CACI International Inc

Thanks, Vandeep, and good morning, everyone. I'm George Price, Senior Vice President of Investor Relations for CACI International. Thank you for joining us this morning. We are providing presentation slides, so let's move to slide 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 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 violence. 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, here's John Mangucci, President and Chief Executive Officer of CACI International.

John. Thanks, George, and good morning, everyone. Thank you for joining us to discuss our first quarter fiscal year 25 results, as well as our updated fiscal 25 guidance. With me this morning is Jeff McLaughlin, our Chief Financial Officer. Let's go to slide four, please. Our first quarter results represent a great start to fiscal 25. We delivered revenue growth of 11%, EBITDA margin of 10.5%, and solid free cash flow. In addition, we won over $3.3 billion of awards, which represents a 1.6 times book to bill for the quarter and 1.8 times on a trailing 12 months basis. First quarter awards were a strong follow-up to our record Q4, and nearly 75% of our awards this quarter were for new work to CACI. During the quarter, we also executed purchase agreements for two strategic acquisitions, Azure Summit Technology and Applied Insight. Azure Summit remains on track to close during our second quarter, while Applied Insight closed earlier this month. Both our strong first quarter organic performance and the addition of Applied Insight enables us to raise our FY25 guidance. And Jeff will provide the financial details shortly. CACI continues to be well-positioned to drive long-term growth and free cash flow per share and shareholder value thanks to our exceptional business development function, our strong execution, our strategy of investing ahead of need, and our flexible and opportunistic capital deployment. Slide five, please. Our $3.3 billion of awards represents another strong quarter of business development performance. Let me briefly highlight a couple of the wins this quarter. We were awarded two separate contracts with the U.S. Navy to provide engineering expertise and technology that focused on accelerating the implementation of new capabilities to the warfighter. First, a five-year task order valued at up to $805 million with Naval X, the innovation arm of the Navy and U.S. Marine Corps to support the development and deployment of new technologies in areas such as artificial intelligence, command and control, and cyber across their platforms and sensors. Second, a five-year task loader, valued at up to $314 million with the Naval Undersea Warfare Center to support fleet readiness, accelerate implementation of new technology, and enhance cyber resiliency for undersea warfare systems. Slide six, please. Our strong track record of awards is driven by our strategy to address critical and enduring national security priorities, invest ahead of need in differentiated capabilities, bid less and win more, and focus on larger, longer duration programs. Equally important to the long-term success of our business is superior execution after those contracts are won. Strong execution builds a track record of past performance, which together with the other elements of our strategy, creates sustainable differentiation and enduring competitive advantage. Let me share a few examples of just how CACI is consistently executing at scale on our large programs. First, the Army's integrated personnel and pay system, which is referred to as IPS Army, is the largest and most complex PeopleSoft implementation in history. Since going live, the system has had over 1 million distinct users and supports more than 140,000 users per day. IPS Army, for the first time, provides online integrated HR capabilities across the entire Army, and is recognized as the model Agile program within the service. Next, our Enterprise IT as a Service program with the Air Force, known as ITAS, continues to scale. Our new IT service management system has been seamlessly deployed to replace their old system, and we are now supporting over 400,000 users, exceeding the contract milestone by nearly 60%, and tracking to over 600,000 users by the end of this calendar year. And most importantly, customer feedback has been extremely positive on the value, the speed, and the responsiveness that we are delivering. In addition, we've met all milestones on our recent network modernization awards, including DIA, ECS3, Army CIPR Mod, and Army GEN Mod. CCI is designing and deploying faster, more secure, software-defined networks that not only enhance efficiency and reduce cyber vulnerabilities, but are also critical enablers of customer priorities like JADC2 and AI. And finally, we recently began ramping up and executing on our NASA NCAPS contract. With this work underway, CCI is now executing the three largest agile software development programs in the U.S. government. We continue to see a healthy pipeline of additional opportunities as the government increasingly adopts agile methodologies. Slide seven, please. I'm also pleased with the increasing demand we're seeing for our software-defined RF technology. CACI has the right capabilities to meet our customers' critical needs in the current geopolitical environment today because we began to invest ahead of need over a decade ago. First, our spectral program for the Navy has successfully completed the design phase and is shifted to development and integration. This is a major milestone on a program critical to our country's national security strategy. The Navy's goal is to bring enhanced capabilities to the fleet faster, and CACI is making that possible. Next, on our TLS MANPAC program for the Army, we will begin deliveries against the previously announced $100 million IDIQ this quarter. As a reminder, the TLS MANPAC system allows disrounded soldiers to conduct signals detection, direction finding, and electronic attack while on the move. CACI's technology enables the Army to dominate the electromagnetic spectrum, an increasingly critical domain on today's battlefield, and one where the U.S. is still in the early stages of modernization and investment. Our technology can also address counter-UAS threats, a capability that was not previously available at the individual soldier level. We expect additional orders in FY25 as these critical capabilities are in high demand by our customers. Through our strategy of focusing on differentiated software-defined technology, we are delivering speed and agility to our customers to address their most critical missions and increasingly setting CCI apart from a wide range of competitors. Slide 8, please. We continue to execute our flexible and opportunistic capital deployment strategy, where we evaluate M&A, share repurchases, debt repayment, and other actions based on the dynamics we see at the time. Our M&A program focuses on filling gaps in our capabilities, our customer presence, and past performance. And on this front, we recently announced two fantastic acquisitions. First, in September, we announced a definitive agreement to purchase Azure Summit. Azure Summit is a provider of innovative, high-performance RF technology and engineering focused on the electromagnetic spectrum. Strategically, they add established and complementary technology and expand our customer presence. Financially, Azure Summit will be accretive to CACI EBITDA margin, adjusted EPS, and free cash flow per share in the first year. And they have strong cultural alignment with CACI and bring an exceptionally talented workforce. In addition, in earlier this month, we completed the acquisition of Applied Insight, a company that fills gaps by enhancing our capabilities and customer presence around cloud migration and AI, particularly in the intelligence community. Applied Insight utilizes repeatable tools and technology that enable faster, more efficient cloud migration, particularly within classified cloud environments. They also have several existing contracts with intelligence community customers to provide AI and machine learning technology development. And financially, they are similarly creative to CACI in the first year, like Azure Summit. Slide nine, please. We continue to monitor the government fiscal year 25 budget process closely. As with most years, government fiscal year 25 began under a continuing resolution which lasts through December 20th. We prepared it for a number of scenarios, most of which we believe are addressed within our guidance range. We typically do not see a material impact from CRs, though they can sometimes influence the quarter-to-quarter timing of shorter cycle revenue like our software-defined technology deliveries. We continue to see customer demand being driven by geopolitical dynamics, the elevated global threat environment, and the pacing capabilities of our adversaries. National security remains bipartisan, and budgets are healthy with an upward bias. CCI is well positioned in areas of enduring demand with deep, resilient funding streams. With that, I'll turn the call over to Jeff.

