CACI International Inc (NYSE:CACI) Q1 2024 Earnings Call Transcript

We’re hearing the same thing that you’re all hearing about the $100 billion plus up as well as other international spending. Look, we deliver mission expertise and technologies to all the Five Eye countries today. I’m convinced that the Eastern European allies are also going to be increasingly interested in our products. We’ve made a few trips there to some key countries. We know what they are looking at, they are looking for. It’s exactly what our software defined mission technology suite was built for the automatic spectrum and everything in the EW world into [indiscernible] signal. Nations around the country want to know where that signal is, what it is and how can they repeat it. So I’m sure that expansions around Eastern Europe and NATO and other select countries is what will start taking a look at – it’s too early to discuss the specifics.

We’re going to be very, very conservative and very, very calculating as to how we enter the international markets with the offerings that we have. Thanks, Matt.

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

Josh Corn: Hi. Good morning. This is actually Josh Corn on for David.

John Mengucci: Good morning, Josh.

Josh Corn: Good morning. I wanted to ask if the materials purchases in the quarter were considered expertise or technology. It sounds like technology. So if that’s the case, ex-those purchases, it seemed like expertise growth was up 20% and tech was flat. So I wanted to ask if that implies anything about the remainder of the year or anything specific in the quarter? Thanks.

Jeff MacLauchlan: First of all, they were technology. John, want to add to this, but I don’t think there is – I don’t think there is a particular conclusion to extend from that. I mean these statistics move around, obviously, and we’re generally kind of managing mix.

John Mengucci: Yes. Thanks, Jeff. Look, I probably said this, sorry. The good news is they are both growing, right? So I’m extremely pleased with every dollar of expertise growth, just as much am excited by every dollar of technology growth. I think some of what you all see in some of those tables, whether it’s expertise in tech or [indiscernible] DoD, but we see expertise is seeing the benefit of lapping the Afghanistan withdrawal and then also the ramp-up of our new NSA, Intel, and Cyber program. At the end of the day, they are both extremely important to us. Expertise informs tech and tech enables more cost-effective expertise. And I could tell you, within our mission technology space Todd [ph] over here does an outstanding job of picking up all the mission expertise work that we are doing and all those tips in cues to understand how we invest.

And gray ones, most of our enterprise work does outstanding job of finding ways to bring new technology, whether it’s AI or agile software development scale, anything that takes the cost of expertise down which, frankly, when we do that, that helps us drive margins as well. So, I think quarter-over-quarter, Josh, we are going to see different pieces of our business growing at different rates. But there is usually some large movements that are easily explained with the latest 12 months of work that we have done. Briana, we are ready for our next question.

Operator: Our next question comes from Connor Walters with Jefferies. Your line is open.

Unidentified Analyst: Hi guys. Congratulations on a strong quarter and thank you for taking my question. I just wanted to dig into some of these major programs a little bit more. Now that FocusFox is over a quarter into the ramp, can you provide an update on the cadence and progress around hiring and how we should think about the contribution to revenue and profit in the next few years there?

John Mengucci: Yes. Thanks. So look, it’s a major expertise program for us. And we have always said that at a normal level, expertise ramps up faster than our technology programs. We won the work because our CACI proposal was technically superior. And frankly, programs were ramping up just as we propose, maybe slightly ahead, but nothing but positive feedback from our customer to-date. What’s crucial to know about that program is we won that program by making certain that we would have a low to zero risk transition from the long-term incumbent to us. And that transition is well down the path of the way it was planned in our proposal. I would – I am not going to talk about the exact quarter-by-quarter and year-by-year, but all I will tell you is its $1.5 billion worth of awards that we recognize. I would say we are somewhere in the 80% ramped up phase today. Connor, and I would expect that great performance by Marcie Small [ph] and her team to continue.

Unidentified Analyst: Got it. That’s super helpful. And maybe in the same vein as it relates to the new $1.3 billion award with the intelligence community customer. How should we be thinking about the timing of the ramp and contribution at scale from that?

John Mengucci: Yes. Connor, I think that’s – I think it was an 8-year award, $1.3 billion. That’s a network build-out job. So, that ramp-up curve is going to be a little bit different, right. When we do these large scale network jobs, there is a lot of front-end work, specification, making sure that we revisit what the customer wanted. Technology is changing either in the full network realm or at that last mile or where the actual device is connecting, which is what makes our TFC offering so unique. But those programs start up a little bit on the light side, Connor, and I would say over a period of the next year, we will have what that design looks like and then we are working with the customer as to how we would roll that out.

That’s a network that is used globally. And again, we just won that work. So, we will be putting that plan in place. If there are no protests on it, we will see some lighter revenue come in, in the third quarter and fourth quarter, but nothing that’s going to change our guidance. Thanks Connor.

Operator: Our next question comes from Jan-Frans Engelbrecht with Baird. Your line is open.

Jan-Frans Engelbrecht: Good morning John and Jeff. I am for Peter today.

John Mengucci: Good morning.

Jan-Frans Engelbrecht: Great. So, just wanted to quickly revisit the M&A comments that you made and with net leverage of 2.3 today. Could you provide some color on sort of how high you would go if you identified an attractive target?