CACI International Inc (CACI) Earnings Call Transcript & Summary

Good afternoon, everyone. This is Sheila Kahyaoglu with the Jefferies aerospace and defense equity research team. Welcome to our IT Services Virtual Summit. We're lucky enough to have the CACI team with us: Tom Mutryn, who is CFO and Treasurer; Dan Leckburg is also on, CVP -- SVP, Investor Relations; and George Price, VP of Investor Relations. Thank you all for being here.

Tom, we're going to kick it off with you and some questions we've been receiving from investors with regards to the defense budgets. How do you see them shaping up as stimulus balloons deficits? And how do we think about CACI's exposure to the defense budgets going forward?

Yes. Thank you, Sheila. Good afternoon, everyone, and welcome. Thank you for joining us today. Our 2-year budget framework was put in place for government fiscal year '20 and government fiscal year '21. So we're in the finalized -- the final stages of government fiscal year '20 and what still needs to be passed for FY '21. So a framework has been put in place and agreed to. Now that said, since that framework was in place, several things have occurred, COVID-19, obviously, significant increase in spending associated with the CARES and other acts. And we're in the midst of a political campaign for a president in an election cycle. So we'll see how well that transpires as we move into the fiscal year. The fundamental underpinning, in our opinion, is that the world remains a dangerous. There's significant but necessary inadvisable investments in kind of defense and intelligence to keep our nation safe both related to the global war on terror, which hasn't gone away, as well as some other kind of nation-state actors. And we expect to see healthy growth in DoD and intelligence spending. And some of the areas where we have expertise are well suited to take advantage of those kind of budget areas.

That's helpful. And then moving forward, organic growth has really accelerated throughout the past year, almost reaching double digits in your fiscal Q3, which just ended. And with trailing 12-month book-to-bill of 2.1x looks just continue that growth path you're currently on. I guess what type of visibility does the backlog provide for growth as we start to move into the next fiscal year?

Yes. Thank you. So the backlog does provide a good amount of visibility. As we go into a fiscal year, we categorize our revenue for the coming fiscal year in 3 buckets. One is existing work. This is work that is under contract, multiple-year contracts. And we're able to forecast the revenue and profitability of those programs with a high degree of fidelity. So in a typical year, that's around 80% of our kind of business going forward. Another portion of our work is recompete, work that we're currently performing, which is coming up for recompetes. And we typically have a very high recompete win rate. The economic characteristics of the recompete sometimes change, kind of margin profiles may change, size of the recompete may change. We factor that into our guidance. Then we have another portion of our guidance. The third leg is work which we need to win and begin executing in the upcoming fiscal year. And typically, that's anywhere between 5% or kind of 8% of the revenue for the coming year. So your question was the current backlog, which is at very healthy levels, provides a strong foundation going into FY '21. We're in the process of finalizing our FY '21 plan on understanding kind of the puts and takes sensitivities, factoring those in and, again, coming close to finalizing those particular numbers. So more will come when we kind of have initial guide for fiscal '21. So a good position to be in.

We'll save that for June, I guess, a few weeks from now. I forgot to mention this earlier, but if anybody has a question, type it into the webcast or e-mail me. This is a question from the audience that I'm going to weave in. Your book-to-bill has been best in class relative to your peers. Just continuing on this visibility question, how many quarters of visibility does the backlog give you? Just more on organic growth sustainability, I guess.

Yes. So it's kind of very productive and helpful. But at any point in time, we call them sand charts where if I look at over the next several years, the existing business will only erode over time because certain programs are finished, kind of we end existing programs. And we need to replace that with new wins and recompete wins. And so it does give us a good amount of visibility as a base, but we're always in a situation where a good portion of our work reaches end of useful life and we need to replace that piece of kind of work. In terms of our kind of organic growth characteristics, the fact that we are kind of winning large programs, multiyear programs, is very productive to organic growth. Last year, in 2019, our overall win rate was greater than 70%. This year, so far, our new business win rate is greater than 50%. So we're demonstrating that we're able to rack for large opportunities, win those large opportunities. And that process needs to be kind of repeated for us to maintain kind of growth going forward. And we believe that the defense budgets and the intelligence budget support near that level of growth given the [ overprice ].

That's helpful. And then just on the 70% win rate, when we think about the pipeline, are there particular areas of focus for CACI that you're focused on? You mentioned $17.4 billion in new submits or in submissions in the last quarter. What are the sort of areas of biggest concentration?

