CACI - NYSE

Ladies and gentlemen, thank you for standing by. Welcome to the CACI International Fiscal 2023 First Quarter Conference Call. Today's call is being recorded. At this time all lines are in a listen-only mode. Later, we will announce that opportunity for questions and instructions will be given at that time. [Operator Instructions] At this time, I would like to turn the conference call over to Dan Leckburg, Senior Vice President of Investor Relations for CACI International. Go ahead sir.

Well, thank you and good morning, everyone. I'm Dan Leckburg, Senior Vice President of Investor Relations for CACI International. Thank you for joining us this morning. We are providing presentation slides. So let's move to Slide Number 2. There will be statements in this call that do not address historical facts, 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. 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. 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 or as a substitute for performance measures prepared in accordance with GAAP. Let's turn to Slide three, please, to open our discussion this morning. Here's John Mengucci, President and Chief Executive Officer of CACI International. John?

Thanks, Dan. Good morning, everyone. Thank you for joining us to discuss our first quarter fiscal year 2023 results. With me this morning is Tom Mutryn, our Chief Financial Officer and Jeff MacLauchlan, Senior Vice President of Finance, who will assume the CFO role on November 1. As you all know, after 16 years of dedicated service to CACI, Tom has announced his plans to retire in January. For the last 10 years, I have had the great pleasure to depend on Tom's financial acumen, his leadership and his uncompromising commitment to always do what's right, Tom, we've accomplished quite a lot together. And I thank you for your unwavering dedication to CACI, our employees, our customers, and our communities. And Jeff, welcome. I look forward to the contributions you'll make as we continue to execute our strategy and deliver ongoing shareholder value.

Thanks, John. I'm very happy to join the team. Over the years, I've watched CACI success with great admiration and respect. I look forward to helping us deliver continued profitable growth and strong cash flow.

Thanks, Jeff. And now on to my commentary, and then I'll turn the call over to Tom to cover the financials. Slide 4, please. Last night, we released our first quarter results for fiscal year 2023. I am pleased that our performance and the strong start to our fiscal year. We grew revenue 8% with growth in both expertise and technology profitability and cash flow were also strong. And we won $3.2 billion of contract awards, which more than 80% is new business to CACI. That represents a two times book-to-bill for the quarter and 1.3 times on a trailing 12 month basis. Tom will provide additional financial details shortly. Slide 5 please, turning to the external environment. As we look out over the next several years. Prospects remain positive. In the immediate term, we are operating under a CR through mid-December, while the timing of the government fiscal year 2023 appropriations is not clear. What is clear is that we continue to see strong demand and bipartisan support for national security and modernization priorities. From a customer perspective, there are favorable budget indications for sustained spending in defense, intelligence and Homeland Security. And we see compelling opportunities in areas like digital solutions, enterprise IT and C4ISR cyber and space. This strong backdrop gives us confidence in our ability to drive long-term growth and margin expansion, robust cash flow, and shareholder value. Slide 6 please. As you've heard us say in the past, we are focused on investing the head of customer need to differentiate our technology offerings. Some of our most recent examples and successes include those in the space domain, where we are investing in photonics capabilities acquired through LGS and SA Photonics. The long-term growth opportunity for photonics is compelling with space-based capabilities a very high priority for many customers. And we are already delivering these capabilities directly to our government customers, as a supplier to OEMs on other programs. We also continue to invest in other space-based technology, like Assured Precision Navigation and Timing, and laser remote sensing or LiDAR. These technology investments are already seen demand from the major government R&D agencies in prime to space payloads. Turning to C4ISR, we continue to invest in a broad range of capabilities with software defined offerings a priority. Leveraging these investments CACI was recently selected to provide advanced technology capabilities to the U.S. Space Force. This one is a great example of our ability to deliver software defined innovation in a fast, agile manner to support critical national priorities. Evidence that our software-defined everything strategy continues to pay off. The enterprise IT modernization is a key requirement. Agencies need to improve cyber defense, support an increasingly dispersed workforce, consolidate and modernize legacy applications and networks for efficiency and realize the value of available data. Here we are investing in repeatable processes, automation infrastructure as code and key partnerships with commercial technology providers such as AWS ServiceNow UiPath in Juniper. A great example of CACI differentiation is the recent $5.7 billion enterprise IT-as-a-Service Wave 1 contract award by United States Air Force. Under this program, CACI will deliver enterprise IT service management systems and processes across the entire department of Air Force, as well as at the foundation for future waves. This program will leverage all of the IT investments I mentioned earlier. In addition to investing the head of customer need, we also invest in technology to provide better value to our expertise customers. A recent example was a contract award within the intelligence community, where the customer was buying mission expertise to support their intelligence collections, and analysis efforts. Through investments we've made an AI-based computer vision software, we differentiated CACI's offering and demonstrated how we can make our offering more efficient, effective and valuable to the customer by leveraging our technology. This benefits both sides, our customer realizes enhanced capabilities and repeatable solutions with a reduced dependency on people and overall reduce cost. And we realize benefits of differentiate in our bids, reduce labor requirements and a constrained labor market and earning better margins. All of these examples are proof positive that our technology strategy is working to not only grow our business, but also to enhance margins. In summary, we delivered strong first quarter results and remain on track for the full year. Demand in the budget environment are positive, we continued bipartisan support for national security and modernization priorities. We are successfully executing our strategy to invest ahead of need and leverage the synergy between expertise and technology to win in the marketplace. With that, I'll turn the call over to Tom.

