Right, we're back with Cantor's Global Technology Conference for our Government Technology and Space Track. I'm Colin Canfield, CANTOR's Government Technology and Space Analyst. We have the pleasure today of having Jeff MacLauchlan, CACI's CFO, as well as Jason Bales, CACI's CTO. It should be a good conversation today. Thank you for joining us. Great. Thank you. Of course. I assume all the investors have read the forward-looking statements. We'll get right into the questions. Just first and foremost, as we think about the latest government efficiency impacts in the business, how are those impacts tracking in the quarter, and how has that impact varied by CACI's end market? Yeah, let me first say that, as we have said several times over the last couple of weeks in similar kind of venues, the disruption to our business has really been minimal. We had a couple of contracts that were early on the DOGE board. Two, one of them turned out to be over, and the other one was nearly over, but was a very low level of activity, $1 million or so a year of revenue. We did have a number of contracts on the GSA list. Eight of them were in the relevant NAICS codes at the risk of geeking out for everybody. Those are the codes, types of contracts that the DOGE activities focused on. Two of them accounted for about 90% of the volume of the eight. They were both mission-critical activities that were kind of quickly defended by our customers and removed from consideration. We are really only really minimally disrupted by this and do not see anything at this point that gives us pause relative to our guidance for the year or the three-year targets that we established last fall. Brilliant. Brilliant. If we think about the moving pieces within this year's guidance outlook, if you can maybe talk us through kind of what are the swing factors, the sensitivities, the big moving pieces that you're assuming? Yeah, for the current year, again, it's going to be we expect everything to be fairly uneventful. About 95% of our fiscal year 2025 revenue at this point is in backlog. About 3% of that is recompete, or 3% in addition is recompete, meaning that about 98% we have a really clear view on to the extent there's any delays or any disruptions, that recompete sort of continues. Only about 2% to win, which is a relatively small amount at this point in the year. A couple of other wild cards that we've gotten a few questions about. Continuing resolution, our guidance for the year accommodates a CR. A full-year CR would also be a non-event. Again, we don't see anything that really gives us any pause for the year. Got it. Got it. You mentioned before, just no disruption in terms of your longer-term targets. If you could maybe just for the investors in the room as well as on the webcast, refresh us around what your long-term targets are. Sure. Thanks. Sure. What we said last fall on our investor day was that we foresaw over the next three years high single-digit revenue growth, mid-11% EBITDA margin, and $1.6 billion of free cash flow. Significantly, none of that free cash flow, the deployment of none of that free cash flow is contemplated in the revenue and margin guidance. That represents upside to the targets that we laid out. Right. Right. Turning over to company exposure, if we want to maybe talk a little bit about kind of some of the buzzier topics, maybe update us on the size of your space business today, how large are the relative revenues across geospatial analytics, satellite manufacturing, and satellite communications? Maybe talk about we can talk about some other stuff too. Yeah, Jason will want to expand on this, but a few overview items about our space business. We're really positioned in our space business to think about it in terms of a contested domain. If you think about analytics of overhead imagery, think about optical comm terminals, those are really the activities that we're focused on, and they're related both to security and also processing and analyzing Intel data. We're not probably going to we won't be giving any specific sort of size references to this particular part of the business other than to say that we've kind of previously disclosed we have some ramp-ups in the optical comm terminal production. We expect to be six to eight times units delivered relative to last year. It is an important and growing part of the business, but I am going to defer to Jason to talk a little bit more about some of the specifics of the things we do in that area. Yeah. Yeah, thanks, Jeff. I think in terms of growth in those areas, the photonics area is still a big place for us that we're putting in, continuing to put investments and moving. We have relationships with SDA, with NASA, Space Force, where we're developing to put those optical communications up and proliferate up in space. Continued growth inside that area is in the counterspace domain too. We do a lot of play in, like Jeff said, in the overhead kind of analytics of imagery data, but also in the mission management of the space-based assets and extending that to the counterspace domain. We've actually taken a lot of our software from other domains and moved it in to create stuff like a remote modular terminal, which was an award with Space Force for the counterspace area. A lot of growth in that domain for us. Sure. Sure. Maybe digging into that a little bit, I think the dynamics that have been occurring within the space supply chain have been challenging. I think that a lot of people have kind of worked to gain confidence that things like lynk can scale. Maybe if you just want to talk about kind of digging a little bit deeper into that, kind of how you think about scaling that business and the level of kind of manufacturing supply chain pull ahead and the like. Yeah, we are in that area, as I mentioned, ramping up production. Significant to note that we are the only U.S. manufacturer of space-qualified optical comm terminals to the SDA's spec. And we have done both