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Ladies and gentlemen, thank you for standing by. Welcome to the CACI International fiscal 2023 second quarter conference call. 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. At this time, I would like to turn the conference call over to Dan Leckburg, Senior Vice President of Investor Relations for CACI International. Please 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 No. 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 those 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 discussions 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 3 please. To open our discussion this morning, here’s John Mengucci, President and Chief Executive Officer of CACI International. John?

Thanks Dan, and good morning everyone. Thank you for joining us to discuss our second quarter fiscal year ’23 results. With me this morning is Jeff MacLauchlan, our Chief Financial Officer. Slide 4, please. Last night, we released our second quarter results, and I’m very pleased with our performance. We grew revenue 11% with growth in both expertise and technology. Profitability was healthy with an adjusted EBITDA margin of 10.2%, and we had another strong quarter of contract awards, winning about $3.5 billion which represents a book to bill of 2.1 times for the quarter and 1.5 times on a trailing 12-month basis. About 70% of our contract awards were for new business to CACI and we had strong performance on our re-competes as well. Overall, our execution in the second quarter and first half sets us up well to achieve our fiscal year guidance. Jeff will provide additional financial details shortly. Slide 5, please. Turning to the external environment, market and demand trends remain very constructive for CACI’s business. On December 29, the president signed the omnibus appropriations bill funding the government through September 2023. Budgets in general saw healthy increases, including defense spending which increased about 10% from last year. Below the top line numbers, we see healthy spending trends across both expertise and technology in key areas of focus for CACI, including C4ISR, cyber, digital solutions, enterprise IT, and mission support. CACI’s commitment to invest ahead of need drives differentiation and positions us extremely well to deliver innovation to our customers and value to our shareholders. Slide 6, please. Let me update you on a key recent award. Last quarter, we announced the award of the Air Force Enterprise IT as a Service contract, or EITaaS, demonstrating our leading position in IT modernization. This enterprise technology award was protested and the Air Force subsequently undertook corrective action. Late December, we were notified by the Air Force that, after correction action, the award to CACI was reaffirmed. We were very pleased by our customer’s decision. Not surprisingly, that decision was protested again and now sits with GAO for resolution. Our team is ready to go and we look forward to beginning this important work for the Air Force, which we expect will be a positive driver of growth in fiscal ’24. This award is a great example of our strategy to bid less and win more, focus on larger contracts, and leverage our leading position in enterprise IT modernization. Turning to second quarter awards, CACI won a sizeable mission expertise contract to provide network and exploitation analysis in support of foreign intelligence and cyber security missions. As you know, our work in mission expertise engages highly skilled employees who apply their technical and domain knowledge to support critical and complex agency missions. The work on this program will incorporate CACI’s deep, longstanding capabilities in both intelligence analysis and cyber. We won this competitive award and displaced the incumbent by leveraging our superior ability to understand and execute the mission thanks to our industry-leading talent. This award was also protested and the customer is currently taking corrective action. In the space domain, we continue to see strong demand trends and our photonics business continues to grow in scale. As we have discussed before, we supply both government customers and defense primes with our photonics technology. In the second quarter, we received additional follow-on order from a defense prime. Our industry-leading photonics technology addresses the requirements of spacecraft operating in all ranges of space - low earth, medium earth, and geostationary orbits and beyond. CACI’s optical communications technology is the only U.S.-based offering operating in space today that meets DoD and intelligence customers’ stringent security and performance requirements, and we continue to invest in this technology to maintain our leading position as we see increasing demand for secure high bandwidth communications across all domains. I also want to highlight our strong re-compete performance, in particular our re-compete wins of our best private investigation work for DCSA and important cyber-related work for the intelligence community. Our re-compete successes are driven by strong execution and the value we bring to customers. All of these awards, new business and re-competes are for high value, enduring work that addresses critical priorities for our customers and supports our ability to deliver long-term growth, margin expansion, strong cash flow, and shareholder value. Slide 7, please. As we have discussed before, we are committed to a flexible and opportunistic capital deployment strategy that includes internal investments, M&A, share repurchases and other capital deployment options, based on business and market dynamics. This morning, we announced that our board of directors has authorized a $750 million share repurchase program of which $250 million is expected to be executed imminently as our summary share repurchase. With moderate leverage, ample borrowing capacity and confidence in generating strong future cash flow, we’re in a good position to deploy capital to drive additional shareholder value. In summary, we’re pleased with our performance and we remain confident in our long term prospects. We are successfully executing our strategy, making the right investments, hiring and retaining top talent, winning new work, managing the business efficiently, and leveraging our strong cash flow to deliver shareholder value. With that, I’ll turn the call over to Jeff.