Thank you, John, and good morning, everyone. Before I turn to our results, I want to thank John for his kind remarks in the support he has provided over the many years we have worked together. I take pride in our many accomplishments and successes. Not only the strong financial performance and shareholder value creation, but also safeguarding and strengthening our culture of integrity and innovation. We are truly a great place for our employees to come to build their careers, and we deliver value and operational excellence to our customers and our country. I am grateful to have been part of this dynamic team. I retired from CACI knowing that the best for the company is yet to come. And I wish John and Jeff and the rest of the CACI team every success. With that let's turn to our results. Slide 7 please. Our first quarter is a strong start to the fiscal year. We generated revenue of $1.6 billion in the quarter, representing overall growth of 7.7% and organic growth of 4.3%. First quarter adjusted EBITDA margin was 10.6%. Adjusted diluted earnings per share was up 3% from a year ago, driven by our higher revenue and associated profits. Slide 8 please. First quarter operating cash flow excluding our accounts receivable and purchase facility was $143 million reflecting healthy profitability and strong cash collection. We recorded DSO of 48 day a record low, which represents hard work and diligence across our company. Free cash flow was $130 million for the quarter. We ended the quarter with net debt to trailing 12 months adjusted EBITDA at 2.3 times. Given our strong cash flow profile, modest leverage and access to capital, we continue to have significant optionality to deploy capital in a flexible and opportunistic manner. Slide 9, we are reaffirming our fiscal year 2023 guidance. We expect revenue to grow between 4.5% and 7.5% with growth in both expertise and technology. We expect acquired revenue of about $180 million and our full year EBITDA margin will be in the mid to high 10% range. As a result of higher interest rates, we now expect interest expense in fiscal year 2023 to be around $75 million, around $14 million higher than our original forecast. Given the underlying strength of our business, we are maintaining our adjusted net income and free cash flow guidance. As a reminder, we will make a final payment of $47 million in the second quarter to repay deferred payroll taxes under the CARES Act. In addition, as we've previously discussed, we are assuming the repeal or deferral of Section 174 of the tax code relating to R&D expense. If this does not occur, our operating cash flow would be around $95 million lower for the year. Recognize that 174 Section only impacts timing of cash taxes, not the absolute amount. Slide 10, please. Continuing to our forward indicators, the prospects remain strong. We won $3.2 billion of contract awards during the quarter, driving backlog growth of 4% compared to last year. That includes approximately $2 billion from our large Air Force enterprise IT-as-a-Service award based on currently known scope. The difference between this and the headline value represents additional opportunity to drive even more innovation and modernization to the Air Force over the 10-year period. For fiscal year 2023, we now expect 90% of our revenue to come from existing programs, 5% from recompetes and 5% from new business. We have nearly $11 billion of submitted bids under evaluation, over 70% of which is for new business with CACI. And we expect to submit another $16 billion of bids over the next 2 quarters with over 90% of that for new business. With that, I'll turn the call back over to John.