Thank you, John. Good morning, everyone. Please turn to slide 10. In the first quarter, we generated revenue of nearly $2.1 billion, representing 11.2% growth, of which 9.9% was organic. The balance was generated by the three acquisitions that we made in our fiscal 24. First quarter EBITDA margins of 10.5% represent a year-over-year increase of 110 basis points, which was driven primarily by business mix and timing. Adjusted diluted earnings per share of $5.93 were 36% higher than a year ago. Greater operating income, along with lower interest expense and a lower share count, more than offset a higher income tax provision. First quarter operating cash flow, excluding our accounts receivable purchase facility, was $61 million, reflecting strong profitability and cash collections, partially offset by some of the working capital factors we discussed last quarter. Day sales outstanding, or DSO, of 47 days was a slight uptick from Q4's record low as we continued to efficiently manage working capital. Free cash flow of $49 million for the quarter was in line with our expectations. Slide 11, please. As John discussed, subsequent to the conclusion of the first quarter, we closed on the applied insight acquisition, and we remain on track to close Azure Summit during the quarter as we previously indicated. Our pro forma leverage following the completion of both transactions will be 3.2 times. As we've demonstrated in the past, the healthy long-term cash flow characteristics of our business allow us to quickly delever to our target range. This means that, as always, we remain well-positioned to continue deploying capital in a flexible and opportunistic manner to drive long-term growth in free cash flow per share and shareholder value. Slide 12, please. We're pleased to be raising our Fiscal 25 guidance. This increase is due to the ongoing momentum of our organic business, as well as the recently completed acquisition of Applied Insight. We're raising our revenue guidance to be between $8.1 and $8.3 billion. $75 million of this increase is driven by the organic performance of the business, while the balance is from the inclusion of Applied Insight. This represents growth of 8.6% to 11.3% on an underlying basis. In addition, we now expect fiscal 25 EBITDA margin to be toward the upper end of the high tens range we previously communicated, driven by the strength of the organic business, increased visibility of some of our software-defined technology sales, and the inclusion of applied insight. As a result of our updated revenue and EBITDA margin outlook, we're also increasing our FY25 adjusted net income guidance accordingly. to be between $515 million and $535 million with an intended increase in adjusted EPS to be between $2289 and $2378 per share. And finally, we're increasing our free cash flow guidance to at least $435 million due to higher organic growth as well as the income contribution of applied insight that have increased interest expense. Please note that additional details of our updated guidance have been included in our presentation to assist you with your modeling. Additionally, as previously mentioned, Azure Summit will be included in our guidance during our normal cadence once it has closed. We continue to work through the customary closing process and remain confident it will occur during the second quarter, most likely sooner rather than later. Slide 13, please. Turning to forward indicators, our trailing 12 months book to bill ratio of 1.8 times reflects strong performance in the marketplace. Our record backlog of $32.4 billion increased over 21% from a year ago and represents just under four years of annual revenue. These metrics provide good long-term visibility into the strength of our business. For fiscal 25, we now expect approximately 89% of our revenue to come from existing programs, with approximately 8% coming from re-competes and just over 3% from new business. Progress on these metrics reflects our successful business development and operational performance and yields increased confidence in our expectations for the year. In terms of our pipeline, We have $4 billion of bids under evaluation, around 80% of which are for new business CACI. We expect to submit another $13 billion in bids over the next two quarters, with over 70% of that being for new business. In summary, we delivered outstanding first quarter results and deployed capital in a flexible and opportunistic manner to bring additive capabilities and customer presence to CACI. We continue to win and execute high-value, enduring work that supports long-term growth, increased free cash flow per share, and additional shareholder value. And with that, I'll turn the call back over to John.