Yes. So a couple of the areas are very consistent with the framework that we laid out on our Investor Day. We're focused on both enterprise and mission capabilities. The enterprise -- in a supporting government, enterprises, from a business system perspective or IT perspective, are kind of main stage of CACI. And we've won recently large awards in those areas. And there are some nice opportunities in those. Our programs are what you pay in personnel system for both the Army, for the Marine Corps, a new Marine Corps HR system, a work for Homeland Security, continuous monitoring of their IT systems on kind of BEAGLE, which is the agile software development. So those are a large portion of our pipeline activities. And the other piece is mission work, where we're supporting [ technical ] missions, either through expertise or through technology. Think highly specialized folks who help the government with intelligence analysis or think capabilities, technology capabilities, looking at electronic warfare, cyber defense, offensive cyber, counter-UAS and other cyber-kind-of-related capabilities.

I'm just going to sneak one in because you mentioned the Analyst Day and your 2 profiles of growth, Enterprise IT and Mission Solutions. Can you remind us of the growth prospects for both? And do large contracts like BEAGLE and COVID change the enterprise revenue trajectory at all?

Yes. So when we looked at our addressable market, we've broken it into 2 categories: enterprise and mission. And for us, the enterprise market was larger, growing at approximately 2% a year. And the mission was a smaller market, I think, maybe $90 million addressable market growing at approximately 5% a year. Dan, did I get those numbers?

No. You're spot on per usual.

Okay. Very good. Thank you. Yes. COVID is interesting. And we have some ability to take advantage of some of the emerging trends that we're seeing associated with COVID. The CARES Act, kind of a very large amount of spend, dissecting what part of that spend is addressable to us. What we believe is that the government as well as corporate America are rethinking how they work. Do people need to be in office buildings or can they work remotely? And if they work remotely, what happens in terms of kind of technology, connectivity, kind of resiliency of networks and capabilities? And we believe that's going to be more demand for those types of services and capabilities. And we certainly have capabilities to support kind of those undertakings. So I think that's when you're working, we'll be able to provide valuable help for customers as they kind of rethink how they work. The other that we're seeing is some of the work that traditionally needed to take place in government locations or secured government locations, rethinking of what really is need to be done in a classified environment or what parts of that work can be done outside of the classified environment. And that creates kind of more opportunities for us as well.

That's helpful. And then two shorter-term questions on COVID related. What's going on with hiring? What percentage of your business is more hiring focused versus software? And then can you just provide an update on attrition, if possible?

Yes. So what we've been saying -- I'll start with attrition first. Probably not surprising, we're seeing lower attrition today than we have in quite some time. In CACI, kind of very resilient and stable employer, we've been very focused on keeping our employees safe, creating a very positive environment during COVID-19, positive messaging, flexibility to our workforce like in no layoffs, no reduction in benefits and kind of no any adverse consequences to employees. And I think our employees most appreciate that and at the same time, people are people. And I think in today's environment, people are more risk averse. And so you're seeing less attrition. So that's positive for CACI. On the other side of the coin, how are we doing with regards hiring and recruiting, we still have a number of positions open. Some of those are for growth, some of those are to replace and some of the attrition that we [indiscernible]. We've been doing virtual aspects of our hiring for quite some time. And now we're doing more of that in terms of searching for candidates, interviewing, creating that connectivity. And we are hiring people as we speak. BEAGLE, a large program in our enterprise area, is in the midst of ramping up, bringing on hundreds of people in this quarter to support that in a particular program. So things are kind of generally intact in terms of hiring and bringing people on into the company.

And then just a shorter-term question on COVID once again. You guys were one of the few that quantified the impact of the CARES Act. I think you mentioned for the full year at $65 million of revenue and $15 million of net income. Can you walk through the COVID-19, I guess, mechanism with the CARES Act and any recapture of this work throughout the year?

Yes. Okay. Thank you. So the impact of COVID-19 has a couple of different aspects to us. Kind of one of the -- one of the kind of major impacts is work that historically has been done at either government or government-approved facilities, but cannot be done because of inability for employees to access those facilities. A very good example is some of the intelligence customers have went to a shift work. Half the workforce will come in 1 week. Next week, the other half of the workforce will come in, trying to kind of reduce the probability [indiscernible] workforce is negatively impacted due to a COVID outbreak in a facility. When those employees are in a ready state or unable to come to work, the CARES Act allows government customers to compensate contractors like CACI at the -- at typical building rates for those employees. So we're being compensated to cover the expense associated with those employees. The guidance that we're getting from various agencies is that we need to exclude fee or profit on those hours. And so one of the impacts for us is not capturing the profit on those hours which will be reimbursed under the CARES Act. And at the same time, if there's subcontractors providing hours into the CARES Act, we would not be able to recapture any profit on those particular hours. And so that's what it's kind of major impacts. But we're seeing some product slippages. And most of those were characterizing as a shift from this time period to a future time period because of complications and completing the order of kind of various products and the like. And there's some work that simply is going away because of CARES Act up. For example, we had some training classes just, for example, and the government cancels in-person training classes without substituting virtual training classes. And so those are some cases of work that went away.

