that breaks vendor lock and provides capabilities at the speed of the fight that the Navy requires.

Customer demand remains high driven by the elevated global threat environment.

Pacing capabilities of our adversaries and a significant opportunity for modernization and government to enhance both efficiency and security.

Slide seven please.

Turning to the macro environment, we continue to monitor the government fiscal year 'twenty for budget process closely.

<unk> remains very well positioned in key enduring areas of demand, including brought it modernization.

We're prepared for a number of scenarios most of which we believe we are most of which we believe are addressed within our guidance range.

The electromagnetic spectrum.

<unk> space and intelligence.

Slide eight please.

As a trusted national security company, our government customers rely on CACI to meet their most urgent and critical needs.

As we've said many times the world is a dangerous place and recent events have only confirm that view.

Customer demand remains high driven by the elevated global threat environment.

Given the recent budget uncertainty.

Just such an opportunity arose when we received requests to purchase nearly $200 million of network equipment cyber security licenses and other material before the government fiscal year ended.

Pacing capabilities of our adversaries and a significant opportunity for modernization and government to enhance both efficiency and security.

<unk> remains very well positioned in key enduring areas of demand, including brought it modernization.

We are proud that our team was able to rapidly and efficiently respond to these requests with a $100 million of the material delivered in our first quarter and another 100 million slated to be delivered next quarter.

The electromagnetic spectrum.

<unk> space and intelligence.

Slide eight please.

Excluding these material purchases our underlying organic growth was 9%.

As a trusted national security company, our government customers rely on CACI to meet their most urgent and critical needs.

In summary, our first quarter results were strong in fiscal year 'twenty four is off to a great start.

Given the recent budget uncertainty.

Just such an opportunity arose when we received requests to purchase nearly $200 million of network equipment cyber security licenses and other material before the government fiscal year ended.

Demand signals are healthy and we are well positioned to address key customer priorities.

We are successfully executing our strategy to invest ahead of need to build differentiated capabilities and as a result, we are winning in the marketplace and we are leveraging our financial strength to deploy capital and a flexible and opportunistic manner to drive free cash flow per share growth and shareholder value.

Excluding these material purchases our underlying organic growth was 9%.

With that I'll turn the call over to John.

Yeah.

In summary, our first quarter results were strong in fiscal year 'twenty four is off to a great start.

Thank you John and good morning, everyone. Please turn to slide nine.

Our first quarter of fiscal year 'twenty four is a strong start to the fiscal year, we generated revenue of $1 $85 billion in the quarter of which about 100 million was related to the unplanned government material purchases, which John just described.

Demand signals are healthy and we are well positioned to address key customer priorities.

This activity drove 6% of year over year growth was essentially no profit the.

The remaining 9% growth was driven by strong execution across the business as we capitalize on our healthy awards over the past several quarters.

With that I'll turn the call over to John.

Thank you John and good morning, everyone. Please turn to slide nine.

The weighted average duration of our awards extended to over six years this quarter, an all time high.

Slide 10 please.

This activity drove 6% of year over year growth was essentially no profit.

First quarter reported EBITA margin reflects 60 basis points of drag from the higher material volume I just mentioned.

The remaining 9% growth was driven by strong execution across the business as we capitalize on our healthy awards over the past several quarters.

In that context, our underlying profitability is strong.

This performance demonstrates the effectiveness of our strategy to pursue to pursue fewer and larger opportunities and invest ahead of customer need a further indication of the success of our approach is that the weighted average duration of our awards extended to over six years this quarter, an all time high.

Adjusted diluted earnings per share of $4 36 were unchanged from the prior year.

Higher interest expense was offset by higher operating income a lower tax provision and a lower share count as a result of our share repurchases.

First quarter operating cash flow, excluding our accounts receivable purchase facility was $93 million, reflecting solid profitability and strong cash collections.

Slide 10 please.

First quarter reported EBITA margin reflects 60 basis points of drag from the higher material volume I just mentioned.

We reported days sales outstanding of 49 days, just one day above last year's record low as we continue to efficiently manage working capital.

In that context, our underlying profitability is strong.

Adjusted diluted earnings per share of $4 36 were unchanged from the prior year.

Free cash flow was $79 million for the quarter.

Slide 11 please.

Interest expense was offset by higher operating income a lower tax provision and a lower share count as a result of our share repurchases.

Recall that last year, our board authorized a $750 million share repurchase program.

First quarter operating cash flow, excluding our accounts receivable purchase facility was $93 million, reflecting solid profitability and strong cash collections.

As John mentioned, our value creation model is focused on driving growth and free cash flow per share, including through flexible and opportunistic capital deployment.

This standing authorization has positioned us to be even more responsive to evolving market conditions. Accordingly, we initiated an open market repurchase program at the end of August and through quarter end executed the repurchase of another 470000 shares at an average price of 319.

We reported days sales outstanding of 49 days, just one day above last year's record low as we continue to efficiently manage working capital.

Free cash flow was $79 million for the quarter.

Slide 11 please.

Recall that last year, our board authorized a $750 million share repurchase program.

For sure.

After completion of this latest share repurchase we have approximately $337 million remaining in our share repurchase authorization.

As John mentioned, our value creation model is focused on driving growth and free cash flow per share, including through flexible and opportunistic capital deployment.

Since the $750 million board authorization in January we have repurchased over 5% of our shares outstanding.

This standing authorization has positioned us to be even more responsive to evolving market conditions.

We ended the quarter with $2 three times leverage of net debt to trailing 12 months EBITDA, reflecting the funds used in the quarter for the share repurchases.

<unk>, we initiated an open market repurchase program at the end of August and through quarter end executed the repurchase of another 470000 shares at an average price of $319 per share.

The healthy long term cash flow characteristics of our business, our modest leverage and our access to capital continue to provide us with significant optionality.

After completion of this latest share repurchase we have approximately $337 million remaining in our share repurchase authorization.

We remain well positioned to deploy capital and a flexible and opportunistic manner to drive future growth and shareholder value.

Since the $750 million board authorization in January we have repurchased over 5% of our shares outstanding.

Slide 12 please.

With our first quarter results and additional share repurchases, we are raising our fiscal year 'twenty for revenue adjusted EPS and free cash flow guidance.

We ended the quarter with $2 three times leverage of net debt to trailing 12 months EBITDA, reflecting the funds used in the quarter for the share repurchases.

We now expect fiscal 'twenty for revenue to be in the range of approximately $7 2 billion to $7 4 billion essentially all of which is organic this $200 million increase in revenue reflects the higher material purchases we discussed earlier.

The healthy long term cash flow characteristics of our business, our modest leverage and our access to capital continue to provide us with significant optionality.

We remain well positioned to deploy capital and a flexible and opportunistic manner to drive future growth and shareholder value.

This increased volume is split evenly between the first and second quarters.

Slide 12 please.

I want to be clear that our EBITDA dollar expectations for the full year are unchanged.