Thank you John, and good morning everyone. Please turn to Slide 8. As John mentioned, we’re pleased with our second quarter results. We generated revenue of $1.6 billion in the quarter, representing year-over-year growth of 11%, including organic growth of 6.2%. Expertise revenue grew 8% and technology grew 14%, which is well aligned with our view of the year. Adjusted EBITDA margin was 10.2% in the second quarter and 10.4% for the first half of the year. Our strong first half performance is on track with our full year guidance. Second quarter adjusted diluted earnings per share were $4.28, reflecting the higher interest expense we discussed last quarter, partially offset by our higher operating profit. Slide 9, please. Second quarter operating cash flow excluding our accounts receivable purchase facility was $22 million. This result reflects $93 million of unusual tax items we have previously discussed, namely the final repayment of $47 million of the deferred payroll taxes under the CARES Act, and a $46 million payment related to Section 174 of the Tax Cuts and Jobs Act of 2017. We have previously disclosed the full year impact of $95 million from Section 174. This quarter’s payment represents the half year effect on our quarterly tax payments. Cash flow also reflects the timing of ramping revenue recognized later in the second quarter and its attendant working capital. We ended the quarter with net debt to trailing 12-months adjusted EBITDA at 2.2 times. As we have previously discussed, the strong cash flow characteristics of our business, modest leverage and access to capital provides significant optionality to deploy capital in support of future growth and shareholder value. To that end, we announced earlier this morning that our board of directors has authorized a $750 million share repurchase program. As John mentioned, we are in the final stages of deploying an initial $250 million of that authorization as an ASR. We expect to finalize and execute the ASR promptly and will provide you with additional details when we execute that repurchase agreement. Beyond the ASR, we expect to deploy the remainder of the $750 million authorization in a manner based on business and market dynamics over time. This approach to capital deployment is a refinement of our strategy to be flexible and opportunistic in the management of our capital structure. We are now even better positioned to respond with agility to changing market conditions and investment alternatives. Slide 10, please. We are reaffirming our fiscal year ’23 guidance with the exception of free cash flow, which we are updating to include tax payments under Section 174. Let me also be clear that our guidance does not reflect any share repurchases under the authorization we announced this morning. We continue to expect revenue growth of between 4.5% and 7.5% with growth in both expertise and technology. As a reminder, all of our recent acquisitions have now anniversaried and so future growth in these areas will be organic. We continue to expect our full year adjusted EBITDA margin to be in the mid to high 10% range, and we are reaffirming our prior adjusted net income and adjusted EPS guidance. We are updating our fiscal year ’23 cash flow guidance solely to reflect the previously disclosed $95 million cash tax payment related to Section 174, given no changes have been enacted. Lastly, I want to reiterate that our guidance does not reflect any share repurchases under the $750 million authorization we just announced. We expect to provide more information after we finalize the details of the $250 million ASR. Slide 11, please. Turning to our forward indicators, CACI’s prospects remain strong. We won $3.5 billion of contract awards during the quarter, driving our backlog growth of 10% compared to last year. Second quarter backlog includes roughly $1.5 billion from our intelligence customer mission expertise award, as well as roughly $1.2 billion from our DCSA background investigation re-compete win. These reported amounts reflect current customer requirements. For fiscal ’23, we now expect 95% of our revenue to come from existing programs with the remaining 5% split evenly between re-competes and new awards. We have $6.6 billion of submitted bids under evaluation, approximately 65% of which is for new business to CACI. This is down from the first quarter primarily as a result of our strong second quarter contract awards, and we expect to submit another $15 billion in bids over the next two quarters with over 75% of that being new business to CACI. In summary, we’re very pleased with our results, which demonstrate the successful execution of our strategy. Our team continues to perform well and we remain confident in our ability to generate long term growth and shareholder value. With that, I’ll turn the call back over to John.

Thank you Jeff. Let’s go to Slide 12, please. In closing, the second quarter and fiscal first half keep us well on track to deliver our full year guidance. I’m pleased with our continued growth, profitability, cash flow and contract awards. 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 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 for our nation; and to our shareholders, I thank you for your continued support of CACI. With that, Emily, let’s open the call for questions.