That's helpful. And then just transitioning longer term on the COVID impact. We started talking about this with the Enterprise Solutions perspective and work from home. I guess how are you seeing the customer transition? How do we think about these opportunities? Is it 5 years out? Is it 2 years out? Has the government closed together RFPs?

Yes. I would think it's kind of shorter term, kind of 1 to 2 years out versus 5 years out. I heard a smart person talking about COVID and the implications to society. And what the individual said is, oftentimes, these types of crises are not creating new trends, but they're accelerating trends. And so to the extent that there was a trend to kind of work remotely, to connect virtually via Zoom meetings, this is an accelerant to that particular process. And the government will adapt as well to these particular processes. From my perspective, a lot of the activities to the government are continuing quite nicely. The acquisition workforce is out there. We're submitting RFPs. RFPs are being adjudicated. In terms of government payment offices, the government payment offices are either adopting remote work processes or shift work, but the money continues to be kind of flowing, invoices are approved and funds dispersed. And so we kind of applaud the government's ability to continue to function quite effectively during this time period.

That's helpful. And then just in terms of the classified market, what types of trends are you seeing within that market? Has more work been moved into classified realm? And then how do we think about CACI share within that business?

Yes. I don't think any more work has moved into that realm. We've always had a relatively high amount of classified work, be it enterprise classified kind of networks can only be done in government agencies or classified kind of locations or intelligence support work, which is highly classified. But as I mentioned earlier, if anything, there is a question of some fundamental tenets, well, why does this work specifically need to be done in a government location, what makes it classified? Or if there's a multiple step in a process, perhaps some pieces of that process don't need to be classified. One example would be imagine a visualization tool where we take a variety of classified intelligence information, bring it together, put it in a very usable format so a government customer can quickly digest multiple parts of this classified information simultaneously. Well, at some point in time, we create some user interface screens, let's put a layout, should it be a blue background or a green background? And should -- is the graph be in the upper left or the bottom left of the screen? And some of those foundational aspects are not necessarily classified. There's no need for that to be classified while the content could be. So we can kind of dissect some of those processes and kind of rethink that.

That makes sense. I wanted to talk about the Agile Solutions factory. It was one of the driving forces behind your BEAGLE win, which was a takeaway. Can you talk about that facility and how you're leveraging it in order to win more contracts in providing the customer with a differentiated software solution?

Yes. Yes. And this one here again -- and so, Dan, let me pass this one over to you. I know you've been up to the Agile Solutions Factory kind of multiple times [indiscernible].

No. No. Sure. And you're right, Sheila. It was pretty helpful in that award. And it's just a cool example of bringing a process to software development and not your traditional process, but an iterative, really, on what factory-driven process, where it's sort of -- the software kind of moves down the factory line in this facility. And it gets -- it's produced just some great results, just the metrics that come out of there as far as quality and lack of bugs with each software deployment are pretty kind of staggering. So it was -- we had an existing program there with the Army where we had some really good success, and we're able to bring in and we continue to bring in additional customers to show them sort of the art of impossible when it comes to, yes, agile software development. And those proof points were just a pretty compelling when it came to the BEAGLE bid evaluation. And yes, we're kind of ramping up on that as we speak. The end of May was a significant milestone in the ramp of that program. August is another one, but very large program win, just an incredible past performance referenced in that Agile Solution Factory and its capability set. And it's pretty impressive just to see the results these guys drive out of that facility.

I'm going to ask you one more on this one, Dan, sorry, to press on it, but I think it was a Unisys federal contract before and you guys took it away from them. What do you think is the differentiating factor for us that are on the outside and not on the inside? What did the Army like about the development structure, I guess? And then you mentioned the ramp, May milestone and then August, another ramp. How do we think about the dollar values associated with this?

Yes. So I'm going to speculate in what we believe the Army saw in value in that bid there or CBP in the -- in our -- in their evaluation of us. But again, it was a different way of doing software development and a way in which we were able to illustrate some real tangible results with hard metrics that say, we can deploy capabilities faster than you've done before. And we can do it with very few defects and bugs. And it's a highly visible process. We really see the efforts that go into each deployment and each iteration and kind of move along this factory line, a lot of visibility, a lot of understanding into where we are in the process and an insight into the capability rollout. So just a very different way of doing software development that I think sort of disrupted what is a traditional very heavy development -- deployment a year from now and then we'll fix bugs, and it's not a very collaborative, iterative process like the agile software development is. And so again, in our view, that carried a lot of weight and value with CBP and drove that selection there. So yes, as far as value, it is ramping up through May into August. It's not your typical divide-by-the-period performance, and that's the kind of run rate. So it is in a phase of ramping. And so a little bit of contribution in our fiscal '20, be a heavier contribution to '21, but not -- we make it a practice to not share program level financials. So we'll...