Thank you, Tom. Let's go to Slide 11, please. To wrap up, Q1 was a great start to our fiscal year. We delivered strong revenue growth, profitability, cash flow and contract awards. We have a robust pipeline of additional opportunities. Looking forward, we remain committed to delivering long-term growth and margin expansion while compounding those returns with a flexible and opportunistic capital deployment strategy. All of this is driven by a commitment to grow free cash flow per share over the long-term. As is always the case, our success is driven by our employees' talent, innovation and commitment. To everyone on the CACI team, I'm extremely proud of what you do each and every day for our company and our nation. And to our shareholders, I thank you for your continued support of CACI. With that, Alex, let's open the call for questions.

Thank you [Operator Instructions]. Thank you. Our first question for today comes from Tobey Sommer from Truist Securities. Tobey, your line is now open.

Thank you. I was wondering if you could dig into and frame a little bit the opportunity in your photonics and laser business that you garnered via recent acquisitions, what the size and level of profitability is today versus what it may look like over some sort of medium term, if successful? Thank you.

Yes, Tobey, thanks. Look, we're really happy with the position that we created for ourselves and for our shareholders in the photonics market as well as within laser communications. We have production units that are in space and are involved in several missions. A couple of different types one are the - what I would call the bespoke GEO in our planetary ones. We have laser terminals on satellites that are going to be headed to the moon as part of the Artemis mission. And then on the higher volume side is, those proliferated LEO satellite constellations that everybody has heard a lot on. We've got - we're starting to build manufacturing scale and capability to produce high-volume small form factor devices. And just to give a view of what we're talking about here. We're looking at laser comp terminals and modems and optics that are anywhere from 46 pounds down to something the size of a grape fruit that is able to complete satellite optical cross-links. We are partnered with most, if not all of the satellite OEMs today, whether you're talking DARPA or larger-scale production programs. And we're also involved, Tobey, in a number of imaging contracts and CRAD activities. And why that's important is those CRAD activities help support the investments that we're making, so we can extend our capabilities in new markets. The last part of your question, as I mentioned, when we purchased LGS and then SA Photonics, we're looking at this market taking off to more material growth in the fiscal year 2024 to 2025 timeframe. We still have some additional capital investments that we are making there. We've opened up a second production facility in the state of Florida. So one, I like the positioning of where we are in photonics and the work in LGS and SA Photonics is right in line with the way we've planned it.

And for my follow-up, I'd like to ask a question about the M&A market and higher interest expense, clearly, that - will influence the trajectory of bottom line growth as rates seems higher for a period of time. How is it - the changes in interest in available sort of leverage and financing influenced valuations, if at all, if it hasn't yet, do you expect it to? How is it kind of influencing your capital allocation? Thanks.

Yes, yes, Tobey thanks. Look, we've always talked about the fact that M&A is a very important use of our capital, but as we've talked over the number of years, not our only one. We continue to evaluate all capital deployment options based on the dynamics at the current time. Our M&A strategy is always going to be strategically focused, right? We're going to look to find areas that give us additional capabilities or different customer relationships that allow us to continue driving long-term growth. We're a disciplined acquirer. We're always looking for the right target at the right price and then of course, with the right culture. On the M&A side, the pipeline really hasn't materially changed from what we've been discussing over the last few quarters. It's not as robust, but we always continue to pursue our preemptive M&A strategy looking at a way for us to fill gaps. Tom, do you want to talk a little bit about rates and how it positions us?