air-to-ground, air-to-air, and what's the third one? Air-to-air, air-to-ground, and. Ground-to-ground? Yeah, well, space-to-space. Space-to-interspace, right. Sorry. We are the only one. We have demonstrated interoperability in all three of those required domains and the only one with U.S. manufacturing. Got it. Got it. Maybe if you can provide a similar context around the level of kind of directed energy exposure, C-UAS for people in the audience, that's counter-uncrewed air systems—that would be just kind of helpful in thinking about where you think the real growth shoots are in that business. Yeah, I'm going to let Jason talk about counter-UAS, but it's a very important part of our portfolio. Yeah. I mean, the key there, right, is with counter-drones. We've been doing counter-drone stuff for over two decades with the full group. If you think of the size of the drones from the small stuff you buy at Best Buy to the nation-state stuff whose wingspan is the size of this room, right? That's group one through five. We've been doing the full group one through five for over two decades. We've got thousands of systems deployed all over the world doing national defense in that space. We see a lot of interest nowadays in bringing that back to the homeland, right, with Iron Dome and now Golden Dome in that space. We are well-positioned to pivot towards homeland defense, whereas historically we've been kind of world defense on that side with the nation there. It's an important part of our field. I would like to say we've also built not just the systems themselves, but also the backbone that disseminates that information to the warfighter for near real-time intelligence. Bringing that, expanding that to the homeland defense is something we're well-positioned to pivot into. Like all of our technology solutions, the key component of that is the software defined and the flexibility that comes from it being a software-centric kind of solution. Got it. Got it. Okay. Turning over to maybe the margin side of the house, as we think about companies' cost, cost-plus exposure, can you maybe just size what your latest cost-plus exposure is and how the team thinks about its ability to do more fixed-price work? Yeah. We this year are about 60% cost-type work, about 30% fixed-price, about 10% time and material, which is kind of a hybrid. It gives us an opportunity to make some money on rates, but we also have some exposure about the time and material that are expended. The margins this year, our guidance is low 11s. Obviously, with the three years and the mid-11s, that's an increasing metric for us. There are a couple of things that are going on in there. One is growth. It's really driven to a large extent by growth in our spectral and Azure acquisition recently and the mix that that brings with it with some greater profitability. Got it. Just tying that theme together, if we maybe think about how investors think about, I think one of the things that folks have been kind of concerned is cost-plus conversion to fixed price and the ability of management teams to kind of manage that risk. If you can maybe just talk about kind of how you think about the comparison of CACI business to a commercial IT business and why that comparison doesn't necessarily hold. There might be two things in there. Let's unpack that a little bit. The first I would say, first point I would make is we like fixed-price business where things are logically priced and executed under fixed-price contracts. Outcome-based performance is our preference, and we have steadily moved the business in that direction. More of the technology side of the business is already in that direction. The business model, though, relative to commercial software companies, the second part of your question is a little different. The commercial companies are more sort of arriving with a finished product sold as a service. Our business model is a little different and we think a little bit better received or more customer-friendly in that we generally are interested in developing and fielding systems where we have open architectures, where the government owns the data, the government is able to use the systems and the data as they like. We are obviously well-positioned to manage and improve, enhance, and evolve those systems for them, but they are not necessarily locked into a particular approach or structure. It gives them really the maximum flexibility. The open architecture aspect of that in particular, we find that they find appealing because it gives them the flexibility to add things and evolve as threats evolve. I do not know if I missed anything. Yeah, and I think the big team takeaway there, right, is that we have developed the ability to bring commercial applications and pull them through into the defense and the national space to produce mission outcomes, right? Like Jeff was saying, we build our applications on top of those commercials and tailor them towards the defense mission. That is really the big value add that we bring in so we can bring that speed and that velocity of the commercial world to produce mission outcome. That is a big focus for us. Got it. Got it. Maybe kind of digging into that a little bit further, if you can just kind of while we have Jason, if you can maybe talk about kind of the evolution of open architecture systems, where we're at now, where we used to be, and where we're going. Yeah. Yeah. I would historically, and this gets kind of to a hardware-software kind of balance as well, whenever you brought new capability to the defense, a lot of it was kind of a closed box. Every time you needed to bring a new capability to the mission to handle a new threat, you were bringing a new box. The soldier's backpack was getting too full. The Humvees were getting too packed, right? It was too hard. As we've migrated over time and focused on, as CACI has focused on an open architecture, we've been able to kind of reduce those boxes and collapse them down into a nice set of