Thank you, Jeff. Let's go to slide 14. Overall, this has been a great start to our fiscal year 25. We continue to successfully execute our strategy and are delivering strong performance as we ramp up large awards we've won over the past few years. along with strong on contract growth from our existing programs. We have added to our differentiated capabilities, customer access and employee talent with our acquisition of Applied Insight. As a result, we are pleased to be in the position to raise our fiscal 25 guidance. In addition, we look forward to closing the Azure Summit acquisition shortly and welcoming them to CACI as well. We are well positioned in the right markets with the right capabilities and remain confident in our ability to drive long-term growth, increase free cash flow per share, and generate additional shareholder value. I look forward to discussing our business, our strategy, and our longer-term financial outlook in more detail during our investor day at the New York Stock Exchange on November 8th. As is always the case, our success is driven by our employees' talent, their innovation, and their commitment. To everyone on the CACI team, I'm proud of what you do each day, and every day for our company and our nation. And to our shareholders, I continue to thank you for your support of CACI. With that, Mondi, let's open the call for questions.

Thank you. We will now begin the question and answer session. If you've dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. For today's session, we ask that you please limit yourself to one question and one follow-up. Again, press star 1 to join the queue. Our first question comes from the line of Scott Mekas with Melius Research. Please go ahead.

Good morning, and great numbers. Thanks, Scott. Good morning.

Thank you.

John, Jeff, I wanted to ask, we saw Mineric had some production issues with their optical communications terminals. They're supposed to be supplying a number of contractors for the Space Development Agency's Tranche 1 satellites. So I was just wondering, have any of their customers reached out to you, and could this be an opportunity to gain share either on the Tranche 1 satellites or is this more an opportunity for a tranche to and beyond?