With our first quarter results and additional share repurchases, we are raising our fiscal year 'twenty for revenue adjusted EPS and free cash flow guidance.

Beyond the material purchases the underlying operating results of the business are consistent with our expectations.

To assist with your modeling, we expect second quarter revenue and EBITDA dollars to be relatively flattish with the first quarter.

As was the case last year and as we shared in our guidance call last quarter, we see higher profitability in the second half of the year.

This increased volume is split evenly between the first and second quarters.

This second half improvement is driven by declining levels of mission technology investment from the first half as well as second half increases in new fixed unit price work and higher volume of some mission Tech programs.

I want to be clear that our EBITDA dollar expectations for the full year are unchanged.

Beyond the material purchases the underlying operating results of the business are consistent with our expectations.

We are raising our adjusted EPS guidance to reflect the lower share count as a result of our additional open market share repurchases.

To assist with your modeling, we expect second quarter revenue and EBITDA dollars to be relatively flattish with the first quarter.

Our full year diluted share count guidance is now $22 7 million shares.

As was the case last year and as we shared in our guidance call last quarter, we see higher profitability in the second half of the year.

In addition, our full year interest expense is now expected to be in the range of $100 million to $105 million, reflecting the additional share repurchases.

With minimal net income impact of this change is accommodated within the existing adjusted net income guidance range.

We are raising our fiscal year 'twenty for free cash flow guidance by $10 million to at least $410 million.

We are raising our adjusted EPS guidance to reflect the lower share count as a result of our additional open market share repurchases.

We expect that this increased free cash flow combined with the benefit of the reduced share count results in an increase of 4% versus our initial free cash flow per share expectations.

Our full year diluted share count guidance is now $22 7 million shares.

In addition, our full year interest expense is now expected to be in the range of $100 million to $105 million, reflecting the additional share repurchases.

Slide 13 please.

Turning to our forward indicators caci's prospects continue to be strong our first quarter book to Bill of one seven times.

With minimal net income impact of this change is accommodated within the existing adjusted net income guidance range.

Strong performance in the marketplace and our first quarter awards have a weighted average duration of over six years.

We are raising our fiscal year 2000, and for free cash flow guidance by $10 million to at least $410 million.

First quarter backlog of $26 7 billion grew 7% from a year ago and represents almost four years of annual revenue.

We expect that this increased free cash flow combined with the benefit of the reduced share count results in an increase of 4% versus our initial free cash flow per share expectations.

These metrics provide good long term visibility into our business.

For fiscal year 'twenty four we now expect 89% of our revenue to come from existing programs.

Slide 13 please.

Turning to our forward indicators caci's prospects continue to be strong our first quarter book to Bill of one seven times.

<unk> percent from re competes and 4% from new business.

Aggress on these metrics reflects increased confidence in our expectations for the year.

Strong performance in the marketplace and our first quarter awards have a weighted average duration of over six years.

In terms of our pipeline, we have $11 billion of bids under evaluation about 65% of which are for new business to CACI.

First quarter backlog of $26 7 billion grew 7% from a year ago and represents almost four years of annual revenue. These.

And we expect to submit another $10 billion of bids over the next two quarters with over 80% of that for new business. These.

These metrics provide good long term visibility into our business.

These metrics reflect healthy demand and disciplined bidding.

For fiscal year 'twenty four we now expect 89% of our revenue to come from existing programs.

To wrap things up first quarter was a great start to the year and we're pleased to be able to raise our full year revenue adjusted EPS and free cash flow guidance. The business is performing well and we remain confident in our ability to continue to drive long term growth increase free cash flow per share to generate additional shareholder value.

7% for Recompete and 4% from new business.

Progress on these metrics reflects increased confidence in our expectations for the year.

In terms of our pipeline, we have $11 billion of bids under evaluation about 65% of which are for new business to CACI.

And with that I'll turn the call back over to John.

And we expect to.

Thank you, Jeff Let's go to slide 14. Please.

Our fiscal year 'twenty four is off to a great start we continue to show that we are strategically positioned in the right markets with differentiated capabilities.

We are winning high value enduring work that supports long term growth.

We're deploying capital and a flexible and opportunistic manner the.

The combination of these successes.

<unk>.

Is driving free cash flow per share growth and shareholder value.

Our business success is a tremendous talent CACI has been able to attract develop and retain.

As a leading national security company CACI offers boundless opportunities for our employees to serve their country rolled their skills and expand their horizons.

Ours is a long standing culture, where character leads innovation every day.

The.

Since we've made and the value proposition we offer our people continue to drive a number of positive outcomes, including lower attrition increased referrals of new hires by existing employees and numerous awards recognizing CCI is one of the best places to work in the country.

In fact for 12 years CCI has been recognized by Fortune magazine as one of the world's most admired companies.

<unk> also continues to be recognized as a top workplace for women.

<unk> and diversity.

I'm, especially proud to CCI received a number of recognitions for our support of our veterans, including being named the best employer for veterans by Forbes.

As is always the case, we can achieve our success because of our employees talent innovation and commitment.

I want to thank the entire CACI team, what they do for our company and our nation, each and every day with that Briana, let's open the call for questions.

Thank you at this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.

We kindly ask that you limit yourself to one question and one follow up.

Our first question comes from Mariana Perez Mora with Bank of America. Your line is open.

Good morning, gentlemen.

Good morning.

So great question is going to be about.

Macroeconomic environment political environment without the box yet.

Just the growth into this year it depends on having a funded debt and more specifically when you see those like 10 billion now flix.

I now submit in the next six months, how much of that depends on new contract awards turn out to be how many how much of that is just takeaway.

Marianna thanks.

I'll start with this one but as I mentioned in my prepared remarks, but we're monitoring a bunch of process closely we're prepared for a number of different scenarios.

But here's what we what we know.

The Senate has passed all 12 appropriations bills, our audit committee and Theyre going to start bringing those bills to the floor to vote.

The house now has a speaker appears to be committed to avoiding any debt feeling an impact.

And we're very aware of the 1% cut in spending from 'twenty three of Congress can't pass those but.

We are actually planning that though do get passed by the April 30 deadline.

It's hard to say.

I'll likely a full or see a full year CR or shutdown is but we're pretty confident.

The majority of our work will continue with the funding.

And in case of a shutdown we're quite.

Confident that the work that we do we're going to be continuing and ongoing through the shutdown because of the current world events.

Getting closer to home.

In our guidance, we considered many variables Narayana in one of those.

The duration of the FY 'twenty budget process and the CR if you will.

I'll remember the low end of our guidance, we assumed a full year CR.

During this entire fiscal year. The high end, we assumed a short CR and the budget passed sooner.

Pertained to the jobs that we have already submitted and we're waiting for the government to.

Choose select the award awarded after the submitted bids, but we're very confident that the work that we have is in the deep streams of funding.

That are exactly those areas of the budget that are that are not being touched.

