We are holding to our fiscal year ’24 EBITDA margins on the underlying business. We’re executing on our strategy. We’re investing out of need. We’ve got strong awards and strong execution. As I provided to Rob on his earlier question, if we do look back at our ’24 guidance call in August, we provided six reasons why we could end the year at the low end, six reasons why we could finish at the upper end of that. Since August, we’ve captured five of our six of our upper-end guidance range expectations. So, you all should expect that we’d be raising guidance. That is what we did. That additional $100 million is coming at our high 10% area, and we believe that we’re on track. What’s not covered? Tied into your question, and Rob, if the government completely shuts down for three months, probably not covered by our August guide.
But look, we’re going to stay focused on what we can control. We’ve got the book of business, we got ramping up happening much stronger than we thought, and love to be sitting here at the end of the year talking about a successful fiscal year ’24 for the company.
Bert Subin: Got it. Okay, that’s very helpful. Just as a follow-up, I mean, Jeff just mentioned some of the Photonics investments in the first half. Obviously, some of the investments you’ve made in EW and Sigint and cyber and software development are paying off. Can you talk about what inning you think we are in when you focus in on your tech investments reaching the payout phase? And then relative to that, how does that make you think about M&A over the next one to two years? Are there still capabilities that you need to bolster?
Jeffrey MacLauchlan: Yeah, Bert, thanks. Let me unpack that. Technology investments Sigint and EW, I really like where we are. We have invested the larger tranche when we expected to, and it’s already paying off. You’re seeing that our margins are now into the high 10 areas. That plus a growing revenue base is going to continue to provide nice strong growth for free cash flow per share. On the Photonics stuff, look, it’s modestly relative to the size of the overall company. As we’ve been discussing and as our prepared remarks shared, there’s strong demand from both government and our satellite primes. We’re proven, we’re deployed, we’re operational, and we’re tested for various orbits. As my prepared remarks stated, some of those bespoke solutions that are out there sending signals from Mars to Earth, that’s all high-tech algorithms, a lot of government, and CACI investment dollars to get the art of how to connect laser signals between two different points over millions of miles.
All of that technology and all those algorithms go into the lower swap, lower cost terminal market. If we look at demand, look, we are seeing higher order volume than we expected, which is why we accelerated some of the P&L investments that tied to Jeff’s comment on SDA tranche zero and one, we’re currently under contract to deliver terminals. SDA tranche two, we’ve got roles with two primes for both beta and alpha. We expect tracking awards in quarter three. So look, we believe it’s a burgeoning five to ten year market. I’d say we’re probably in the seventh to eighth inning of investment. We’re probably in the early second inning of growth. So I see this as a business being much more meaningful contributor, as we mentioned, exiting ’20 and ’24, but really playing into ’25 and beyond, which was our investment thesis when we bought SA Photonics just a couple of years ago.
Operator: Your next question comes from the line of Peter Arment with Baird. Your line is open.
Peter Arment: Yeah, thanks. Good morning, John, Jeff, George. Hey, John, maybe just to circle and follow on with Bert’s kind of questioning, as this technology mix continues to grow and it sounds like you’re in the, as you mentioned, the seventh inning, roughly on the investment side. As the volume starts to pick up on the technology, should we still view this to be a lift to margins longer term? And then just related to this is, Jeff, made a comment that the M&A environment is getting a little more potentially attractive. Is that — that there’s just more assets coming available or are prices resetting? Any color there would be helpful. Thanks.
John Mengucci: Yeah. Peter, thanks. Let’s see — let’s start with margins first, because when I hear margins, I sort of get my head back into free cash flow per share growth. And look, that has many, many levers, right? Look, first, we’re taking a long term approach to driving organic revenue growth in areas that actually matter. And I think based on earlier discussion, dot, dot, dot, and are also going to be well funded, right? We can’t guarantee everything we’re going after is always going to be well funded. But given the size of the overall defense budget and the size of CACI and the size of things that we need to have funded, that risk meter gets low at the top level and it gets lower and lower as you really look at those narrow, deep funding streams that we’re part of.
Margin expansion, for us, yes, it is still — it has our attention. Our focus is the long term. I think I mentioned I’m not going to short-arm investments that are going to be driving long-term future growth. We’re not going to do unnatural acts to achieve it. I’d also say that our EBITDA is just that it’s EBIT plus DNA. There’s no other additives, no other subtractions, no adjustments. So on the margin growth side, yes. That plus beginning to push this company from the low single-digit revenue growth to the mid-single-digit revenue growth business has been a large achievement over the last number of years, and we will continue to look for growth on both. As you talked about M&A and I’m going to let Jeff provide some comments here as well. But we’re going to continue looking those key technology areas.
We’re always going to be looking to Sigint and EW. It’s a massively large front. We are watching, as my prepared remarks stated, we are watching in some of these events around the globe just how quickly the adversary changes their behaviors. There used to be a time where we had a lot of ACAT I programs and your adversary would change their DTPs once every three years. These are changing once every three days. Let’s try this, see how that works, see how the enemy reacts, then let’s make changes in the Sigint and the EMS world that needs great software, defined tech that can be built quickly, a lot agile. So anything in that Sigint and EW area, IT modernization, I love the hand that we’ve Great Earth team event playing that’s sort of been doubled down on network modernization as well.
And frankly, core CACI technology and recent technology from other recent acquisitions is what has positioned us well. So let’s Jeff talk about how the M&A market is looking today.
Jeffrey MacLauchlan: Yeah, for the second part of your question, the short answer is both. Probably of more import to us is we’re seeing a little bit of modulation and tempering of valuation expectations. So we’re starting to see some of the consequences of interest rate environment and broader regulatory constraints whatnot sort of manifest themselves in a little bit more reasonable valuation premises. That also probably is accompanied by a little bit more in the pipeline in terms of volume, but it’s really more about valuation expectations that could afford us with some interesting opportunities.
Peter Arment: Thanks so much, appreciate it.
John Mengucci: Sure.
Operator: Your next question comes from the line of David Strauss of Barclays. Your line is open.
Josh Corn: Hi. Good morning. This is actually Josh Corn on for David. I just wanted to ask, we’ve seen really strong growth in DoD revenues over the last couple of quarters and a little bit of a decline in the Federal Civilian. So just wanted to ask how that may look going forward and what the bid pipeline looks like there. Thanks.