Yeah, Scott, thanks. Look, in the area of photonics, you know, we're seeing great success with our technology and strong demand from both government and primes. I'm not going to comment on where the other vendor is at today. I will share, though, that we have had discussions with other primes around that topic, but I'm not going to go into too many details there. What I would say is, and as we have been saying over the last six quarters, you know, we're that optical communication terminal provider that's proven, we're deployed, operational, and tested in various orbits. As we share with many of the primes, our technology is the most mature. That's not our words. That's our customers' words and a number of our major OEM Prime's words. They do come to us because we're the most mature and the lowest risk. And we're U.S. designed and manufactured. So we're still on track to do six to eight times the number of deliveries that we did last year. I think I shared that during our guidance call. And we're still entertaining additional bids. So there's There's a long road ahead. It's very sizable and very profitable for us. And as always, Scott, we're going to keep an eye and keep an eye around where everybody else is at and have the discussions we need to make sure that the end customer is well served.

Okay. And then I wanted to ask about Azure Summit. It seems like you could open up a lot of new doors for Kaki. So are any other products exportable and could this open up a pathway for foreign military sales for Kaki?

Yeah, Scott, look, we've been talking about what our international plan is, and you should think about Azure Summit, Switchblade, and other products that they deliver to be similar to everything we've shared on our software-based RF tech products. Look, they will be very applicable clearly immediately to all the five vice countries that we serve today. They are also very involved in a number of platforms in the U.S. government inventory. So the path to international partnerships there, Scott, is really how do we take our software-defined tech, put it into their signal processing rack, and get that kit running well where we can provide much more capability to our U.S. customers. And then the step forward there, of course, is have a look at Five Eyes, NATO, and Eastern European countries that not only sell our RF tech, but also be selling Switchblade and other products. So it's what drove, it was one of the reasons that drove the acquisition. It is some of the gaps that Azure Summit fills, and they are coming with a large number of really mission-focused, top-notch engineering and technologists. market for expansion there and then as we slowly but very aggressively work into the international market. Thanks, Scott.

Perfect. Thanks for taking the questions.

Our next question comes from a line of Jan Engelbrecht with Baird. Please go ahead.

Good morning, John, Jeff, and George. Congrats on a set of strong results. I just want to revisit some of the comments you made on the business update call with is there a summit and just your position that you'll have on the spectral contract after that transaction closes and any potential sort of future content that you can expand there? I was just looking at the justification documents for the Navy, and it looks like essentially the spectral line item doubles from government fiscal year 25 to 29. So it looks attractive, but just wanted to get your thoughts there.

Yeah, Dan, thanks. So if you look at the work, the fact that that Azure Summit has today. They're on C increment F. So picture that as the next stage of the below deck signal suite that is on all US Navy surface ships. So they are doing the next modification to that kit. That is a prime program that they won from a major prime a couple of years back, and they're doing just an exquisite job beginning the production run-up and the delivery. And that production run goes for the next four to six years. Spectral then gets built on top of InkF, and that's where a lot of AI and machine learning comes in. We've been able to process many more signals. And Azure is a subcontractor to us on Spectral. So if I zoomed up from those micro comments at a macro level, the next 10 years for surface ships below deck, anything to do with signals, intel, counter UAS, and the like, is going to come from the combination of CACI and what is now known as Azure Summit. We're very pleased with the work that we've done on Spectral. We just were successful in a minimally viable product demonstration and test with the United States Navy. We'll be moving into further development and then getting into the implementation, the integration, and the production stage another 12 to 18 months from now.

Perfect. Thanks, John. That's really helpful. And then just a quick follow-up. Is there any meaningful just changes over the next couple of quarters or maybe the next year or two in terms of the contract mix? I know you previously called out Azure Summit pricing mix, which is probably more fixed price versus the rest of CACI. But any large programs and backlog or new acquisitions that should close that we should think about in terms of fixed prices, the cost plus mix?

Yeah, Dan, I mean, other than the fact that, you know, all of our software-based technology revenue comes with direct tech sales, then we'll see some level of firm fixed price work come up. We did move into a time and material phase on the ITAS program. So if you look behind the release, you'll see where time and material is a little bit higher, but that's

ramp we expect. Thanks, Dan. Thanks, guys. I'll jump back in the queue.

Our next question comes from the line of Mariana Perez Mora with Bank of America. Please go ahead.