Whether in a CR or whether we're not we spent a long time within this company, making certain that the work that we bid on has to be long and enduring work that is the major reason why we moved from being a pure government services company into one that offers both expertise and.

So we don't see any near term impacts to it I don't want to predict our FY 'twenty five year, given that I'm only a 140, even for FY 'twenty four.

But there is nothing that we're submitting today that we're sitting on the table, saying boy if the budget is cottonwood the CR.

<unk> does that present any growth to us.

A concern to us.

Perfect. Thank you very much and then as a follow up to just mention transitioning to more technology pockets company high supply chain.

Yeah. Thank you look we are we've talked about supply chain quite a bit we've done a couple of things.

One is that.

Over the last few quarters, we have purchased.

In a very cost effective, but wise manner to make certain that we could get our mission technology.

Offerings delivered without any future delays.

The supplier supply chain. So that's that's one second we've also instrumented all of our bill of materials with frankly, AI technology that actually alerts us two parts that are either going to go obsolete or predictive a longer supply chain.

<unk>.

Delivery dates and when that happens we really go in and we make all the right business calls to make sure it doesn't get in the way of us delivering our vision technology offering.

Thanks Marianna.

Our next question comes from Steven <unk> with Stifel. Your line is open.

Hey, good morning.

Just a follow up.

John Jeff George.

Maybe just a good follow up tomorrow on his question. There is the C are having any impact on the current ramp process for the three contracts you highlighted in your slides or are things progressing sort of as expected.

Yes, Bert thanks.

We truly have not seen CR create any impacts in a number of areas RF rfps in RFID as youre still coming out in a timely manner of you all for me say in the class in the past every organization has the wrong awards DNA and some perpetually or always deliver late on delivery.

Early.

So no impact there as.

As for funding for our three major major programs, but it has our large Intel program I draw wholly fully funded.

Through fiscal year 'twenty four.

I'm sorry, yes.

The current fiscal year that we're in.

And we just haven't seen any slowdown these are awards RF rfps deliveries and then and then funds.

Okay, Great and then Don just just more I guess high level question.

Historically, you've talked about ever increasing margins for Jackie now that you have pretty clear line of sight into growth over the next couple of years has that view changed at all near term I guess that is to say does the dial shift more toward growth over margins over these next two years.

Yes, Bert thanks.

Couple of things here and I'll have.

Jeff and his and his view as well look we are we are very much focused.

Value creation model and drive free cash flow for sure right. So the way we built this company and again were purpose built for exactly the position we're in today.

We realized seven or eight years back that we were winning work that wasn't generating the right level of full value return.

So first step focus on margins and focus on the things that were out there bidding not let's build a great case capable capability bench. So we can go after.

More longer term enduring during work Allah moving a little bit from expertise to technology that drove margin focus from the high Sevens.

<unk> to the high the high patents now that we are there what we talked about coming into this fiscal year and absolute focus on free cash flow per share topline growth.

Reliable organic topline growth.

Bottom line growth.

Capital to the appointment and making certain that we're running a cost effective business. So.

It's no longer the focus on one is the focus on all four and for US every one of those levers that we have now availed to us and we're very happy that we've driven an additional 4% of free cash flow per share since our original original guidance Jeff anything.

That's exactly right I think it's additive it doesn't it doesn't placed the profitability focus because obviously generating earnings is an important part of generating free cash flow, but it's sort of we kind of think of it as taking it to the next level. So now.

We've made significant progress on profitability and we're not taking our eye off that ball, but we're now adding to that our focus on.

Increased focus we've always been focused on it but decreased focus on capital efficiency and the free cash flow per share is.

As John shared at <unk>.

It also follow up too as it pertains to this current year that we're in because I know we have some initial moving parts with this $200 million worth of.

I'm sure you'll want to make very very clear.

That as we look at the underlying business without that $200 million.

We are focused on a high 10% margin period full stop the fact that we had $200 million of.

Zero margin revenue come in it was our decision to make them very transparent and I understand that the math works out to 10, five or 10 six outstanding but we are the underlying business is executing at a high teens rate and we'll continue to do so throughout this year.

It can't be said too many times that the underlying operations of the business are entirely consistent with where we expect to see.

Thanks Bert.

Our next question comes from Seth Sigman with J P. Morgan Your line is open.

Good morning, this is Ross on for Seth.

Good morning.

The 9% organic growth ex material buys was impressive in Q1 with the new guidance increase for the unplanned material buys should we expect sales growth.

It would be front half weighted extra buys or will Q2 Q2, the lower with a build throughout the year as indicated on the prior call.

Sure Yeah.

Can't be said too many times that the underlying operations of the business are entirely consistent with where we expect to see.

Our view thanks for the question Rocco are our view is that the second quarter, you ought to expect to be fairly flattish from the first.

Thanks Bert.

Our next question comes from Seth Sigman with J P. Morgan Your line is open.

Remember theres a $100 million.

Good morning, this is Ross on for Seth.

Material buys in each of those two quarters.

Good morning.

The 9% organic growth ex material buys was impressive in Q1 with the new guidance increase for the unplanned material buys should we expect sales growth.

And.

I think the <unk>.

Underlying operations of the business.

We've reiterated the year in our guidance, we feel like we're off to a really strong start.

It would be front half weighted extra buys or will Q2 Q2, the lower with a build throughout the year as indicated on the prior call.

But we're going to work.

To operate here for another quarter or so.

Yeah. Our view thanks for the question Rocco are our view is that.

Reassess.

The second quarter, you ought to expect to be fairly flattish from the first.

Great that makes sense and then how are you thinking about future capital deployment is there a potential for there to be a consistent share repurchase program and how does the M&A pipeline looks.

Remember theres a $100 million.

Planned material buys in each of those two quarters.

Yeah, that's right.

And and.

Go on for days Rocco.

I think the.

Look.

Underlying operations of the business.

First of all look we're flexible in upper opportunistic and those are the dynamics that we've actually laid out there.

While we've reiterated the year in our guidance, we feel like we're off to a really strong start.

We are going to continue to evaluate a range of factors either what our M&A pipeline looks like as you mentioned.

But you know we're going to work.

Gonna operate here for another quarter or so.

What our stock prices, what our valuation is leverage interest rates demand trends business outlooks and frankly those are all of those options are always on the table.

Reassess.

Great that makes sense and then how are you thinking about future capital deployment is there a potential for there to be a consistent share repurchase program and how does the M&A pipeline look.

Stable so they all create value as you all know given dynamics at the at the at the time.

Yeah Boy, that's a [laughter] Guan for current days Rocco.

Because they all drive free cash flow per share overtime.

First of all look we're flexible in upper opportunistic and those are the dynamics that we've actually laid out there.

Leverage feels feels feels right and.

We're going to evaluate all of the options.