[Operator instructions] The first question today comes from Robert Spingarn with Melius Research. Please go ahead, Robert.

Hey, good morning.

Morning Rob.

Nice numbers, and congrats on your reauthorization and ASR. John, I don’t know if this question is for you or Jeff, but Jeff just talked about the opportunity set that’s out there and the pipeline. What kind of book to bill should we anticipate after a strong first half, you know, here in the second half, especially with this budget rising?

Yes Rob, thanks. Look, we’re extremely happy with the book to bill that we posted. We’ve also been able to boost the trailing 12-months number to, I think, 1.55 times. You know, 13, $15 billion of additional bids in the pipeline. I like our new business win rates, very proud of our re-compete rates that year-over-year continue to stay above a 90% capture rate. What I’ll use as evidence of us continuing to execute, I guess I would say memory management around how we do business development, we’ve been on a long term path of this bid less and win more and drive durational programs in our pipeline longer and longer, because to me, at the end of the day, I want predictable, long term growth, right? So we’ve got some nice bids in the pipeline. I like the way that the EITaaS Air Force award is trending. I’m very proud of the team for an extremely well laid out, competitive incumbent takeaway in the intelligence community, and on the DCSA award, that is a driver of both revenue and margins, and that comes not only with some re-compete volume but also comes with some new business volume as our government customer reduces the number of people providing that service from three folks to two. I would tell you, to me on the new business front, everything is in position. We don’t get to win them all, but we are very focused on making sure we’re bidding on the right work, and the right work involves looking at top and bottom line growth. We’ve got to sort of keep this mix up, whether it’s expertise or tech. Growth in both of those segments--you know, as I’ve always said, people tell me all the time, you must be happy with that high tech segment growth because it exceeds where the expertise one is, and I consistently say, I want both of them to grow. I think we’re sort of getting ourselves to that point.

In that vein, do you see equal budget support for defense hardware and services, especially now that you’re in both?

Yes Rob, look - I think that at least the ’23 budget, first of all, it’s constructive that it was passed without a long term CR. It does support very key areas of where CACI is focused. If I look forward, I don’t like to look too much further than electronic warfare, [indiscernible] and cyber, and sort of where those three areas go. We’re beginning to become a heavier player in the space domain. I think those are decade-long budget growth areas, so we’ve gotten ourselves strategically, not by accident, into those deeper river, longer flowing streams of funding, and that makes us a very different company going forward. A lot of small left and right turns that has really, I believe, positioned us well so that just about any budget environment--you know, we’re a national security company and the world is a dangerous place, and I’m very pleased so far with the budgets.

And I apologize, I don’t want to overstate it, but I want to ask Jeff for a clarification. You know, John, you talk about technology versus expertise, and technology mix is up in the first half yet the margins for the first half are going to be lower than the second half, so Jeff, if you could just explain that dynamic of what changes in H2.

Sure Rob. The mix operates in two dimensions, and I think oftentimes people kin of hear fixed price and they think higher margin, and they hear cost-plus and they think lower margin, and that’s really not always the case. We have plenty of higher margin cost-type work and we have some important fixed price work that’s also slightly lower margin, reflecting a lot of real business factors, risk and whatnot. It’s still good work for us but it doesn’t necessarily have the same margin. There are some lower margin fixed price sales in the second quarter that you see reflected in that mix.

Our next question today comes from Peter Arment with Baird. Please go ahead, Peter.

Yes, good morning John and Jeff. John, maybe just to touch base, first a clarification. Is there a deadline date on the GAO when we’d see a resolution on the Air Force contract? Then just as a second question, photonics obviously has been a huge focus for you and the war tech continued to pick up. How does the runway look regarding scale? I know you just mentioned space is going to continue to be big.

Yes Peter, thanks. Let me try to unpack that. First off on the Air Force contract, look - we’re very, very pleased, as my prepared remarks mentioned. The protesters were unsuccessful, we were successful at holding onto that award. We have a lot of confidence in the Air Force seeing us through with us. We’re ready to go. We are very well staffed and already have had discussions with our customer, so we would expect this ought to be wrapped up in the April time frame, Peter. It will not and is not planned to be a large contributor of revenue in FY23, but we clearly would expect as we get things ramped up and started up to see this deliver in FY24. On the space front, where we are with our optical comms business, look - I’m very happy with where we’re at. I’ve been very transparent. Picking up the photonics business of LGS and combining that with the SA Photonics business really is the best example of putting, I guess, [indiscernible]. I really like what that’s going to deliver to us. We’re going to continue to invest in it, so you all are going to continue to see us investing in that area. That’s a good decade-long, nice growth business for us at better than average margins. I think we’re on the right path to get onto that on-ramp at the right time and we’re really working on expanding into--you know, already into future related markets that are going to include some airborne systems, potted and non, and then really working on pulling the synergies together between LGS and our SA Photonics business. Peter, you had one other question on that, and I didn’t catch it.