Good morning, everyone. Great. So my question is around the election. And I think everyone is kind of used to a continued resolution that goes into the end of the calendar year. But If we were to think about more noise around the election, how are you prepared to a longer continuing resolution probably going into next year? And how can that affect, I don't know, the awarding time or how fast some of the awards that you have recently awarded or even the pipeline of opportunities that is really exposed to new businesses? And continual resolution caps kind of like the start of those new businesses. How should we think about the impact of a longer continual resolution?

Marianne, this is John. Thank you. So when I hear election, I sort of think after the election and where do budgets go and the fact that defense for as long as we've been a country has always been a bipartisan effort. So I sort of work our way through that noise and really focus on budget because that's what we're focused on. Look, I think it's safe to say that CRs in an election year last longer than other CRs, but I've been surprised there in the past. You know, how it impacts our business, as I tried to share in my remarks, is that it can impact some of our shorter cycle purchase order-based software product awards. Now, having said that, let's take a look at where our customers have gone in that regard. As we announced last quarter and during our guidance call, customers that were traditionally buying our software technology on purchase orders as funding became available to put in place IDIQs where they could do larger scale, larger bulk buys of that technology that we sell in a firm fixed price manner. A perfect example would be TLS ManPack. where we're building a common software framework that allows dismounted soldiers to do the same kinds of things, signal collection and the like, and all the way up to kinetic and non-kinetic attack. But the customer has put in place buying structures where it's not considered any new program, and those programs have been adequately funded. In the areas during my prepared remarks where you heard me talk about we will look for additional volume or additional awards, those are not underscore bold impacted by where this budget goes. At a macro level, you know, I like to talk about it in the manner of we're an $8 billion company with a $250 billion decimal market throughout the United States government. Not as deep on the federal civilian area, but very, very deep. in the intelligence community and the Department of Defense. So, you know, a large portion of the market that we can address is very, very rich. It's more than enough to support our future growth. I've said over and over, we're in deep and enduring funding, funding streams, and there's still a tremendous opportunity for growth. So, you know, I don't see the budget going forward, whether it's the president's budget, whether it's a mark from either of the, you know, um, potential new, uh, presidents coming into the position, national security priorities are going to, um, uh, Trump a lot of what we heard, no pun, no pun intended. Um, and, uh, I think we'll be, um, you know, fine, but it could move some quarter points around. Hopefully that gives you some additional color.

Thank you. And then a little bit on M&A, if you could discuss how is the competitive environment, if you have any deals or attractive deals in the pipeline. And especially, do you think there are any areas that you like to be exposed, like particular customers and products that you can actually use to penetrate with your software solutions? Or how should we think about that?

Yeah, John will want to add to the strategy and the capability gaps a little bit. But we continue to see a really strong pipeline. We have a lot of opportunities and robust set of opportunities that we're working on. We have mentioned for a year or so that we expected valuation multiples to contract a little bit, which is consistent with our recent experience. And I'm going to say somewhat mechanically, we're committed to remaining very patient and disciplined acquirers. We have a very rigorous evaluation criteria. We spend a lot of energy making sure we're applying our precious capital in the right places. And we continue to do so. But we see a good, rich, robust pipeline. I don't know, about particular capabilities.

Yeah, I mean, I think, you know, everything's going to be around SIGINT and EW. We talked about cyber and space, IT modernization. I sort of look back and look at Azure Summit, sort of covering down on the SIGINT, EW, and cyber area. I look at Applied Insight, covering down on the IT modernization area. We want to do just, you know, moving even more applications to the cloud at, you know, lightning speed at a much lower risk level. Look, anything that drives our expertise and our technology businesses, clearly we're very focused on the technology side. But really, no other changes there. And I'll foot stop what Jeff mentioned. Disciplined and patient are those words that we've been using over the last few years. And I know many of you have been asking, when is the next M&A coming? You know, it sort of comes when the time is right. It's not highly predictable. But rest assured, we're always out there looking. We've looked at over 600 targets in the last 18 months. And, you know, we sort of call those down. We're an experienced, acquisitive company. We've been doing it for, you know, three or four decades. And it works very, very well for us. So, Arianna, thanks for the questions.

Thank you.

Our next question comes from the line of Toby Summer with Tourist Securities. Please go ahead.