We're going to continue to evaluate a range of factors either you know what our M&A pipeline looks like as you mentioned, you know where where what our stock price is what our valuation is leverage interest rates demand trends business outlooks and frankly those are all those options are always on the table.

We have to look at share repurchase versus M&A, we look at internal investments versus M&A.

Our decision is going to be based on a relative rates of return on whatever two options that we're looking at over.

And with that Jeff anything you'd likely path, yes, I mean look this is a this is a very I know you guys, probably get tired of hearing flexible and opportunistic but that really is where we are I mean.

Table, so they all great value as you all know given dynamics out there at the at the time.

Because they all drive free cash flow per share overtime.

We are continually looking at the pipeline.

No leverage feels feels feels right and.

When we see a combination of factors.

We're going to evaluate all of the options we have to look at share repurchase versus M&A, we look at internal investments versus M&A.

Where we don't see maybe near term opportunities that are interesting to us we see some market weakness in our share price.

You know our decision is going to be based on a relative rates of return on whatever two options that we're looking at over.

Those are times that we're going to stop and buy back some shares.

On time and with that Jeff anything you like like that Yeah. I mean look this is a this is a very I know you guys, probably get tired of hearing flexible and opportunistic but that's it.

I mean, it's continually under evaluation.

A very disciplined return driven exercise it does not make much sense for us to be any less levered than we are.

Really is what where we are I mean, we are continually looking at the pipeline.

We have a very favorable capital structure in that regard those of you that followed.

And when we see a combination of factors.

Where we don't see maybe near term opportunities that are interesting to us see some market weakness in our share price.

And studying those out and I won't bore you with the details, but it is not particularly appealing to us to become any less levered.

There are times that we're going to stop and buy back some shares.

So we're you know we're constantly looking at that range of options and Youll see us.

I mean, it's continually under evaluation of.

We continue to act as appropriate as we go.

A very disciplined return driven exercise it does not make much sense for us to be in.

As we look at changing circumstances.

Luckily you also asked about M&A and look I know you all know we've done some really good acquisitions in the past they've addressed the large number of gaps.

The less levered than we are.

We have a very favorable capital structure in that regard those of you that follow us and studying those out and I won't bore you with the details, but it is not particularly appealing to us to become any less levered and so we're you know we're constantly looking at that range of options.

But you know as the frankly the valuations.

And the sellers' expectations have been relatively slow to adjust to a changing market dynamics.

That's our view.

In light of rising interest rates and a lot of other factors.

But we do have a pipeline that is starting to build.

You'll see us.

Continue to act as appropriate as we as we look at changing circumstances.

We're always always looking at things in the SIGINT EW area cyber and in the space area.

You also asked about M&A and look I know you all know we've done some really good acquisitions in the past they've been trust are a large number of gaps.

But when we see the market shifting back to a buyers market from a seller's market, we may see more opportunities in the near term.

But we're really looking at that moderate sized company that drives capabilities and customer relationships. So that five years from now we can talk about what the company did sort of changed the way our company looks now and again with the type of rate and terms that are going to continue to drive longer longer term free cash flow per share growth.

Is the frankly the valuations.

And the sellers' expectations have been relatively slow to adjust to a changing market dynamics.

That's our view.

Light of rising interest rates and a lot of other factors.

But we do have a pipeline that is starting to build.

Thanks for the questions.

We're always always looking at things in the SIGINT EW area.

Our next question comes from Matt Akers with Wells Fargo.

And in the space area.

But when we see the market shifting back to a buyers market from a seller's market, we may see more opportunities in the near term.

Is open.

Hey, guys. Good morning, Thanks for the question.

You had mentioned that I guess, the 200 million of material buys that I think may be shifted based on some of the uncertainty that that's going on I mean, these people pulled that forward I guess, if you strip that out kind of your base business.

But you know we're really looking at that you know moderate sized company that tries capabilities and customer relationships. So that five years from now we can talk about what the company did sort of changed the way our company looks now and again with the type of insurance that are going to continue to drive longer at longer term free cash flow per share growth.

Was there any kind of pull forward in that business as well just curious how people are sort of.

Customers are acting around some of the uncertainty around the budget.

Thanks for the questions.

Let's make sure first.

Our next question comes from Matt Akers with Wells Fargo.

Unpack a little bit the premise of your question.

It is open.

Unplanned material pause, we're not pull forwards so that was unplanned.

Hey, guys. Good morning, Thanks for the question.

I thought you had mentioned that I guess, the 200 million of material buys that I think maybe shifted based on some of the uncertainty that that's going on I mean, these people pulled that forward I guess, if you strip that out kind of your base business was there any kind of pull forward in that business as well just curious how people are sort of customers.

Customer activity, which we are.

We were.

Additionally in.

Responsibly addressed.

Beyond that the <unk>.

Underlying performance of the business is.

Slightly ahead of our expectations for the first quarter and we think we're on a good path.

We're acting around some of the uncertainty around the budget.

Look let's make sure first.

We may if anything be.

Its unpack a little bit the premise of your question.

Well, we think we're on a good path so.

Unplanned material buys we're not.

We will be continuing to evaluate that but.

Pull forwards.

No that was unplanned.

It's early in the year I mean, as John said, where we're 100 days into the year.

Customer activity, which we which we were.

And we're happy with our position and we will.

Efficiently and responsibly.

<unk>.

Did you manage it.

Responsibly addressed.

Got it okay. Thanks, and then I guess just.

Beyond that the up.

Underlying performance of the business is.

Any thoughts.

Some of the things happening in the Middle East now.

Slightly ahead of our expectations for the first quarter and we think we're on a good path.

U S involvement over there and does the 100.

William Clough supplemental that that's on the table any potential work do you think that maybe you could come out of that for CACI.

If anything be well, we think we're on a good path. So we.

We will be continuing to evaluate that but it's.

Yeah, Matt Thanks look.

We said many many times right that unfortunately, the world is a dangerous and cheapest place.

It's early in the year I mean, as John said, where we're 100 days into the year.

I think that what's going on in Ukraine was the first wakeup call. It certainly raised the urgency level around defense and National security globally frankly.

And we're happy with our position and we'll continue.

<unk>.

Did you manage it.

Got it okay. Thanks, and then I guess just.

I think the attack on Israel is a reminder, that despite the increase of near peer threats. You've all heard me say this car tourism is still a major.

Any thoughts on.

Some of the things happening in the Middle East now.

Between kind of U S involvement over there and.

The 200 billion plus supplemental that that's on the table any potential work do you think that maybe you could come out of that for CACI.

And.

Yes, there is a there's more money going to be spent on the new European threat, but I've always said it is in our mind was that rent or it was always going to be an E M.

Yeah, Matt Thanks look we.

We said many many times right that unfortunately, the world is a dangerous place.

But look they don't most of.

I think that what's going on in Ukraine was the first wake up call. It certainly raised the urgency level around defense and National security globally frankly.

What we're doing as to specifics.

My friend and I can address those on this call, but I can tell you is that we're engaged and we're supporting.

