CACI International Inc

Ladies and gentlemen, thank you for standing by. Welcome to the CACI International Fiscal 2022 third 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 the instructions will be given at that time. If you should need any assistance during the call, please press star zero and someone will assist you. At this time, I would like to turn the conference call over to Dan Leckberg, Senior Vice President of Investor Relations for CACI International. Please go ahead, sir.

Well, thanks, Seth, and good morning, everyone. I'm Dan Lechberg, Senior Vice President of Investor Relations for CACI, and we thank you for joining us this morning. We are providing presentation slides, so let's move to slide number two. 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 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 also point out our presentation this morning 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. With that out of the way, let's turn to slide number three, please. To open our discussion this morning, I'll turn the call over to John Meguchi, President and Chief Executive Officer of CACI. John, over to you.

Thanks, Dan, and good morning, everyone. Thank you for joining us to discuss our third quarter 2022 results. With me this morning is Tom Uttren, our Chief Financial Officer. Slide four, please. Let's start off with our third quarter financial highlights. We grew revenue by 2 percent. Profitability was healthy with adjusted EBITDA margin of 10.2 percent, and we generated robust free cash flow of nearly $300 million. We also continued to win new and re-compete work with $1.2 billion of contract awards, 568 million of those classified, representing a book-to-bill of 1.5 times on a trailing 12-month basis. Our results reflect the short-term headwinds we discussed last quarter, albeit a bit more than expected, with funding delays being the key driver. Slide five, please. While market trends remain positive in the medium and long term, the short-term headwinds I discussed last quarter still exist, including slower issuance of task orders, supply chain challenges, delayed funding, and restricted customer and facility access due to COVID. What changed during our third quarter is the process of getting funding on contracts has been much slower than in past years. In fact, our third quarter funding orders are down over 300 million, or 20%, compared to the same quarter last year. As a result, we are reducing our outlook for fiscal year 2022, which Tom will discuss in more detail shortly. Slide six, please. Looking past these short-term funding issues, we have a large and growing addressable market, and the budget environment is even more constructive today than in the recent past. For example, we see increased spending across defense, where we have a robust footprint, the intelligence community, where approximately 30 percent of our revenue is generated, and important non-DoD customers like DHS, where we provide cyber and applications development. From a capability perspective, we see increased spending in IT modernization across the federal government, the space domain, including photonics and space situational awareness, and continued strong spending across the electromagnetic spectrum to include SIGINT, EW, and cyber. Slide seven, please. With those spending priorities as a backdrop, I'll cover recent investments we have made in IT modernization and space. First, on the IT modernization side, we continue to invest in commercial solutions for classified or CSFC. You've heard us talk before about our subscription-based software-as-a-service Steelbox application for secure communications. We continue to invest in new capabilities and are seeing successes with recent deployments within the intelligence community. And our recent acquisition of ID Technologies expands our portfolio of software-based CSFC for classified networks. Combining these CSFC offerings with our existing network modernization capabilities provides a compelling end-to-end solution to capture increased spending in IT modernization. Second, we continue to invest in the increasingly important space domain. SA Photonics, in partnership with DARPA and SDA, recently demonstrated the connection of an optical link and data transfer between satellites in orbit. This success is an important step in establishing space-based communications to transmit greater amounts of data in a more secure modality. We also recently completed an important milestone for two mission payloads that will launch into low Earth orbit early next year. These upgradable software-defined payloads will demonstrate APNT, an alternative to GPS, as well as tactical ISR from space. These space payloads are great examples of taking exquisite terrestrial capabilities and investing internally to deploy them in space. Slide 8, please. The bottom line is our business is performing well on the things under our control. We are delivering with quality, winning new business, driving profitability, generating robust cash flow, investing ahead of need in relevant and differentiated technology, hiring great talent, and being recognized in several surveys by our employees is a great place to work. Before I turn things over to Tom, I want to make it clear that our business is performing well and long-term prospects are positive. While we are still going through our FY23 planning process, our preliminary assessment indicates healthy organic growth, profitability, and cash flow. We have the capabilities, the contracts, a robust backlog, and a track record of winning business to continually delivering shareholder value next year and beyond.