I remembered Air Force contract and space.

Okay. Thanks Peter.

Thanks.

Our next question comes from Matt Akers from Wells Fargo. Please go ahead, Matt.

Yes, good morning. Thanks for the question. I wanted to ask about capital structure and your target leverage. You’ve been running kind of two, three times the last several years, but interest rates were very low. Does that change at all given where rates are now, and do you think about the mix of variable rate debt any differently now?

Yes Matt, I’ll start off and I’ll turn over to Jeff. For a long time, we’ve been talking about we are comfortable in everything up to a 4.5 range, maybe temporarily getting a little bit higher than that to do something that was very transformational. What I like about where we are now, leverage somewhere in the low 2s, but I want to tie it to opportunistic and flexible. If we deploy the full $750 million of the combined ASR and open market repurchase, that’s going to still leave us around three times, and it really leaves us considerable capacity for other options. To me, that’s the kind of flexibility and optionality we were looking for. Jeff?

Yes, just to add a little bit to what John just said, you guys are probably tired of hearing flexible and opportunistic, but that really is what this is. We’re in a really nice spot here to operate the company in the near term kind of the mid-2s, which gives us a good chance to--you know, mid-2s to 3, gives us a good chance to have plenty of options as we approach either organic investment or acquisitions. We really are in a nice spot with lots of options, which is just exactly where we like to be.

Got it, thanks. Then if I could do one more, I guess on M&A, it’s been slower than you sort of have done historically. Could you talk about what are sort of the hurdle rates you’re looking at and where are some of those deals falling short, is it just valuation or just not the right assets out there that are the right fit for CACI?

There are a few observations we’d make here. The pipeline is not necessarily any smaller. I think we’re starting to see some valuation re-thinking as the market sort of adjusts to the current circumstances. I imagine a lot of that is interest rate driven, or some amount of it is interest rate driven. But we remain very active lookers and we’re going to continue our practice of being very thoughtful and deliberate and strategic, and when the right--that’s the other part of this optionality, right? When the right opportunity presents itself and the right fit and the right time, we’re poised to move with some speed.

Our next question comes from Bert Subin with Stifel. Please go ahead, Bert.

Hey, good morning. Thanks for the questions. Just to follow up on an earlier question, if I think about it maybe on a near term basis, the DoD’s L&M budget is expected to grow high single digits, RD&C is expected to grow even faster than that, but your organic guidance is still for low to mid single digits in fiscal ’23. Even if we factor out your Army exposure, at least from our seat, it would seem like higher budgets and easing labor would yield more opportunity just relative to what your view was last summer. Is there a reason that’s not the case?

Yes Bert, thanks. Look, let me start off with saying that we’re really happy with our first half performance - I mean, 5% organic, 10.4% adjusted EBITDA margin, so I like how that sets us well going forward. We’ve said in the past, we’ve got a large, growing, addressable market, so there’s plenty of opportunity for a $6.5 billion CACI. I like the strong awards that Rob highlighted earlier, we’ve got a nice pipeline. Back on guidance, look - it reflects a lot of different assumptions and scenarios in terms of how a multitude of factors are going to play out, and that’s why we provided a range at the beginning of the year. To put a little color on what goes on here when we look at do we hold our guidance, we had a strong first half, do we narrow guidance, do we raise it. We mentioned things like new award timing, facility and customer access, COVID exposures, and the FY23 budget is positive. Those are all trending more position than what we would have seen back in the July-August time frame. Cost of labor, contract expansions, sort of a little unchanged to negative, a little bit of pressure on margins if you look at continuing to retain current employees and hire new ones, and then the whole contract officer resources, those are about the same, so we’ve got some things that move us closer to the right goalpost and there’s some things that keep us somewhere along the left one, so we’re just trying to balance risk and opps. We could probably through in some of the 2024 comms commentary and does that blow back onto ’23, so we’re very comfortable with the guidance that we have out there. We’re very strong and well positioned to land within that guidance, and we’ll be able to potentially make different moves and different commentary when we get to the end of our third quarter.