I think the attack on Israel is a reminder, that despite the increase of near peer threats. You've all heard me say this car tourism is still a major concern. Yes. There is a there's more money going to be spent on the new European threat, but I've always said that in our mind was that rent or it was always going to be.

We're hearing the same thing that you're all hearing about the the $100 billion plus up as well as.

No other <unk>.

International spending.

Look we deliver mission expertise and technologies to all the Fireeye countries today I'm convinced that the eastern European Allies are also going to be increasingly interested in our products. We made a few.

E M.

But look you know most of.

What we're doing as to specifics.

Trips there to some countries are we know what they're looking at they're looking for it's exactly what our software defined mission technology suite was built for.

My friend and I can address those on this call, but I can tell you is that we're engaged and we're supporting.

You know we're hearing the same thing that you're all hearing about the the $100 billion plus up as well as.

Electromagnetic spectrum and everything in the EW world of touring many of the signal nations.

Nations around the country want to know where that signal is what it is and how can they repeat it so I'm sure that expansion throughout eastern Europe, and NATO and other.

Other.

International spending.

Look we deliver mission expertise and technologies to all the Fireeye countries today I'm convinced that the eastern European Allies are also going to be are increasingly interested in our products. We made a few.

Select countries and what we'll start taking.

Look at what Frank is too early to discuss the specifics we're going to be very very.

Trips there to some countries are we know what they're looking at they're looking for it's exactly what our software defined mission technology suite was built for.

A conservative and very very.

Calculating as to how we enter the international markets with the offerings that we have thanks, Matt.

Electromagnetic spectrum and everything in the E. W World of touring many of the single nation.

Our next question comes from David Strauss with Barclays. Your line is open.

Nations around the country want to know where that signal is what it is and how can they repeat it. So you know I'm sure that expansion throughout eastern Europe, and NATO and other.

Hi, Good morning, this is actually Josh <unk> on for David.

I wanted to ask you.

Good morning, I wanted to ask if the material purchases in the quarter were considered expertise or technology. It sounded like technology. So if that's the case.

Select countries, but we will start taking them.

Look at what Frank it's too early to discuss the specifics we're going to be very very.

Ex those purchases it seem like expertise growth was up 20% in tech was flat. So I wanted to ask if that implies anything about the remainder of the year or anything specific in the quarter.

Conservative and very very calculated.

<unk> as to how we enter the international markets with the offerings that we have thanks, Matt.

Our next question comes from David Strauss with Barclays. Your line is open.

First of all they weren't technology.

Okay.

John will want to add to this but I don't think there's I don't think there's a particular conclusion to extend from that meeting.

Hi, Good morning, this is actually Josh corn on for David.

I wanted to ask them.

Statistics, you know move around obviously.

I wanted to ask if the material purchases in the quarter were considered expertise or technology at Sao.

We are generally on managing mix.

Like technology. So if that's the case ex those purchases it seem like expertise growth was up 28% and tech was flat. So I wanted to ask if that implies anything about the remainder of the year or anything specific in the quarter.

Sure Yeah, Thanks, Jeff look.

I've always said this right. The good news is they're both growing so I'm extremely pleased with every dollar of expertise growth just as much and I am.

We're excited by every dollar.

Of of technology, both I think some of what you all see in some of those side tables, whether its expertise in Tac or fed civil D O D.

First of all they weren't technology.

John will want to add to this but I don't think there's I don't think there's a particular conclusion to extend from that meeting.

But we see extra expertise is seeing the.

Statistics, you know move around obviously and we are.

Benefit of lapping the Afghanistan withdrawal and then also the ramp up of our new.

We are generally on a managing mix.

Sure Yeah, Thanks, Jeff look.

MSA, Intel and cyber and cyber program.

I've always said this right. The good news is they are both growing so I'm extremely pleased with every dollar of expertise growth just as much and I am.

At the end of the day, they're both extremely important to us expertise informs tech and tech enables more cost effective expertise.

We're excited by every dollar.

And I can tell you within within our.

Of of technology growth I think some of what you all see in some of those side tables, whether its expertise in Tac or central D O D.

Within our mission technology, the technology space, Todd Probert here does an outstanding job of picking up all the mission expertise work that were doing and all of those chips in Houston understand how we invest.

But we see extra expertise is seeing the banner.

And the benefit of lapping the Afghanistan withdrawal and then also the ramp up of our new.

<unk>.

Yeah, Gray who runs.

Most of our enter enterprise work those outstanding job of finding ways to bring new technology, whether it's AI.

MSA, Intel and cyber and cyber program.

At the end of the day, they're both extremely important to us expertise informs tech and tech enables more cost effective expertise.

AI or agile software development at scale anything that takes the cost of expertise down, which frankly, when we do that that helps us drive margin.

And I can tell you within within our.

Just as well, so I think quarter over quarter, Josh Youre going to see different pieces of our business grow at different rates.

Within our mission technology, the technology space, Todd Probert here does an outstanding job of picking up all the mission expertise work that we're doing and all of those chips in Houston understand how we invest.

But there is usually some some large movements that are easily explained with the latest 12 months of work that we want.

And.

Yeah, Gray who runs.

Most of our enter enterprise work those outstanding job of finding ways to bring new technology, whether it's AI.

Yeah.

And I think we're ready for next question.

AI or agile software development at scale anything that takes the cost of expertise down, which frankly, when we do that that helps us drive margin.

Our next question comes from Connor <unk> with Jefferies. Your line is open.

Hi, guys congratulations on a strong quarter and thank you for taking my question.

Just as well, so I think quarter over quarter, Josh Youre going to see different pieces of our business probably in different states.

I just wanted to dig into some of these major programs in a little bit more now that focus foxtons over a quarter into the ramp can you provide an update on the cadence and progress around hiring and how we should think about the contribution to revenue and profit in the next few years there.

But there's usually some some large movements that are easily explained with the latest 12 months of work that we want.

Yeah. Thanks, So look it's a it's a.

Major expert expertise expertise program for us and we've always said that.

Yeah.

And I think we're ready for next question.

You know.

Our next question comes from corner Mall tenants with Jefferies. Your line is open.

At a at a normal level expertise ramps up faster than our technology.

Hi, guys congratulations on a strong quarter and thank you for taking my question.

Programs.

You know we are we are.

I just wanted to dig into some of these major programs in a little bit more now that focus boxes over a quarter into the ramp can you provide an update on the cadence and progress around hiring and how we should think about the contribution to revenue and profit in the next few years there.

We want to work because our CCI proposal was titled piece of carrier and frankly program is ramping up.

Just as we propose maybe slightly ahead.

But nothing but positive feedback from our customer to date, what's what's crucial to know about that program. As we won that program by making certain that we would have a low to zero risk transition from the long term incumbent to us.

Yeah. Thanks, So look it's a it's a.

Major expert expertise expertise program for us and we've always said that.