hardware that's flexible that we can continue to just do software updates on top of. Also make that so that's great, right? Because software lets you move rapidly for the threat, and that's a focus we have on acceleration. Also, building it with an open architecture, meaning that you can drop in third-party capabilities. Now we come and we bring commercial partnerships to the table. We're bringing commercial capability and we're dropping it right in, right? We're bringing other partners in the defense in and we're dropping their capabilities in. We can help act as an integrator, but also get rapid capability to the field because it's a layered approach for national defense and you got to bring all the player stuff to the table. Sure. Sure. And just maybe in the vein of that question, we'll do one more on the subject and move on, but focusing on kind of the level of co-opetition within the space. I think the previous iteration of tech coming from Washington was something of the kind of mid-2010s and the kind of outcome there being largely beneficiary for the GovIT names, right, who are able to kind of benefit from better productivity, better efficiency, and assigning the right headcount to it. So within that vein, if you could kind of maybe talk about how much of this time is different versus this time is just good for CACI. Yeah. I think it falls back again to the concept I mentioned earlier about how we've pivoted ourselves towards a portfolio of bringing the 60-plus years of our company's kind of expertise in mission space, bringing that forward, and over the last decade or so, establishing ourselves as a technology company that is informed by that expertise, right? We're informed by that expertise and we're pulling in commercial capabilities through, and commercial, not just capabilities, but tools and processes, our agile methodologies, right? We're basically presenting ourselves with the best of commercial for defense mission outcomes. That's our focus and that's what is making us different in the past. We're continuing to be efficient and have improvements to the customer. Jack, anything else? I was just going to point out our partnerships with organizations like GitLab, AWS, the whole DevSecOps framework is a big part of that. We are very active with several prominent commercial software providers for tools and skills. Got it. Got it. Maybe switching over to government budgets, if you can just provide the latest on what we're hearing with respect to DC and government budgets, and then breaking that out by 2025 and 2026. Yeah. I probably can't do that super specifically, but I can make a couple of general observations. The first one is that our revenue this year will be about $8.5 billion with a $250 billion TAM, total addressable market. We really are not in a position where top-line budget in and of itself drives a lot for us. A key part of our positioning in our portfolio and the work we've done over the last number of years is being in areas where we see enduring need and solid, stable support, bipartisan support for budgets. If you think about things like signals intelligence, we've talked a little bit about counter-UAS work in the electromagnetic spectrum, optical communication terminals, and a number of other items. These are areas that generally are not super dependent on top-level, top-line budget decisions, which often have a lot more to do with platform rates and volumes and a number of other factors. You really have to get a level or two into it and say, "Okay, the total budget is the noise. The signal is areas of the budget where you can see specific moves," where we generally have fared pretty well. We've actually grown reliably in growing budget environments, declining budget environments, and flat budget environments. It is more about where you are in the pieces of the budget in our view. Sure. Sure. Maybe something that investors probably do not appreciate as much in CACI's resilience, but if you can just kind of speak to your past experience navigating shutdowns and what kind of lessons you have learned from the past, and if this time is any different, it seems like we are not going to get one this time around, but it is always a tool in the toolbox. Yeah. It feels like we probably won't, but again, as you say, it's not done till it's done. We generally have fared pretty well in this regard. The 90+% of our revenue that is security and intelligence has enjoyed a fair number of exemptions from specific shutdowns. Even in the case of actually suspending the operation of the government, we have a number of areas where we're directed to not stop working. There's a little bit of pressure from that. Again, our guidance would not be affected by a relatively short shutdown. I mean, if we were shut down for a few days or a week or so, it would not have an appreciable effect on us. An extended shutdown, obviously, at some point, it does become more impactful, and we'd have to see that where it is. It does not feel to us like we are on that trajectory at this point. Right. Right. Maybe going back to that TAM number you provided and talking to the underlying budgets, we will get FY2025 requests as maybe the proxy, but command and control budgets up roughly 40%, Intel growing well, IT growing well. Maybe talk about kind of where you expect to be most sensitized to and where you expect to be the fastest growth. Yeah. I think I would, the numbers that you quote obviously are correct, but I think I would probably also focus on the items in the supplemental budget where Congress is about to add about $300 billion, $100 billion or so for defense, $200 billion or so for Department of Homeland Security. I say or so because there are slight differences between the House and Senate versions, but they're tens of millions of dollars apart. They're within easy, relatively straightforward conference resolution range, but on the order of $300 billion about to be added to places that are right in the middle of