Okay, that’s super helpful. Maybe just as a follow-up to that, if we look at that guidance, it implies a pretty healthy step up in the second half from 428 in earnings in 2Q to something north of 450 per quarter, I guess based on the cadence in the back half. Can you just walk us through what changes, and to your comments there on ’24, are you starting to contemplate anything like a potential government shutdown, or are you hearing anything like that? Just any commentary around what steps up in the back half and what those risks are.

Yes, I think maybe I’ll start that off and then let John address the second part of your question. The mix phenomenon that I alluded to a few minutes ago, a few questions ago, extends really nicely into your question here about the back half. We see a growing fixed price content, but we see some of that margin mix that I alluded to earlier changing in a way that’s favorable to margin. You can see a little bit of that if you look at our cash usage and a little bit of inventory growth. You can see sort of the front end of that starting to happen. In my prepared remarks, I referred to that when I talked about ramping revenue at the end of the second quarter and that attendant working capital growth, so we’re starting to see the front end of exactly what we expected to see in the second half. Again, at the risk of repeating myself, it’s really lining up nicely with right where we expected to be at this point in the year.

Jeff, thanks. Bert, you brought up a little bit about government fiscal year 2024. Look, we’re hearing the same--I guess I’ll chose my words wisely, I’ll call it commentary. I’ve been asked noise, rhetoric, but look, there’s always a lot of noise and there’s always a lot of headlines. We’re a 60-year-old company, we’ve been through many environments and administrations, budget cycles. We’ve heard a lot of commentary and a lot of political-ness over time. Look, in all fairness, on one side you have legitimate concerns about the government’s deficit and debt situation, and therefore talk about budget cuts in government fiscal year ’24. On the other side, there remains significant bipartisan support to fund defense and national security, just given the geopolitical environment and threats. There is a war in Europe, there’s near peer threats like China, who has surpassed us on some ways. Cyber is the great equalizer, whether it’s Iran or North Korea. A decade-plus ago, we were at war in Afghanistan, very germane to us. We operate in the skies, in the electromagnetic spectrum, and it remains pretty much unencumbered and that’s most likely not going to be the case in any type of near peer conflict, and we’re relying much more heavily on space and that domain is now contested, so. If I had to write the pluses and the minuses, we’re going to continue to monitor it, Bert, but to some extent I’m a guy and we’re a company that are going to work on things that we can influence for now. We’re going to focus on running the business, delivering long term growth and shareholder value, and what we know is national security is extremely important and they have a lot of critical needs. We know our expertise and technology can address many of those needs. We’re a strategically based company, strategy is where we come from. We’re not in these high growing, very important markets by accident, so I like the fact we have a full government fiscal year ’23 budget that supports where we want to head, and we’re going to continue to focus on a long term strategy that delivers consistent value, no matter what that commentary happens to be. Thank you, Bert, for that question.

Our next question comes from Seth Seifman with JP Morgan. Seth, please go ahead.

Thanks very much, and good morning. I think it was a few quarters ago, maybe it was around the middle of 2022 when there was some of the slowness in government funding, and I think you talked a little bit, John, about being unsure kind of in terms of figuring out what might be delayed versus what might be lost. I wonder if six months on or so, if you’ve gotten a better sense of that, and particularly maybe on the product side, since it seemed like that was an area where maybe there was some more dislocation in terms of what was expected.

Yes, thanks. I’ll start off, as Jeff mentioned, the year is playing out as we expected, and some of the mission tech work that we have out there is clearly planned to deliver during the back half of the year. Back to where we were, and you’re absolutely right, second half of fiscal year ’22, we were looking at a funding slowdown in dips and the like, and look - some has come back and some has and will come back in a slightly different form, so the update to that is while funding was the original issue and while the customers struggled through funding, some of the threats and the requirements changed. It’s requiring an enhanced capability versus what we all may have delivered just about a year ago until now. Now for us, [indiscernible], what that means for us is we’re working on software mods to our hardware solutions, and we can deliver those items that haven’t yet come back by the end of our fiscal year and that does drive a stronger bottom line. It’s something that we continue to watch, but it does unnaturally, Seth, play into this concept of software defined, low size weight and power multi-mission tech that can really take on different needs. If we look at what’s going on in Ukraine, there is a lot of UAS activity there, and even those requirements continue to change as the pace of battle changes, so the fact that we don’t have to push all those mission tech sales out through the end of the year is a great kudo to our earlier acquisitions and that they were very software defined. We’ll be able to get back on track - I’m very confident in that, and we’ll need that, of course, for us to close on our fiscal year ’23. Thank you for that.