You know.

At a at a normal level expertise ramps up faster than our technology.

That transition is well down the path of the way it was planned in our proposal.

Programs.

You know we are we are.

I wouldn't I wouldn't I'm not going to talk about the exact quarter by quarter and year by year.

We want to work because our CCI proposal was technically superior and frankly programs ramping up.

I'll I'll tell you is.

Billion five worth of awards.

Just as we propose maybe slightly ahead.

We recognized I would say, we're somewhere in the 80% ramped up face today.

Today.

Conor and I wouldn't expect that great performance by Michelle Leslie and her team to continue.

Got it that's super helpful and maybe in the same vein as it relates to the new $1 $3 billion award with the intelligence community customer how should we be thinking about the timing of the ramp in contribution at scale.

That transition is well down the path of the way it was planned in our proposal.

Yeah, Conor I think that side I think it was an eight year.

I wouldn't I wouldn't I'm not going to talk about the exact quarter by quarter and year by year, you know, but I'll I'll tell you is it's a good sign.

Award 133 billion.

You know a billion five worth of awards there.

That's a network buildout jobs, so that ramp up curve to me a little bit different right. When we do these large scale network job. There was a lot of front end work specification, making sure that we revisit what the customer wants it technology is changing either in the coal network realm or at that last mile or at where the actual devices.

We recognized I would say, we're somewhere in the 80% ramped up phase today.

Conor and I wouldn't expect that great performance by Mr. Leslie and her team to continue.

Connecting which is what makes our CSE TFC offering so unique.

But those programs start up a little bit on the light side, Conor and I would say over a period of the next next year, we'll have what that design looks like and then we were working with the customer as to how we would roll that out that's a that's a network that is used globally.

Yeah, Conor I think that side I think it was an eight year Award 1.33 billion. You know that's that's a network buildout jobs, so that ramp up curve should be a little bit different right. When we do these large scale network job. There was a lot of front end work specification, making sure that we revisit what the customer wants it.

And so you know.

And again, we just won that work. So you know it will be.

Putting that.

Technology is changing either in the coal network realm or at that last mile or at where the actual devices connecting which is what makes our CSE TFC offering so unique.

Planning in place.

If there are no protests on it.

We'll see some lighter revenue come in in the third and fourth quarter, but nothing that is going to change what our what our guidance thing.

Thanks Connor.

Our next question comes from John <unk> and go back with Baird. Your line is open.

Good morning, John.

For Peter today.

Good morning.

Great.

And so you know and again, we just won that work. So you know we'll be.

Just wanted to quickly revisit the the M&A comments that you've made and with net leverage of two three today could.

Putting that.

<unk> plan in place.

Could you provide some color on sort of how high you would go if you identified an attractive target.

If there are no protests on it you will see some lighter revenue come in in the third and fourth quarter, but nothing that is going to change one or what our guidance thing.

Yeah.

I mean, that's a sensitive.

No perfect answer to the hypothetical.

Thanks Connor.

For a long time, we said that we would occasionally perhaps consider four and a half I think in the current environment, that's going to be less.

Our next question comes from John <unk> and go back with Baird. Your line is open.

Good morning, John.

You know, but I could imagine for the right asset.

For Peter today.

Yeah.

Great. So just wanted to quickly revisit the the M&A comments that you've made in with Midland rates of 2.3 today.

Three and a half.

Maybe a little more is sort of in.

And the ZIP code, we consider it's difficult to answer that obviously outside the context of a specific target, but certainly you should think about us is thinking about.

Could you provide some color on sort of how high you would go if you identified an attractive target.

Yeah.

I mean, that's a sensitive.

Up to a turn or so although what we've historically said.

Perfect answer to the hypothetical.

You know for a long time, we said that we would occasionally perhaps consider four and a half I think in the current environment, that's going to be less.

Okay. That's really helpful. And then just a quick follow up on the on the spectrum of award.

Given the hunting threat environments in the Indo Pacific strengthen the Navy budget.

You know, but I could imagine for the right asset.

We continue for the next couple of years.

Three and a half.

Any sort of additional bidding opportunities that you see in the next 12 to 24 months, specifically related to Navy electronic warfare signals signals intelligence.

You know maybe a little more is sort of in.

And the ZIP code, we consider it's difficult to answer that obviously outside the context of a specific target, but certainly you should think about us is thinking about.

Yeah. Thanks, Good luck.

Yeah Yeah.

Great book.

Our.

Up to a turn or so all of that what we've historically said.

Our electronic warfare, and our electro magnetic spectrum detection and counter equipment.

Okay. That's really helpful. And then just a quick follow up on the on the spectrum of award.

The point on a lot of assets today.

Given the hunting threat environments in the Indo Pacific strengthen the Navy budget.

<unk>.

It's not so much about the next 12 to 24 months what are the other bids that we can.

We continue for the next couple of years are.

Are there any sort of additional bidding opportunities that you see in the next 12 to 24 months, specifically related to Navy electronic warfare signals signals intelligence.

Without put out there it really talks about the reason why in my prepared remarks mentioned that spectrum is D program right our customer on spectral is already looking at how do we more the program as it was awarded its something they can do two things one that actually gets updated for todays current current threats remember.

Yeah. Thanks, Good luck.

Yeah, Yeah great.

Great.

Our.

Our electronic warfare, and our electro magnetic spectrum detection encountering equipment issues like that.

We began investing in on spectral.

I think it was.

Point on a lot of assets today.

Fiscal year 16, if I remember right that job was.

Actually it's not so much about the next 12 to 24 months what are the other bids that we can.

<unk> awarded this past year, and we're having a lot of detailed discussions around what does the threat look like today is there anything we can do to get delivery sooner and then can we address more platforms that we have set.

Put I'll put out there it really talks about the reason why in my prepared remarks mentioned that spectrum is the program right our customer on spectral is already looking at how to lean more the program as it was awarded its something they can do two things one that actually gets updated for todays current current threats remember.

Setup in the contract today.

When we won that program, there's a $1 $2 billion War believe we booked at a $600 million.

And we're sort of sorting through what the other $600 million website. So we've done an outstanding outstanding job. We are we are all over the US market. The Navy is the perfect purpose built customer for us.

We began investing in an on spectral I think it was.

Fiscal year 16, if I remember right that job was.

As.

You know out there.

Delivering.

And I'd also also say that as we start to show what spectrum has and we can deliver to the Navy theres other customers out there that are getting another look at where our capabilities.

Set up in the contract today, when we won that program. There's a $1 $2 billion War believe we are booked at a $600 million.

Yeah.

They've moved to and then tie back to an earlier question in light of what's happening on the global global stage Theres. Other countries that are seeing those types of capabilities. So one loved the funding that we have in place on spectral too you know we made all the right rate calls to invest ahead of ahead of customer need. So we would start up immediately and then three.