where we live. Just maybe for the clarification of folks on the webcast, the supplemental you're considering is in addition to the base budget. The way you want to think about that is if we have an $800 billion or $900 billion defense budget, that $100 billion goes on top of that, right? Yes. Yep. Maybe triangulating on that, what have you kind of heard in terms of the duration of that spend? I think we go back to the Infrastructure Act as kind of the big other supplemental, obviously other supplementals related to war fighting. What is the sort of duration that we've heard on that $300 billion? Yeah. I think that's still an open matter between the two. We've heard in a number of cases that it's expected to be sort of two-year money, so think this year and next. Got it. Got it. A pretty substantial growth rate off of base, I would say. Substantial. Yeah. Got it. Versus market expectations of cuts. We'll see how that shakes out. As you consider kind of capital deployment, how do you think about kind of visibility around government budgets and efficiency efforts and how that interacts with shareholder returns? Our capital deployment strategy, which many of you that follow us have heard us talk about before, remains to be one of being flexible and opportunistic. We are serial acquirers. We make regular acquisitions. The opportunistic part of that means in some years we've done three or four, in some years we've done none. We have also, prior to this quarter, repurchased over the last several years about 12% of our outstanding shares. I say prior to this quarter because in this quarter, we have also been in the market with an open market repurchase program related to $337 million or so of an earlier authorization. We have bought back some shares this quarter, which obviously we'll disclose at the end of the quarter. We're very much focused on flexible and opportunistic. I don't think we probably have acquisition targets in the near term. That can always change, but the valuation volatility in particular makes for difficult sellers these days. Sellers process multiple contractions more slowly than do buyers. I'm not sure that we see opportunities in the near term, but we certainly remain interested in being acquisitive. Our acquisition program is very much gap-focused, very much grounded in strategy. We don't buy bulk. We buy to fill gaps in technology, gaps in customer footprint, gaps in experience rather than just sort of adding. We're not in the business of just adding volume. Appreciating there's maybe less of a full pipe in terms of near-term capital deployment, but maybe if we turn over to Jason and get him involved, what are some of the capabilities that you want the most? How often is Jeff saying no because of price? Jeff's a good guy. Good guy to say no. He's a good CFO. He could still say no. That's what he wanted to hear. Jeff made, I want to first emphasize a point that Jeff made, right? It's like when we do look for acquisition opportunities and things, we're looking to fill gaps, right? With the acquisition of Azure Summit, Applied Insight that we pulled, we filled some of our major gaps recently. We feel we're actually in a good, strong position where we're pulling our portfolio together to go out there and really strengthen our competitive position in the market because that's important to us. In terms of areas that we always want to grow inside of, right? Obviously, like I said, and I'm going to hit it again, right? Bringing kind of the fast commercial capabilities into the defense outcomes. A lot of that today is AI, right? In the generative AI space. We're always looking to bring new capability in there. We build our applications on top of the commercial AI. We're not in the business of making AI. We're in the business of applying it to the customer outcome, right? That's an area that we're always paying attention to. For us, it's more about developing the partnerships with the commercial entities. Like we talked about AWS, right? GitLab. We have partners, a slew of partnerships, and we're always looking to increase those partnerships to be able to bring kind of their investments into the government space. Got it. Got it. Turning back over to Jeff, as we think about return hurdles, what are some of the metrics that you contemplate with M&A, and how do you think of kind of the cash dynamics of technology versus expertise acquisitions? Yeah. We should spend a second on that. We talk a little bit about the leverage levels at which we'd like to run the company. We generally like to have a sustained kind of two and a half to three times trailing EBITDA leverage. We find that that gives us, based on the opportunities in our pipeline in particular, that gives us sort of the right combination of enough leverage to be a positive influence to our weighted average cost of capital, but also gives us enough flexibility to be able to hop up and make acquisitions generally in the size range that we're looking for. Once you do that, obviously, at any given time, we obviously have a WACC, a weighted average cost of capital. Our process is really more premised on evaluating the relative returns of acquisitions and share repurchases based on market conditions and available targets. That return decision, rather than being a specific point, is more often kind of a relative one. We're obviously not doing anything that doesn't generate returns pretty comfortably in excess of our WACC on a risk-adjusted basis, but we're able to balance those two together and weigh the relative returns and then act, execute accordingly. Got it. Got it. Digging into that statement a little bit, as we think about kind of your risk adjustment process, maybe high-level conceptualize, kind of what are the three to five points that you look for or run to ground as you risk adjust an acquisition? I know we focus more on kind of the conceptual financial, but actual operational risk adjustments. Yeah. Obviously, like most serial acquirers, we