I want to make it very, very clear. that as we look at the underlying business without that $200 million, we are focused on a high 10% margin period full stock. The fact that we had $200 million of zero margin revenue come in. It was our decision to make them very transparent. And I understand that the math works out to 10-5 or 10-6 outstanding, but we are the underlying business is executing at a high 10s rate and we will continue to do so throughout this year.
John Mengucci: Yes. It can’t be said too many times that the underlying operations of the business are entirely consistent with where we expect to be. Thanks, Bert.
Operator: Our next question comes from Seth Seifman with JPMorgan. Your line is open.
Unidentified Analyst: Good morning. This is Rocco on for Seth.
John Mengucci: Hi, Ros, good morning.
Unidentified Analyst: The 9% organic growth ex-material buys was impressive in Q1, with the new guidance increase for the unplanned material buy, should we expect sales growth to be front-half weighted ex the buys? Or will Q2 be lower what they build throughout the year as indicated on the prior call?
Jeff MacLauchlan: Yes. Our view – thanks for the question, Rocco. Our view is that the second quarter, you ought to expect to be fairly flattish from the first. Remember, there is $100 million of the unplanned material buys in each of those two quarters. And I think the underlying operations of the business, while we reiterated the year in our guidance, we feel like we’re off to a really strong start, but we’re going to operate here for another quarter or so and reassess.
Unidentified Analyst: Great. That makes sense. And then how are you thinking about future capital deployment. Is there a potential for there to be a consistent share repurchase program? And how does the M&A pipeline look?
John Mengucci: Yes. Boy, that’s a – go on for days Rocco. Look, first of all, look, we’re flexible opportunistic, and those are the dynamics that we’ve actually laid out there. We are going to continue to evaluate a range of factors, either what our M&A pipeline looks like, as you mentioned, what our stock price is, what our valuation is, leverage interest rates, demand trends, business outlooks, and frankly, those are – all those options are always on the table. So they all create value, as you all know, given the dynamics at the time. Because they all drive free cash per share over time. Leverage feels right. And we’re going to evaluate all of the options. We have to look at share repurchase versus M&A. We look at internal investments versus M&A. Our decision is going to be based on a relative rates of return on whatever two options that we’re looking at over time. And with that, Jeff, anything you’d like to add?
Jeff MacLauchlan: Yes. I mean, look, this is a very – I know you guys probably get tired of hearing flexible and opportunistic, but that really is where we are. I mean we are continually looking at the pipeline and when we see a combination of factors where we don’t see maybe near-term opportunities that are interesting to us, we see some market weakness in our share price, those are times that we’re going to stop and buy back some shares. I mean, it’s continually under evaluation. It’s a very disciplined, return-driven exercise, it does not make much sense for us to be any less levered than we are. We have a very favorable capital structure in that regard. Those of you that all us in study us know that, I won’t bore you with the details, but it’s not particularly appealing to us to become any less levered. And so we’re constantly looking at that range of options. And you’ll see us continue to act as appropriate as we look at changing circumstances.
John Mengucci: Rocco, you also asked about M&A. And look, you all know we done some really good acquisitions in the past. They have addressed a large number of gaps. Is the – frankly, the valuations and the seller’s expectations have been relatively slow to adjust to a changing market dynamics. That’s our view in light of rising interest rates and a lot of other factors. But we do have a pipeline that is starting to build. We’re always looking at things in the SIGINT EW area, in the cyber and in the space area. But when we see the market shifting back to buyers’ market from a seller’s market, we may see more opportunities in the near-term. But we’re really looking at that moderate sized company that drives capabilities and customer relationships so that 5 years from now, we can talk about what that company did to sort of change the way our company looks now.
And again, with the temporary are going to continue to drive longer, longer-term free cash flow per share growth. Thanks for your questions.
Operator: Our next question comes from Matt Akers with Wells Fargo. Your line is open.
Matt Akers: Hey, guys. Good morning. Thanks for the questions.
John Mengucci: Hi, Matt.
Matt Akers: So you mentioned that, I guess, the $200 million of material buys that I think maybe shifted based on some of the uncertainty that’s going on, people pull that forward. I guess if you strip that out kind of your base business was there any kind of pull forward in that business as well? I’m just curious how people are sort of your customers are acting around some of the uncertainty around the budget.
Jeff MacLauchlan: Look, let’s makes sure. First, let’s unpack a little bit the premise of your question. The unplanned material buys were not pull forwards. So that was unplanned customer activity, which we were efficiently and responsively dressed. Beyond that, the underlying performance of the business is slightly ahead of our expectations for the first quarter, and we think we’re on a good path. We may have anything be well, we think we’re on a good path. So we will be continuing to evaluate that, but it’s early in the year. I mean, as John said, we’re 100 days into the year and we’re happy with our position, and we will continue to manage it.
Matt Akers: Got it, okay. Thanks. And then I guess, just any thoughts on some of the things happening in the Middle East now between kind of U.S. involvement over there? And does this $100 billion plus supplemental that is on the table? Any potential work you think that maybe you could come out of that for CACI?
John Mengucci: Yes. Matt, thanks. Look, we’ve said many, many times, right? Unfortunately, the world was a dangerous place. I think that what’s going on in Ukraine was the first wake-up call. Certainly, raise the urgency level around defense and national security globally, frankly. I think the attack on Israel is a reminder that despite the increase of near-peer threats, you’ve all heard me say this, contourism is still a major concern. Yes, there is more money going to be spent on the near period threat. But I’ve always said, in our mind, it was ever an ore, it was always going to be an E, E, E, and M. But look, most of what we’re doing as to specifics, I can’t address those on this call. I can tell you that we’re engaged and we’re supporting.