Great, great. Thanks. Then maybe as a follow-up for either of you, and I know you guys aren’t responsible for all the stuff that we analysts throw into our models, but if I look at the consensus for next year, it looks like people are thinking about kind of a 10.9% EBITDA margin, something close to 11%. Do you think that maybe there’s still some anchoring around--you know, with the idea of ever-expanding margins and stuff, that might be where things in this environment that we’re in now, this operating environment, where things might take a little longer to deliver on that or be a little bit tougher, and maybe expectations need to be a little bit more in check for now.

Yes, I think what I’ll say to that is we’re 186 days into our year, we’ve got another 180-something days left. We’re going to focus on making sure we button up FY23 to our guidance and to a level that our shareholders have come to enjoy. Look, on the margin side, long term is what I would stress to everybody on the call. We were an 8%-ish EBITDA margin business six, seven years back. It’s great to be having the discussions of mid to high 10s and then where that cap is. The way we see it internally is, look, we are getting into higher and higher, greater and greater funding streams. It’s how we move from 8 to mid to high 10s, frankly, right? It’s really strategically taking a look at the book of business we have and not resting on where we’ve been but looking at where the trend lines are going to be, and the fact that there was going to be greater spend in some areas that we no involvement. Four, five years ago, six years ago, getting ourselves involved more into the national security side, getting us more into space gives us much better chances at continuing to drive margins than we would have been with our, let’s say fiscal year ’17 portfolio, so I’m going to shy away from crystal balling FY24. I really want to focus on this year and finish strong, get the share buyback executed, look for places where we still think we’re not highly valued enough, and going to take some opportunistic stabs at taking some additional shares out and really trying to position us well for our guidance call that comes along August of ’23. Thanks so much, Seth.

Our next question comes from Mariana Perez Mora with Bank of America. Please go ahead.

Good morning.

Morning Mariana.

For my first question, it’s a follow-up on the commentary, the political commentary about next year, continuing resolution, [indiscernible] about that. Have you seen any impact in your customer behavior from this increased uncertainty? Have you seen that commentary actually impacting the award environment, spending environment?

Yes Mariana, thank you. Look, nothing around FY24, right? I think right now, as I shared earlier, from where I sit as a public company CEO in the national security space, it’s sort of an unbalanced scale between--you know, I like what this nation is going to do going forward, and I would say there’s a higher probability that there are supportive FY24 budgets than not. If we look at FY23, we have a fully approved, signed off and appropriated government fiscal year 2023 budget, so with our customers, there’s much more certainty. In my senior level meetings, there’s much more certainty around how they’re going to push money now. We still have this contracting officer thing and everybody on the federal government sees that and they’re all working that - that’s going to take some time to get fully corrected. But I see a much more positive environment with the customer set that we’re supporting. Everything we’re doing in the EW [indiscernible] and cyber and how that begins to converge, what we’re doing in commercial solutions for what I’ll classify with our ID tech acquisition, what we’re seeing in space, those are all highly funded areas that are absolute must-dos within where we had. On the IT modernization side, we’ve won some nice sized contracts there. We have to get some of this protest period, but yes, I have not picked up any concerns, Mariana, around funding. Where will we go in FY24? We’re all going to have to watch. I hear the same things you all hear - you know, could we have a full year CR? Perhaps, but we’re in some pretty important areas, and I believe we’ll still continue to receive the requisite funding.

Thank you, and then you mentioned these recent wins. You have recently won significantly large multi-billion dollar wins. Has your appetite to pursue those larger contracts, like in the pipeline of submitted bids or the bids that you expect to submit in the near term, how much of that is multi-billion dollar contracts?

Yes, look - we’ve been on a long term strategy here of bidding larger jobs, and for a company like ours, we have to contrast that against winning a lot of work that gets you a nice revenue pop, doesn’t do much with margins, and if you find yourself in that grey area where you’re bidding programs with tighter and tighter rates, the reward for that - trust me - is you get to re-compete on that work even sooner. It’s why we’ve been very strategically focused on duration of contracts in our backlog, which is now around four, four and a half years. Yes, it does mean that awards are lumpy, it does mean that there’s a much larger price on winning some of those larger ones because you’re not chasing these really small ones that can sort of fill that in. I think we’ve got the right--I think we have the knob dialed right, Mariana, in that we’re out there winning some nice C-court wins, but we’re also winning these multi-billion dollar ones that, frankly, provide a nice floor and a nice base so that we can be, again, quote-unquote long term growth. We have the appetite for it. We’ve got an outstanding business development team, an outstanding sales support team. We’ve been building it over the last decade, so we’re going to stay with that strategy because once you win something like that, not only do you deliver the long term tech tail but then you get into the [indiscernible] with those programs and that moves us into really nicely positioned expertise work. Thank you for those questions.