Yes, yes, yes. Thanks, Tobey. So I would say - that the higher interest rates do not have a material impact on the way we look at acquisitions. In our first quarter, our average interest expense was around 3.5%. Now that's higher than where it was a year ago, but any long-term historical period that still is actively borrowing cost, and a slightly higher kind of weighted average cost of capital associated with it. But again, I don't think that's going to materially alter the economics of proposed deals. We're still a present value decision maker and to hurdle rates slightly higher, but not meaningful at this point in time.

Thank you very much.

Thanks Tobey.

Thank you. Our next question for today comes from Gavin Parsons from Goldman Sachs. Gavin, your line is now open.

Hi, good morning.

Good morning, Gavin.

And congrats to Tom and Jeff.

Thank you.

Thank you.

Pretty good start in terms of revenue and bookings. I just wanted to get an update on just kind of the customer labor environments and budget funding environment, if you would?

Yes, Gavin, let's take hiring first. Look, the market and you all have heard me say this many, many times. It's always been very challenging for the past few years, and it remains so. As we look at how we handle hiring, and I'm going to call it the cost of labor because that's really how this plays out. We are paying for top talent with specialized technology skills, with the right certifications and the right clearances. So - and I hate to say, I'm very happy to pay for top talent as any CEO would. We are tracking the market and making sure that we are paying talent appropriately, and that does a lot not only for the attraction of folks coming to CACI, but also for the way we've been able to retain a fair amount of our work force. Now those additional labor costs have really two different avenues for us. 60% of our revenue was cost plus. So higher wages do get passed along to the customer, but there, again, our customer asks us to find the best and brightest, and that's what the best and brightest cost. The other 40% is susceptible to higher labor costs. But we've got many avenues for us to keep those costs in check and allow us to still generate the right margins that we need. The first thing there is revenue is not necessarily linear to head count in our business. Half of our revenue is in the expertise area where it's nearly 100% focused on labor. The other portion is on the technology side where we get to write the labor categories, we reserve the full rate who we're going to hire and how we're going to pay them. We are looking for efficiencies as well. I've said many, many times, software is a super power. It allows us to deliver so much more capability out there, much higher productivity, potentially some lesser supply chain issues as well. Gavin, as for hiring us, you also asked about the budget. Look, what I see out there is very, very supportive budgets. We've been very fortunate. We're in the national security space. And I continually say the world is a dangerous place. And we see that with what I call the Ukraine wake-up call. But we also have China, we have other near peers out there and counter terrorism is still there. We are moving into another fiscal year under a continuing resolution. So there's some - we don't have FY '23 appropriations today, but having said that, we're heading into one of the largest defense budgets. We're going to see increased spending in the intelligence community, within DHS and IT modernization and within space. And we're also spending an awful lot of time, Gavin, in looking at the role that INDOPACOM is going to play in our future. We're going to have to have a very solid immediate near peer defensive foster. And that's great for us from anywhere from - provide intel analysts to SIGINT and cyber detection and defeat tech. So all in all, a very supportive budget and the - and a reasonably good solid look at how we are heading into some of the hiring pressures.

Got it. If you marry the two of those for your customer, has the contracting officer labor environment improved? Have they been moving more quickly on getting stuff awarded?

Yes I mean, it really varies by customer, right? I think I've mentioned on the last couple of calls that every customer we have has their own award and their own funding D&A. Funding, we received the normal type of funding awards in the first quarter. And we believe that, that will continue forward and be very supportive of our FY '23 plan. On the contracting officer side, look, there's -- everybody in the government knows that, that is an issue, and they're all working extremely hard. But at the end of the day, there's only so much work that those agencies can do. We are seeing awards Gavin, come out, frankly, pretty much the way we've expected. We have some customers, again, that always deliver the award 100 days after we believe they are. So we put that into our plan. On the contracting officer side, it's going to continue to be tough. I think you'll see that tough throughout our fiscal year and maybe by the middle of '23, the hiring wheels, we have gotten people to a place to make that better. I'd also like to hope that the COVID impacts that also makes that a persistent issue. We'll have, at some point, receded to a point where we can all get back to some sense of normal. Thanks Gavin.