And we're sort of sorting through what the other 600 million web site. So we've done an outstanding outstanding job. We are we are all over the US market. The Navy is the perfect purpose built customer for us.

As.

You know out there.

A great technology team here, that's working with the Navy to find out how can we deliver that even quicker because of that near peer threat in the entire endo and don't pay time region is going to depend on it.

Delivering.

And I'd also also say that as we start to show what spectrum has and we can deliver to the Navy theres other customers out there that are getting another look at where our capabilities.

Yeah.

Our next question comes from Tobey Sommer with choice Securities. Your line is open.

They've moved to and then tie back to an earlier question in light of what's happening on the global stage there's other.

Thank you very much.

Trees that are seeing those types of capabilities. So one loved the funding that we have in place on spectral too you know we made all the right way calls to invest ahead of ahead of customer need. So we would start up immediately and then three a great technology team here, that's working with the Navy to find out how can we deliver that even quicker because of that near peer threats.

Could you talk about trends that you're seeing in it.

In terms of billable head count growth and the outlook for that any any sort of changes in difficulty in recruiting and the implications for kind of.

Revenue growth and associated expenses, as we turn into calendar 'twenty four.

Yeah, Tobey. Thanks, first off look I love, when our expertise and technology grow.

The entire endo and don't pay time region is going to depend on it.

I'm looking for Mitch.

Our next question comes from Tobey Sommer with choice Securities. Your line is open.

Material growth in both of those markets as they get through the year.

Just just having raised guidance says, we're gonna have or organic growth between seven and a half and I don't know.

Thank you very much.

Could you talk about trends that you're seeing in it.

And based on some of the jobs that were you know.

In terms of billable head count growth and the outlook for that any any sort of changes in difficulty in recruiting in the implications for kind of.

Winning frankly, what the real expertise jobs, whether technology jobs, we're going to need talent.

Look I believe we're well.

Both revenue growth and associated expenses as we turn into calendar 'twenty four.

Positions there.

We've got three great internal hiring programs hashtag, making moves Frank is one where we want people to move around the company on different projects.

Yeah. So let me thanks first off look I love, when actually expertise and technology grow.

You know I'm looking for Mitch.

The beauty of building a technology business here folks are much more fungible and we can move them around and that helps them build their career over 40% of our hires to the HOV come from a referral.

Material growth in both of those markets as they get through the year.

Just just having raised guidance says, we're gonna have organic growth between seven and a half and half and based on some of the jobs that were you know winning.

Which is outstanding for us it keeps your account acquisition cost down and we already know people have been having.

Winning frankly, what the real expertise jobs, whether technology jobs, we're going to need talent.

People right you sort of have had this tagline bring people no other great people and it's working very very well and then last.

Look I believe we're well positioned there.

We've got three great internal hiring programs hashtag, making moves Frank is one where we want people to move around the company on different projects.

How does how does the job market look look we've we've done a lot to draw people into our business. We've got it we have a large intern program for our company size with well over 300 and turns.

That's the beauty of building a technology business here folks are much more fungible and we can move them around and that helps them build their career over 40% of our hires to the HOV come from a referral.

And then we move to this flexible time off and financial Wellness program, which is what new hires are absolutely looking at looking for and frankly, we find a way to differentiate ourselves in the marketplace around expertise or technology.

Which is outstanding for us it keeps telling me. It was just some cost down and we already know people have but haven't assessed people right you sort of have had this tagline bring people no other great people and it's working very very well and then last.

Labor. This is the companies are going they are going to find that from first so flexible time off a really good financial wellness.

You know how does how does the job market look what we've we've done a lot to draw people into our business. We've got it we have a large intern program for our company size well over 300 and turns.

Program that comes free of charge to all all of our employees.

So look we finished FY2023.

Tricia run at about a full percentage point lower.

And then we you know route to this flexible time off and our financial Wellness program, which is what new hires are absolutely looking at looking for and frankly, we find a way to differentiate ourselves in the marketplace around expertise for technology.

We can do a percent on you know 22000 people in back.

Back into how many less people we have to have to go out there and the higher.

So for both expertise and for.

I like what the market's giving us our ability to hire and retain talent.

Labor. This is a company isn't going to go.

We're going to find that from first so flexible time off a really good financial wellness.

And if I could get your perspective, what do you think.

The proposed changes in merger guidelines at the FTC and how does that impact.

Hum program that comes free of charge to all all of our employees.

Oh look we finished FY2023.

Your acquisition program and thoughts around that.

With attrition run at about a full percentage point lower.

Yeah.

John will probably want to may want to add some cost to this.

You can do a percent on you know 22000 people in you know back into how many less people we have to have to go out there and the higher.

It's not.

I don't expect it to have a large impact.

So for both expertise and for attack I like what what what the market's giving us our ability to hire and retain talent.

On our on our thinking about managing and evaluating the pipeline I mean.

Sure.

Yeah.

And if I could get your perspective, what do you think of the proposed changes in merger guidelines at the FTC and how does that impact.

We're in a position where our focus is on gaps.

And sort of filling strategic areas that are of interest to us there's very little very little in our pipeline that involves.

Your acquisition program and thoughts around that.

Yeah.

John will probably want to may want to add some cost to this.

Either vertical integration or acquiring competitors, it's really about complementary capabilities, which is probably one of the less threatening.

It's not.

I don't expect it to have a large impact.

On our on our thinking about managing and evaluating the pipeline I mean.

One of the less threatening areas.

In terms of competition.

It's pretty much.

Sure.

I think you've answered it okay. Thanks, Jim.

Yeah.

We're in a position where our focus is on gaps and.

Our final question comes from Louie Dipalma with William Blair.

And sort of filling strategic areas that are of interest to us there's very little.

Your line is open.

John Jeff and George Good morning, very low entering Louie Louie.

Very little in our pipeline that involves.

Either vertical integration or acquiring competitors, it's really about complementary capabilities, which is probably one of the less threatening.

Electronic warfare is proven, particularly disruptive in Ukraine and in your CTO Glen Kurowski at a USA. He gave a great presentation on your success with integrating spectrum.

For the less threatening areas.

In terms of competition.

It's pretty much.

Your payload into 89 different drone platform and has C.

I think you've answered it okay. Thanks, Jim.

CACI.

Our final question comes from Louie Dipalma with William Blair. Your line is open.

And that same distinguish itself versus than many other electronic.

John Jeff and George Good morning <unk>.

Warfare platforms out there and are there opportunities.

Louie Louie.

Beyond <unk>.

Ukraine for your solution to be integrated like across the European Union and.

Electronic warfare is proven, particularly disruptive in Ukraine and in your CTO Glen Kurowski at USA. He gave a great presentation on your success with integrating spectrum.

The country appears to be investing.

In preparation of other future complex.

Your payload into 89 different drone platforms and has C.

Yes, Louie, Thanks look here's here's where I, here's where my mind goes right.

CACI.

And that same distinguish itself versus than many other electronic.