Our next question comes from Sheila Kahyaoglu with Jefferies. Please go ahead, Sheila.

Hey, good morning guys, and thank you. John, just on those comments, I feel like you have a good set-up with longer term contracts, but on your organic growth in the first half, you performed pretty well, up 5% organically, and just the full year guidance implies some slowdown, so maybe can you talk about that a little bit more? You touched on it. Then specifically, I know your contract wins are being held up, including EITaaS, but can you talk about what your assumptions are around EITaaS, DFCA and the IC win? What sort of assumptions do you have for those starting to ramp?

Yes, sure. I would say on the organic front, yes, I’m very happy we had 11% overall growth and 6% in the second quarter, and your numbers are, as they always are, spot-on - 5% organic growth for the first half. Look, that is really playing out because of previous large awards that we’ve been able book, get through the protest period and then--you know, every one of these larger tech jobs has a slightly different ramp-up plan, so those are starting to all get into alignment. On top of that, the mission technology work - you know, we’ve been very transparent on that. Rarely, Sheila, does that make it deeply into our backlog. We’re usually getting awards that’s a 30 to 60-day delivery cycle, so we sort of get that award and that immediately goes to revenue, and then better profits - I know Jeff touched on that, looking towards our second half. I like the book of business we have today, and I’ll sort of move forward to the ones that we just won. Look, we’re extremely pleased with what we have won there. They are two really nice jobs that those and a few others are going to set us up well. On the award side, you’ve always heard me say it - awards are lumpy, right? You’ll never see me post any kind of headline, record award quarter, because I fear coming to you all and showing you the quarter after that we’re slightly less, so. Look, awards are always going to be lumpy, but we do continue to win new awards and execute against our large and growing backlog. On the EITaaS, look, I think we’ll know in the April time frame. I don’t like to go to my crystal ball, but I see more upside than downside to that decision, Sheila. I really see that being the next step up for us as we look at how we’re going to solve for FY24 for organic growth. The other cyber-related IC award, for everybody out there, we’re going to continually call it that because it is a very sensitive program. On behalf of our customer set, we’re not going to discuss the program name or our direct customer. I can tell you that that is in the protest period. We’re waiting for the customer to take corrective action. We’re hopeful we may hear something before this month is out, but as I mentioned on the Air Force job, when we go for these large awards, we’re always planning a 90 to 120-day protest period, so we know when we can count on revenue from that job so we don’t peak too early. I do like what we’ve done there. Those were really strong, strategic wins. We had the right best value solution in both cases. We continually shape these awards from two, three, four years before anybody else sees them, and again we’re leading with investment ahead of customer need. Both of these awards will benefit--we’ll talk more about it after we get through the protest period, but investing ahead of contract award is showing these customers the art of the possible, okay - here’s where the threats are going to go, do you want a more technological solution. It really takes the risk of having to find 2000, 3000 cleared folks, how can we bring technology more in to sort of lower their risk. All in all, I like how ’24 is setting up, and I do believe that we’ll find our way through these protests.

Our next question comes from Tobey Summer with Truist Securities. Please go ahead, Tobey.

Thank you. You mentioned your addressable market increasing substantially. How does the spending growth that the company can tap into compare and perhaps differ from the headline rates of growth of this year’s budget?

Yes, so if I remember right, Tobey, there’s been talk about it’s a 10% growth budget. We could throw inflation in that, then we have to take out things that we don’t do. We’re always looking at that five-year CAGR budget, and I think we’ve called that growth between 22 and 27, somewhere in the 30% range. Overall budgets in ’23, some are going to grow faster in any given year, but the work that we’ve done says that this is at least a 30% growth market all through ’27. You know, what I like is we have a total addressable market of $260 billion, and we’re a $6.5 billion company. That total addressable market, how I measure it is if we hadn’t done the acquisitions, if we hadn’t been strategically focused, if we hadn’t gotten ourselves into these funding streams, if we had done no acquisitions at all - you know, there are some in this marketplace that don’t do any, then we would have not have positioned ourselves well and been able to drive initial shareholder value. Look, strategy is a place where we come from, we’re not here by accident. A $260 billion addressable market is almost two times what it was in 2012, so all I can tell you from a macro level, budgets are holding up well enough for us to continue to grow and we like what the future holds.