Thank you.

Thank you. Our next question comes from Matt Akers from Wells Fargo. Matt, your line is now open.

Yes, good morning, thanks and yes congrats. And I wanted to ask, Jeff, if I could, maybe just as your kind of your initial thoughts as you step into the CFO role, just kind of biggest priority as you step into the season and maybe opportunities as you take over?

Thanks for the question, Matt. Not to repeat myself, but again, I'm really excited to be here, and I look forward to working with John and the team. To your question, I would say that you really shouldn't expect major changes with this transition. I think the company is in a great spot, delivering growth, margin expansion. Tom has done a great job over the years, making a lot of improvements. The capital structure, in particular, we're in a great place for the current situation. And I think you ought to look for kind of refinement and evolution. Thanks.

Okay, great, thanks. And then I guess if I could ask on the IT-as-a-Service win, could you talk about - I know, the headline number is pretty big. I understand that contract is actually a little bit differently. Can you just talk about how fast that kind of ramps up and what kind of revenue contribution we should expect from that?

Yes, thank you on - very large headline value. Either there's some in small businesses who should be getting a portion of that work will not flow to CACI as a prime. So that's kind of not going to be reflected in our kind of books. And you took a careful look at what you would expect and - we came up with a $2 billion number, which was appropriate for us to put into our awards. The ramp up is going to take - some time. It's under protest, as you know. I'm not clear how long it will take that to be adjudicated so if anything, a minimal contribution in FY '23. When we were putting our plans together, we knew this award was pending, we factor kind of new business into our plan, one of the reasons why we have ranges in our guidance is because of the variability of new business, timing and the like. So I would look to next year FY '24 for us to get into a more meaningful ramp up role.

Hey Matt, I'd also add, this is John. When we talk about investments this has been about a two - to three-year road of making certain that we could show this customer, the art of the possible and sort of taking them to somewhere new. They have quite a large goal across United States Air Force. We're extremely proud to have been selected and awarded this contract. But it's very consistent with our long-established goal to win longer duration, larger and higher-value contracts. So it's another in the cater just as BEAGLE was just as the Army network build-out program was, that the strategy is working, bid less, win more, go after larger programs, which means that we're not in the recompete stage as often as we may have been. It allows us to bring technological advancements in that we can do stepping - the repeats on other service-wide jobs that are this size. So thank you for that question.

Yes, it's helpful, thank you.

Thank you. Our next question comes from Scott Forbes from Jefferies. Scott, your line is now open.

Good morning, guys. Tom, congrats.

Good morning, Scott.

Good morning, Scott.

You've talked a lot about the space portfolio today and just to get a little bit more into that. I mean, how do you think about moving up the investment curve there? Is there any color you can provide about the return profile, timing of investments that are being made today? And if we think about some of the recent acquisitions you've done in the space, when do you think about really reaching that kind of inflection point in the domain? Thanks.

Yes, Scott, thanks. I don't want to be repetitive. But look, we have spent a fair amount of investment dollars in CapEx during our fiscal year 2022 upon the acquisition of SA Photonics. And even back to fiscal year '19 and '20 when we purchased LGS. And beyond optics, we're looking at APNT as well within space. We're looking at space situational awareness, so there's a broad scope of work that we're looking to do throughout space. This is definitely one of those perfect examples of investing ahead of customer need. And we're doing that because it does take time. With the acquisition of both LGS and SA Photonics, we are the largest U.S. provider of space-based photonics, optics and the like. So that is a tremendous position for us to have gotten our ourselves to. We're going to continue to spend a higher than normal amount of investment throughout fiscal year '23 and into 2024. When we see volumes pick up, Scott. This is - we've heard a lot about commercial proliferated LEOs whether it's OneWeb or Amazon, other constellation there. We're involved in all of the SDA work within this area. So you're going to see us focus more on the manufacturing side. Frankly, on the algorithmic side, we've cut some incredible work that we've already done. We've been working in the area of photonics for at least 10 to 15 years, so we understand what it takes. We understand how to take commercial wireless technologies and move those types of technologies and then space harden them and then space qual them. So there's a lot of investment going on here. Margins, look, we've been focused. We're looking to grow to topline and bottom line as well. These businesses will do a lot towards pushing margins forward when we get to FY '24 and beyond.