Hey, good morning. This is Sidon for Toby. Good morning. I'm hoping you can provide any details maybe on what your win rate has looked like recently, and maybe if you can call out anything specifically that might be driving it a little bit different than what you've seen historically.

Yeah, you know, when we talk about win rates, we sort of get into a place where we don't like to talk about, right? But, you know, kind of provide some clarity there. Look, I'm going to start off with just how incredibly focused we are on re-competing win rates. You know, we're not a fan of losing our current book of business. We're not a fan of losing current customers. So we are... We are very, very focused on re-compete rates, and those traditionally are all greater than 90%. So we actually leak a smaller percentage of next year's growth dollars by losing re-competes. In fact, what we do more often than not, we win re-competes at larger values at better rates if it's on a piece. On the technology side, we find that we not only win all the poker business we had, but we traditionally bring other people's poker business along because we are performing exquisitely out there. On the new business side, we always say that our overall win rate has to be north of 30% or 40% across everything we chase. to be successful, and by any measure in the last six to seven years, I'd say we've been quite successful at driving to build ratios at one or above over the last six to seven years. We're going to talk at Investor Day, frankly, around sort of the nuts and bolts of why this works and why we're different. We have a different strategy. We have this bid less and win more. We have focus on larger and longer duration programs. What we're looking to share with all of our shareholders is really here's what happens when we say we're in seven markets and here's strategically how we're focused, how that drives pipeline and how that drives individual captures. electronic warfare. We'll be talking about network modernization and sort of give you all that more detailed look at why we are successful there. And I know Jerry Parker is hungry to be giving that briefing to be able to show how we grow today, but also what's behind how we're going to grow into the future.

All right. Thank you.

Our next question comes from the line of Louie De Palma with William Blair. Please go ahead.

Good. John, Jeff, and George, good morning.

Good morning.

Was there any revenue from like zero margin materials that contributed to the gross margin being flat year over year? I think last year there was $100 million in materials revenue and the gross margin was 31% and it was also 31% this quarter.

Yeah, there was a very small amount, but it was sort of at a routine level that we execute as part of larger programs, not materially. It's more broadly probably attributable to mix and some of the better margin technology areas that we talked about when we talked about the EBITDA margin more broadly.

Okay, great. And on the counter UAS side of the business, and this is more of a strategy question, but there's been a ton of innovation related to the different geopolitical conflicts on the mitigation side of counter UAS with high-powered microwaves, lasers, and interceptors. And you have traditionally been more focused on

signal on the signals intelligence side do you feel a need to have a more end-to-end system yeah louis thanks uh you know so yeah we've been in the county oas business for a very long time uh and what's equally as important as uh you know people read what's out there is we handle group one through group five and the real threat procedures and frequencies change every 24 hours. They are larger in nature, they can carry more payload, they're much more dangerous, and they're those groups that have been involved in everything that you all have read and watched the news over. So at the end of the day, the most exquisite and reliable Many drones are going to other methods to be able to launch and then be guided. Many are using wireless. Some are going to begin to use satellite. Everybody needs a link at one point or not. Even dark drones require coordinates to be loaded to them. So I listen and I watch what's going on, and you would imagine we're very much engaged at very, very senior levels across the federal government around what we're seeing in all of the conflicts around the globe. So having said all that, we've been in this business for about two decades. We understand where the state of the art is going. We're not that company that's going to look at, you know, group one drones that you buy for $38. That used to be a focus many years back. That's not what's delivering the most destruction around the globe, which is why we're involved at levels that we don't speak about because we can't speak. about having exquisite county UAS capabilities that is everywhere from a large-scale system fix site to mobile to man packable, which you heard about on someone else's question earlier in the call. We're that exquisite provider. There's different business models out there. We've investigated a lot of those different business models. At the end of the day, our solutions come with a combatant commander stamp of approval and a long list of confirmed kills. and frankly customers out there today that are that are less and less needing to use a million dollar missile to defeat a thousand dollar drone so um i can't comment on any specific company we just talk about ourselves and how we how we go to market but i believe we have a long firm growth pay of path in our economy wise business thanks and and is there a

A lot more opportunities in the pipeline for Counter UAS. I think you suggested that there are more follow on orders expected for the MANPAC program, but for the Navy and you already have the spectral, but are there other opportunities within the Navy for other large platforms for you to be involved?