maintain a view of our acquisitions for some number of some period of time. Often, it's significant to note that if we've done our job well, within a year or two, you sort of can't find them as they're assimilated. We generally have a pretty good idea, and that gives us some solid rules of thumb around things like integration, synergy savings, and our track record relative to business cases, particular opportunities that we may be better positioned for after an acquisition. We keep sort of a track record of that. There's a feedback loop built into our process that we use as we evaluate acquisitions in particular. Maybe just staying on it while we have you up here, any sort of dynamics around kind of deal structuring that you want to call out, earnouts and the like that you like to use? How do you think about kind of keeping folks on and keeping them motivated or keeping them incentivized? Yeah. We have done transactions both ways, with and without earnouts. It's usually a sort of transaction-specific item. It may be related to founders. It may be related to being able, excuse me, to bridge a valuation gap relative to uncertainty in a business case. We use it in a number of ways. We have a pretty decent track record of doing it. I personally am always a little bit slow to come to earnouts because as an acquirer, there's an element of control that you cede when you do that for obvious reasons because you're holding an acquired entity responsible for an outcome, and you can't always integrate them as aggressively as you might like. We have a good track record and use them selectively in certain cases. Certain times, it's the best way to bridge a gap or keep someone interested for some period of time. Sure. Sure. Going back to your repurchase matrix, if we can just kind of talk about how we think about that rubric in greater detail and then kind of the level of how you think about debt versus equity financing within the business. I think multiples come off. Obviously, equity is less relevant, but interest rates are high and debt can be expensive, and there are always kind of ways to structure it. Yeah. Once again, you've asked a question that has two or three questions in it. It's my style. There are a couple of things. First of all, in evaluating share repurchases, we obviously keep a close eye on market conditions and have a view of what near-term volatility might look like and whether or not there's an opportunity to be opportunistic around that. We also obviously pay a lot of attention to our own internal intrinsic value analysis, which frankly is not much of an element in the decision these days since it's quite a bit higher than anything anywhere we've traded in recent history. That's obviously an element in that. Leverage is something that we're kind of more inclined to use than equity. I think situations where we would use equity are probably for particularly strategic items where it was important to the counterparty. We're not necessarily focused on, I've learned to never say never, but we're not particularly focused on large transformative sort of things, which would be cases where you would be more inclined to use equity. We're not particularly focused on that or don't see any particularly compelling options there. I think we'd be more likely to be debt-financed in terms of transactions. Sure. Sure. Circling back on that a little bit, as we think about kind of the dynamics within your, I guess we'll say like your visibility versus scale and your ability to need scale. I know CACI has never been a company that's needed scale before. If you go back to kind of the genesis of the scale conversation, you can make that argument that it's had positive and negative outcomes. Maybe talk about kind of how much are you hearing the need for scale nowadays and how does that kind of reflect on your M&A strategy? Yeah. The areas that are of the most interest to us, where we see the most opportunity for growth and returns and opportunities to add to our free cash flow per share, which is our ultimate figure of merit, we're not scale challenged. Jason alluded to our counter-UAS position, which is a particularly important one to us. A couple thousand deployed locations. We're the largest player. We have a really strong track record execution-wise. I mean, we have the three largest Agile programs in the government. It's our enterprise IT. Modernization is an important part of the portfolio. We have, I think, seven large network modernization programs underway. I think if you decompose your question, $8.5 billion sounds like a relatively small defense company. If you look at the areas of interest to us and the areas where we play, we have a significant footprint. I mean, I don't feel disadvantaged by size in any of those areas where we participate. I don't know. Did I miss anything? Sure. I think that's good. Yeah. Brilliant. Brilliant. In the last 60 seconds, is there anything, 70 seconds, is there anything that you feel that we've missed or that we should follow up on? I would add that I think if there is a silver lining in our current situation here, environmentally, macro sense, I think we're going to have an opportunity to see how divergent the businesses in our sector have become. I think the companies that we often are compared to as peers, not in a judgmental way, that's fine business, but we've become very different businesses. We often find ourselves sort of being painted with a broad brush and sort of compared to companies that aren't actually much like us these days. I think there's an opportunity here for us to be able to sort of see that because you're going to see, I think, that many of us will be affected differently, obviously, by some of the administration's current activities. I think that may actually help with the broader investor understanding of our portfolio and our position. Great. Thank you for joining. Yeah. Thank you. Jeff and Jason. Thanks. Sorry, I used all the wrap-up time. Thank you.