That's very helpful. Thank you.

Yes, thanks Scott.

Thank you. Our next question for today comes from Colin Canfield from Barclays. Colin, your line is now open.

Hi, good morning. Thanks for questions. Congratulations, Tom. Circling back on the capital deployment aspect. How do you guys think about the stock attractiveness for an ASR versus the potential for a secondary offering. Appreciating the rate environment is not as material for capital deployment, but working capital management in the quarter. And the debt pay down, looks somewhat similar to what you've done in previous quarters ahead of ASRs. So I just kind of want to hear your perspective on the stock.

Look, let me sort of start that with where we're at 2.3x in leverage. We recognize that, we're extremely proud of that. right? We've been able to invest in internal needs, increase our CapEx spending, increase spend around inventory levels to support our mission tech businesses and the like. So first off, we like where we're at. We love the options. And frankly, all options are on the table to drive shareholder value. Also we say many times, it's flexible and opportunistic. We purposely don't use the word balanced. And M&A is going to remain that key work. We're going to be looking at M&A and repurchases and internal investments and evaluating all options based on the dynamics at the time. You mentioned valuation, clearly. We're looking at where our valuation is in the market, and it is a consistent watch item for us. We're looking at continuing to invest in key technology areas. And we're also measuring the long-term growth top and bottom line success of focusing capital on internal investments. We've been a lot in Agile software development that won us BEAGLE, which is a multibillion-dollar award as shown off top and bottom line growth. AI-based computer vision, as I talked about in my prepared remarks. And then Counter-UAS, we continue to invest there. So again, all options are on the table. Tom?

Yes. And Colin, I'll make the point that there's asymmetry of information here. So people looking at CACI, just kind of looking at our leverage levels and may have some thoughts about how we should deploy our capital. At any point in time, we have an acquisition pipeline kind of looking at different opportunities. Some may be highly probable, some may be remote, but those are always in our mix and that helps to inform our judgment as to how we deploy capital. And I will underscore what John said, this is something that we look at on a kind of real-time ongoing basis, both at the board level and the company management level. So it's a key focus of ours and the fact that it appears we're not taking any action does not imply that we're not paying very careful close attention to this very important matter.

Got it. And then if you can maybe just talk about, John, some of your lessons that you've learned from Lockheed margins with respect to kind of managing production costs and switching to more of a scaled hardware strategy?

Yes, sure. Look, far more important than me, Colin, is the team that we have in our NSS organization. As we began this journey. It's one thing to strategically take a look at where I and our senior leadership team believe the market is going to go. So I'm really focused where I sit on the strategic level and what is it that will drive long-term growth to also get this company, again, more on to the technology side and then within tech, where is the government most apt to spend the majority of their new dollars in areas that CACI frankly, can make a fist in. Brought folks in from just about all the major primes. Have brought folks in that have got 30 to 40 years' worth of manufacturing production experience. It is what allowed us to build a second line in our optics business. We have one line out [indiscernible], we built the second line in Florida. You don't do that with the size company we are without bringing in people really under understand what good looks like, frankly. And then it's the investment thesis. It's what do we have to invest - and then frankly, somebody asked - I think what Scott asked earlier, right, there's a timing of some of these investments. The fact that we are involved in so many new start imaging contracts with some of the primes out there was another indication that there's other uses for the optical algorithms and the like. So wrapping it up, we brought some really good talent in. We've grown some internal talent. We've got a great supply chain group. We had to, frankly, create a whole supply chain system and an MRP system in all of those areas. Some of that came at a smaller quantity level, but really good thoughts from some of the other companies we bought Mastodon and AVT and others. So they brought us some great innovative thoughts. So not only from the big primes but from the folks who actually created some great smaller companies that are now part of CACI. I'm really - I'm very confident that we've got the right team and I'll stress team, making sure that we're able to scale when the time comes.