Thanks. Is there anything you or the industry can do to effect change in terms of the chronic and burdensome protests that kind of plague the industry and procurement environment? Just wondering if you see the possibility for change.

Yes, you know Tobey, I’ve been in this market a long time, I guess it’s almost 40 years now. The federal government provides the protest path, and I will say for good reason. There’s days we’re happy for that process and days we’re not, right - it depends on whether I’m on the left side versus the right. Look, it would be more helpful to us, clearly, if we could come to you all that we win this job and in the next five days, we’re going to see pops in revenue and margin, but that’s just not the market in. The best we can do, as you’ve heard me say many times, is we control what we can control and we work on, that is when we win jobs like EITaaS and it gets announced in the--in our first quarter, right, we pretty much have to recognize that it may be early fourth quarter before we can recognize revenue, and that’s if a lot of other factors stay stable. On the flipside of that, doing business with the federal government, they’re a well paying customer. I’m not worried about whether 40 million people click on this app. We know what national security needs are, we can be much more strategically focused, and I would say the protest process is just something we have to work through. We have to be reasonable on it, and at the end of the day, you all and our shareholders just have to be patient that these things eventually work themselves out and we all get to move forward. Thanks Tobey.

Our next question comes from Louie DiPalma with William Blair. Please go ahead, Louie.

Good morning John, Jeff, Dan and George.

Good morning Louie.

As a follow-up, John, to your reply to Seth’s question, Ukraine has employed a wide range of systems to counter UAS and loitering munitions. Are SkyTracker orders expected to ramp in the future as you develop the software modifications that you referenced?

Yes, so let’s talk about--a little bit about what we’re seeing in Ukraine. I would--I don’t have to warn everybody there that what we all see is about an eighth of what’s actually going on there. Look, we have--we are very deep in counter-UAS and EW, as many of you know. There’s going to be a lot of technology capabilities that are going to be relevant and are already relevant in the Ukraine fight. There’s also avenues for some of our intel analysts, our training and operations support, and our logistics folks in munition expertise issues. Look, I think issues in Ukraine are going to be there for quite a long time. All the supplemental are rightly laden as to your money, but on the other side of that, Louie, is the federal government makes a decision as to what we can export. What we’re hearing and seeing, what you’re all hearing and seeing - you know, allies around the globe, they’re all talking about expanding their defense budgets just as much as looking at what’s going in Ukraine. We’re already delivering some of our technology to the Five Eyes countries. We’re going to look across our Eastern European allies, they’re increasingly interested in our counter-UAS methods and systems, Louie as you mentioned, far beyond the SkyTracker line. As they increase defense spending, we’re going to be involved in those discussions. We’re already out there understanding what their requirements are. It’s still too early to discuss specifics, but look, it’s another potential market for us. Every time we can do things to grow our total addressable market, better returns come up in the future. So yes, our SkyTracker line, our Korean line, some of our BEAM and B systems that are more manned tech level solutions that do counter-UAS, up to and including moving from kinetics mitigation versus non-kinetic is what we’re looking at next, so I think we’ve got a long potential growth line there.

Great. It appears as though your work with the Air Force’s Enterprise IT as a Service program is close to moving forward, you said potentially April. Are you also in contention potentially for the Wave 2 and the Wave 3 associated with that program? You obviously won Wave 1, but there’s two other ones that are probably big, and does having Wave 1 put you at an advantage to winning either of the other two?

Yes Louie, thanks. I’m going to stick to our long tried and true practice of not commenting on things that aren’t awarded. Yes, Wave 2 is the network build of that. I think we were very well positioned on Wave 1 and we’ll have to see how that plays out.

Those are all the questions we have for today, so I’ll turn the call back to John Mengucci for closing remarks.

Thanks Emily, and thank you for your help on today’s call. We’d really like to thank everyone who dialed in or listened to the webcast for their participation. We know that many of you will have follow-on questions, so Jeff MacLauchlan, Dan Leckburg and George Price are all available after today’s call. Please stay healthy, and all my best to you and your families. Emily, that concludes our call. Thank you all and have a great day.