We believe we have some best in class.

Electromagnetic spectrum tools, whether its buying fixed whether it's.

Warfare platforms out there and are there opportunities.

G O G O G O K when.

Beyond <unk>.

Ukraine for your solution to be integrated like across the European Union and.

When we put a technology model in place.

Our goal was that we wanted to be emission package provider.

The country appears to be investing.

Two the platform companies as well as deliver our offerings.

In preparation of future complex.

Directly to customers.

Yeah, Louie, Thanks look here's here's where I hear from my mind goes right.

And what you heard Glenn talk about is the very first part which is when we build these tools and we I'm sure we build these offerings.

We believe we have some best in class.

Electromagnetic spectrum tools, whether its buying fixed whether it's G.

All software defined.

At the end of the day, if I can put my software defined unit in somebody's hands.

G O G O G O O K, when we put a technology model in place.

I can put it on someone else's flat that form the form factor almost doesn't matter to us.

Our goal was that we wanted to be a mission package provider.

Because the goal is the software inside it's why we talk about software as our Super power. If we look at delivering to an international front those are going to come with a high tar regulations and the like so it is not a difficult modification should take a variance of what we use in the U S. Some of our par.

Two the platform companies as well as deliver our offerings to.

Directly to customers.

And what what you heard Glenn talk about is the very first part which is when we build these tools and we I'm sure. We build these offerings. It's all software defined so at the end of the day, if I can put my software defined unit in somebody's hands.

<unk> will want to unilaterally work with us and if there are five vice country, they're gonna get potentially more capability, if you're not a five eyes country, you're going to get slightly less but the beauty of that is that timeline and the small amount of investment we need to make those changes whether it's a form fit or function is.

Can put it on someone else's flat that form the form factor almost doesn't matter to us.

Because of the gold is the software inside it's why we talk about software as our superpower. If we look at delivering to an international front those are going to come with a high tar regulations and and the like so it is not a difficult modification should take a variant of what we used in the U S. Some of our parts.

It's very easy for us because everything is software defined so whether its spectral silver spectral guard or mag or magpie or Korean or sky tracker. All of those those are mission technology offerings for us have a relatively shared based space baseline when we spend money to make that investment case better.

<unk> will want to unilaterally work with us and if there are five <unk> countries I'm gonna get potentially more capability, if you're not a five eyes country are going to get slightly less but the beauty of that is that timeline and the small amount of investment we need to make those changes, whether it's a form fit or function.

We're able to spend at any one time and distribute all of that logic and all of those algorithms to many different our offerings out there.

Thanks, John and that relates to my my several my second question you just discussed this shared baseline for your software offerings and.

It's very easy for us because everything is software defined so whether its spectral super spectral gov, or mag or magpie or Korean or sky tracker. All of those those are mission technology offerings for us have a relatively shared based space baseline when we spend money to make that investment case better.

Kathy the CACI team has also developed software for for Sapphire.

And then you also have the large.

Pinko program.

Right.

These different software platforms.

<unk>, we're able to spend it and why it one time and distribute all of that logic and all those algorithms to many different our offerings out there.

Are you able to recycle a lot of the common components.

That you have.

Thanks, John and that relates to my my several my second question. You you just discussed this shared baseline for your software offerings and.

Like the favorable operating leverage on the next platform.

Yeah. So let me let me take the first.

Part of that we are.

They the Cathy the CACI team has also developed software for for Sapphire Fade and mess. Then you also have the large <unk>.

We build we deliver a lot of AI based systems.

And visualization systems that allow both our Dod and our intelligence customers the ability to take.

<unk> program.

These different software platforms.

Tara Terabits of data a minute and take all that data and trance transform that into information. So we understand what has to be targeted in black and white and what doesn't and those those systems have been in place for a number of years, we continue to move those from one intelligence customer too.

Are you able to recycle a lot of the common components.

That you have.

Like the favorable operating leverage on the next platform.

Yeah. So let me let me take the first first part of part of that.

Another in our no team.

<unk>.

We build we deliver a lot of AI based systems.

One job of bringing other users on board. So one is all of those.

And visualization systems that allow both our D O D and our intelligence customers the ability to take you know Kara terabits of data a minute and take all that data and trans transform that into information. So we understand what has to be targeted in black and white and what doesn't.

Data visual digital visualization tools and.

And all of those mapping tools frankly are all foundational AI work, we've been doing for a long amount of time with his computer vision.

Or whether it's.

Other other facets of AI, we're actually delivering the base reference models and making certain that those models frankly are real and they are deployed were not advising customers how to make AI happen, we're actually delivering it and it's been used by by the Warfighters for Vod and in Chile.

Are those those systems have been in place for a number of years, we continue to move those from one intelligence customer to another and our team does a phenomenal job of bringing other users on board. So one is all of those data.

Across the board as it pertains to the software yes, those baselines are also.

David visuals and visuals visualization tools.

And all of those mapping tools frankly are all foundational AI work, we've been doing for a long amount of time with his computer vision.

And are you in a manner that we can share those reference models and all of that software.

Ross all of our products so in that domain Lily, it's not so much the actual form.

Or whether it's.

Other other facets of AI, we're actually delivering the base reference models and making certain that those models frankly are real and they are deployed we're not advising customers how to make AI happen, we're actually delivering it and it's been used by by the Warfighters for Vod and in Chile.

You know swap type of things that we would assign to a hardware solution. It's really more about software being this company's super superpower, and just how well we have Arca are.

Architected things so when we get the capability in place, we're able to step and repeat we deliver.

Cross the board as it pertains to the software yes, those baselines are also.

For the questions.

This concludes our question and answer session I will now turn the call back over to John Lindsay for closing remarks.

And are you in a manner that we can share those reference models and all of that software.

Thanks, Breanna and thank you for your help on today's call, we'd like to thank everyone, who dialed in or listened to our webcast for their participation.

All of our products so in that domain really not so much the actual form.

We know that many of you will have follow up questions and Jeff Mclaughlin and George price are available. After today's call. Please stay healthy on my best Junior families and thank you for your continued interest in <unk>.

You know swap type of things that we would assign to a hardware solution. It's really more about software being this company's super superpower, and just how well we have Arca are architected things. So when we get the capability in place, we're able to step and repeat we deliver thank you for the questions.

International.

Concludes our call conclude that you won't have a great day.

You may now disconnect.

This concludes our question and answer session I will now turn the call back over to John Lindsay for closing remarks.

Thanks, Breanna and thank you for your help on today's call, we'd like to thank everyone, who dialed in or listened to our webcast for their participation we.

We know that many of you will have follow up questions and Jeff Mclaughlin and George price are available. After today's call. Please stay healthy all my best to you and your families and thank you for your continued interest in <unk>.

International.

Concludes our call conclude that you won't have a great day.

You may now disconnect.

Yeah.

Okay.

Yeah.

Q1 2024 CACI International Inc Earnings Call

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