Thank you for answering my question.

Thanks Colin.

Thank you. Our final question for today comes from Bert Subin from Stifel. Bert, your line is now open.

Yes, thanks for the question. And I'll echo my congratulations to both Tom and Jeff.

Thank you.

Thank you.

So maybe just thinking about the revenue environment, outlays improved sort of steadily through 3Q with pretty strong growth on the O&M side in September. Did you guys note a significant change in your revenue traction as you went through the quarter? Do you think that should continue in the current CR environment?

Yes. So I think there's two issues, one is revenue and one is your funding level. A good portion of our revenue is kind of very steady and dependable. On our expertise business, we have employees they come to work, we pay them, we charge the government, there is a cost. And that is somewhat independent of fluctuations in government outlays. We have steady funding for those types of programs. In the latter part of last year, we referenced some challenges in funding, and that was more tied to some of the shorter cycle mission technology kind of work we do, where the government may be purchasing kind of $5 million, $10 million, $20 million worth of kind of mission technology hardware and some of that got hung up in the contracting officer activity. At this point in time, as John mentioned, funding levels in our first quarter are generally at normalized levels. And kind of given where we are, that does not appear to be a headwind associated with hitting our guidance numbers. Again, something that we watch carefully - but right now, not a major concern for us.

Tom, maybe just to clarify there. I appreciate the expertise business tends to be steadier. But outlays arising, I think it's fair to think that there's some on-contract growth that I imagine you guys will be a part of. So I guess I'm just trying to get a feel for if I looked at July versus September for CACI, were results trending in the right direction and has that continued into October, given the CR.

Yes, I would say that kind of we're a growing company, - and we're expecting to see continued growth quarter after quarter, kind of recognizing that there is a bit of a seasonality and some fluctuations. And what we're seeing in terms of both on-contract growth and funding support that in - a steady increase in growth as we go forward.

Yes, Bert, I'd also add. Look, our guidance does reflect many of the different assumptions in the scenario, some of those that you're calling out as well, there's a multitude of factors. Look, we are in another CR, we don't have FY '23 operations yet. We got election upcoming. We have the KO situation. But all I can tell you is that at all points along our guidance range, we expect organic growth I also believe from recent meetings that I've been sitting in, everyone on the government side understands numerous threats out there and the ability for us to move ourselves to yet another year with a long pending CR, I think there are more people in the government that would whether or not do that then would like to see that. So - and again, National security is a very large bipartisan supported effort. And I do believe that the '23 budget as well as when their funding outlays come out to support us to fall - finish the year within our guidance.

Okay. I appreciate the color. Maybe just to follow up with sort of the line of space-related questions. Just for some context, I know obviously, the optics has been a big area of growth, but there's been a variety of products that I think puts the space domain. Can you give any sort of high-level view of how much of your business you think is space-related, whether that be 20% of sales or less or something along those lines?

Yes. But I'd rather not go down that path. I like the position that we're in. The reason why we're in that position in some areas is because we let the rest of the world know what we're doing after we've done it. I'm very confident in saying that we are the leading U.S. provider space-based optics. There's a lot of other areas of space that we can't talk about on an open line like this that we are involved in, in our line of business that is very focused on that. That's doing an outstanding job. We're getting the right CRAD efforts [indiscernible] and the like in place. We've got great relationships with the majority of the satellite primes out there. We've got a great ground from station offering. We do a lot of post processing of satellite feeds coming down the ground all the way through the individual analysts. So I always hesitate to give percentage of because it's tough to understand where do you draw that line based on space base. But overall, for our investors. We are in the right areas where the right dollars are - have been spent and are going to continue to be spent, and we have the right partnerships with the larger primes upon these assets. All of our technology, we'll be riding on. So thanks, Bert.

Yes, thanks very much.