Yeah, I think when you look at the Azure Summit acquisition, the platforms that they're on, both airborne and seaworthy, that will expose us to even more platforms. You know, we like to talk about economy and other software technologies that we do. Unique signals that gets put into everybody systems at one time and nobody can match the speed and the power That we can deliver that which is why we talk about speed of the flight and speed of the fleet So yeah, there's plenty of work in our Life line out there. I would assume by I'm almost assured that by next quarter you'll hear about some additional awards But again to get weather cover that know an even more detail at the investor day coming up Thanks, Louie.

Great. Thanks, John. Thanks, Jeff and Jeff. Thanks.

Our next question comes from the line of Connor Walters with Jeffries. Please go ahead.

Hi, guys, and good morning. Thanks so much for the questions. Yeah, so I wanted to dig into your margins a little bit more. The strong performance in the first quarter, your commentary on the second quarter, it certainly de-risked the ramp through the remainder of the year, but it kind of suggests that the second half run rate could be down. 10, 20 basis points year over year. Just curious if that's really conservatism or any other puts and takes you want to call out there.

Yeah, thanks for the question. There's a condition here that we've seen the last couple years where our second half has been relatively flat quarter to quarter with higher margins than the first quarter, or the first half rather, the first and second quarter. And we see that same pattern continuing this year, although the disparity has become less pronounced. So we still have a stronger second half than first half. But the first half of the year, the second quarter that is, the balance of the first half, is probably somewhat flattish from where we are today and then a step up for the second half. Hopefully that gives you some insight.

No, that's great. I appreciate that caller. And maybe just to dig into cash, I think last quarter we talked about how there was kind of an implied headwind of working capital around 100 million for the year. Just curious if that's still the latest thought process and if you could provide any other color around how we bridge to this year versus your fiscal 24 performance.

Yeah, we continue to see working capital demand. I mean, that's all factored in, of course, to our guide. But the changing nature of the portfolio, and if you think about some of the business where we have growing volume, and you'll see this again following the Azure acquisition, you're growing in places that require some amount of working capital for the growth. Certainly still a capital-light business by any kind of customary industrial standard. But we do have inventory and work in process in a way that the business has historically not had. So that is a factor in our cash guidance.

Okay, great. Thanks so much for taking my question.

Yeah, you bet.

Our next question comes from the line of David Strauss with Barclays. Please go ahead.

Good morning, David. Hi, good morning. This is actually Josh Korn on for David. Just wanted to ask about the revenue guide. So we've had three straight quarters now of 10% or greater growth, more with the materials purchases. So what, if anything, is decelerating over the balance of the year to get into the guidance range? Thanks.

Yeah, David, thanks. Look, when we did our original 25 guidance, high-end scenario. Look, we contemplate a number of different scenarios, and we really try to focus on what we can control. I think we're confidently executing our strategy, so that's a checkbox for the right-hand goalpost. But, you know, on that budget question earlier, you know, if we look at anything of an extended CR that can delay some software-defined tech awards, uncertainty that sort of enters in. Those are sort of left side of the goalpost markers. If we see volume pick up, if we see some additional awards during this year, which clearly we did $3.3 billion in the first quarter, then that sort of trends us towards the upper guide. So, you know, I remind we're 97 days into the fiscal year, you know, so we're at the end of the first quarter. So those are just some macro diaries.

to that. I think you summarized it pretty well. I mean, we do think that we encompass most of the scenarios that we monitor and keep our eye on. And we're early in the year. We're encouraged by what we've seen so far here in the first quarter. There's a lot of the game left.

Great. Thanks. I'll stick to one.

Thank you. Thank you.

That concludes our Q&A session. I will now turn the conference back over to John Mangucci for closing remarks.

Thanks, Ron Napin, and thank you for your help on today's call. I would like to thank everyone who dialed in or listened to the webcast for their participation. We know that many of you will have potential follow-up questions. Jeff McLaughlin, George Price, and Jim Sullivan are available after today's call. Please stay healthy, and all my best to you and your families. This concludes our call. Thank you all, and have a great day.

This concludes today's conference call. You may now disconnect.