CACI International Inc

Ladies and gentlemen, thank you for standing by. Welcome to the CACI International Fiscal 2022 Second Quarter Results. 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 then zero and someone will help you. At this time, I would like to turn the conference call over to Dan Lechberg, Senior Vice President of Investor Relations for CACI International. Please go ahead.

Thanks, Andrea, and good morning, everyone. I'm Dan Lechberg, Senior Vice President of Investor Relations for CACI. Thank you for joining us this morning. We are providing presentation slides, so let's move to slide number two, please. There will be statements in this call that do not address historical fact 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, I'll turn the call over to John Noguchi, 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 2022 results. With me this morning is Tom Mutren, our Chief Financial Officer. Slide four, please. Our second quarter results represent solid financial performance, though candidly, we're slightly below our expectations. Organic growth was about 1%, reflected some near-term dynamics we saw develop during the quarter, which I'll speak to shortly. Technology growth of 9% continues to be strong, and profitability was healthy with adjusted EBITDA margins of 10.6%. We generated a robust cash flow, and we won $2 billion of contract awards, representing a book-to-bill of 1.3 times for the quarter and 1.6 times on a trailing 12-month basis. Slide five, please. That said, we did see some headwinds develop as the second quarter progressed, and I categorized these dynamics in a few ways. First, in the last few months, we began to see an unprecedented increase in COVID cases. Many customers responded by stopping in-person meetings and reducing the number of people allowed inside their facilities. This has limited customer engagement and, in some cases, slowed the ramp up of new work. Second, customer access and bandwidth, which was already a challenge, has been exacerbated by the increase in COVID cases. To be clear, this has not materially impacted RFPs and contract awards demonstrated by another strong quarter of awards. Rather, it is a slower pace of the underlying contracting and tasking activity required to ramp deliver, and recognize our associated revenue. In particular, we're seeing this in some of our technology sales that rely on close customer interaction. Again, it's not a demand issue. This is all about customer capacity and access. The supply chain also remains a challenge. While we ordered ahead of need where we could, availability of key components is still tough. Again, this is not a demand issue. Factoring these dynamics into our outlook for the second half, we are modestly reducing our expectations for organic growth and EBITDA margin for fiscal year 2022, and Tom will provide more details shortly. It's important to note that we view these recent dynamics as short-term. They do not change our customers' critical needs or the challenges arising from the heightened global threat environment. The simple reality is we have a healthy and robust addressable market with plenty of opportunity to continue winning business, growing organically, expanding margins, deploying capital for additional value, and growing free cash flow per share to drive long-term shareholder value, all of which we are delivering on today. Slide six, please. In addition to strong overall contract awards, Q2 was another quarter with healthy classified awards and nearly $600 million. This demonstrates continued leadership in our sweet spots of cyber, the electromagnetic spectrum, and software-defined technologies. As an example, We want new work from an intelligence customer, leveraging the capabilities and customer relationships of LGS in the next century, providing another great example of how our strategic M&A positions CACI to win new, high-valued work and take market share. Other classified awards this quarter include a multi-hundred-million-dollar sole source renewal, several new business wins, and expansions of existing work. We also continue to see good demand signals for broad network and digital applications modernization. The pandemic has accelerated this need, including requirements for secure remote work capabilities and cloud migration. And with expanded access, additional cybersecurity requirements are a necessity. We are demonstrating to customers that modernization is not only achievable, but also yields significant benefits. In addition, we are seeing a new generation of government leaders that expect and understand the benefits of modern technology. Recent examples include our $514 million award to modernize network infrastructure for the Army, and new and expanded work for DHS, including CISA. Turn to slide seven, please. With our strong cash flows and overall financial strength, we continue to have flexibility and optionality to deploy capital to drive long-term value for our shareholders. As we have discussed, our focus is on driving growth to free cash flow per share. In addition to organic growth and margin expansion, we generate this through share purchases, like our $500 million ASR last year, and over the longer term, through our organic investments and strategic M&A. On the M&A front, we acquired two additional technology companies during the second quarter, both of which enhance CECI's long-term growth prospects and address technology demands in the near and long term. First, we acquired SA Photonics, a leader in the development and deployment of multi-domain photonics technologies for free space optical communications or laser comps. As we have previously discussed, photonics is already an area of internal investment that is producing compelling results, including awards from NASA, multiple prime contractors, and classified customers. We see significant long-term growth potential for advanced photonics technology driven by the increasing adoption of low Earth orbit or LEO satellite constellations, as well as the demand for faster and more secure communications capabilities. SA Photonics complements our existing photonics business in several ways. They expand our LEO capabilities, adding laser communications for airborne and maritime platforms. They add additional manufacturing capacity, and they expand our customer and contract footprint. The combination of SA Photonics and CACI's existing business creates the leading U.S.-based provider of photonics technology. And second, we announced last night the recent acquisition of ID Technologies, or IDT, IDT started as a value-added reseller and several years ago recognized a growing need for secure remote access by DoD and intelligence community customers. To fulfill this requirement, they invested internally and developed a software-enabled offering that allows out-of-the-box commercial devices to securely access classified networks. IDT's software-enabled end-user devices, coupled with CACI's network modernization capabilities and contracts, providing long-term growth and margin expansion opportunities. To the employees of SA Photonics and ID Technology, I welcome you again to CACI and look forward to the successes we'll achieve together. Before I turn it over to Tom, our long-term market trends remain positive. We continue to see bipartisan support for national security spending and investments. And CACI's capabilities are very well aligned with our government's focus on broad modernization national security challenges which depend on technology, speed, and flexibility to deal with both great power competition and counterterrorism. We will continue to execute our strategy that focuses on well-funded priorities with plenty of opportunities for CDCI to drive consistent long-term growth, margin expansion, free cash flow per share, and shareholder value. With that, I'll turn it over to Tom.