I was so excited when I got 1 contract at CACI I could talk about that was significant. So...

That a good one.

Actually, I have another one that's pretty significant. I think you recently won a $465 million task order. It's a 5-year contract with the Army, C5ISR under Alliant II. Can you talk about what the scope of this contract is? And is this new or existing work?

Yes. I'll start off and, Dan, you can add to it. It's approximately an 80% new, 20% existing. So generally, kind of new work and it's to support the Army's future command. The Army's future command is a new command kind of recently set up. If you refer to the Army to ensure that they have a variety of resiliencies in their tactical communication, kind of redundancy, robustness, somewhat of a fusion of robust cyber networks, signals intelligence, kind of electronic warfare, communications and the like. So an exciting work taking advantage of our expertise in a variety of 2 and 3 and 4 and 5g capabilities and is very much focused on the Army mission to allow kind of the war fighters to have that kind of situational awareness and kind of robustness of communications.

Tom, you just mentioned 5G networks, increased security, helping the Army with modernization. So you went right into my next question. How do you think about the broader trends in terms of modernization of 5G network and just security with the current business and some of the new opportunities that are in the pipeline?

Yes. So the kind of the 5G networks and I'm not certainly an expert on some of this technology, but it really -- at a shorter distance allows for kind of more robustness of capabilities, the Internet of everything. From a household perspective, your refrigerator can talk to your microwave oven to your light bulbs and your bathroom scale or whatever you have. So it is a new kind of protocol for capabilities, and that creates both new opportunities and new vulnerabilities. As I'm assuming most people on the call know, we purchased LGS Solutions over a year ago, the former kind of Lucent Technologies, kind of Bell Lab capabilities. And that organization has the world-class expertise in various networking capabilities. And I know they're working on a variety of support in 2 government agencies to provide the resiliency of our networks and looking for other vulnerabilities and other types of networks. Some of this work is directly on the contract. Some of the work is internally funded research and development, so we can be ahead of the curve. What LGS had been doing historically quite well is anticipating problems, solving those problems, such that when the government customer came to them, but with an RFP, how do we solve this particular problem. Let's give you a development, a task order. They already have the solution in place in at a high degree of sole source awards. I think over 50% of the awards were sole source awards because they had developed those technologies in advance of specific demand signals from the government. So we're doing very similar things with -- in understanding 5G capabilities.

Tom, I'm not going to send you my questions ahead of time next time because you're always going to the next one. In terms of LGS and Mastodon, I guess they're organic. And I think this was the first time you're going to have all organic quarterly revenue. What types of growth rates are you seeing in the business given the revenue synergies you just mentioned?

If you're talking about LGS and kind of Mastodon, we bought the companies, number one, because of their kind of mission technology capabilities where they had ability to solve tough problems on dealing with signals intelligence, kind of networking resiliency, electronic warfare and the like. They were higher growing because there is greater demand for those types of capabilities. And when we bought the companies, we provided guidance that, combined, their EBITDA margins were, I believe, 14% and they were growing in the kind of double-digit ranges. We've seen that play out since we purchased them, and we expect those trends to continue.

Is there any way to quantify their revenue contribution in the past year? Or are they part of the CACI overall P&L right now?

They're part of CACI overall P&L. Yes. So we're not disclosing specifically how those 2 acquisitions are performing. Mastodon is integrated into our CACI product company. LGS, there were portions of LGS that had some enterprise capabilities that were kind of moved to other parts of CACI. So we're kind of integrating them more fully into CACI.

That's helpful. And then moving on to profitability. This is -- it's a shorter-term question, but you're always so good at answering them, Tom. Your guidance implies that Q4 is a steep ramp, about 10.6% margins versus 10% overall for the year. What's driving that improvement?

Yes. So a few things. We're -- we anticipated some higher-organic growth. And so that is helpful. Indirect expense is growing at modest levels. So higher revenue, lower indirect expense is kind of productive in terms of kind of margin characteristics. We're also seeing some higher-margin product sales that we expect it to come through in the quarter. And so that would be helpful as well. So I think those are probably the 2 major things I would point to some kind of indirect spending as well as some higher-margin product sales.

And then I guess as we think about your longer-term target, it's been 10 to 30 basis points of margin expansion per year. How do we think about that from here, given your organic growth has also accelerated, product sales could grow faster? I guess, any puts and takes with the overall margin growth?

Yes. So we're kind of sticking with our story. We believe that our stated goal is to grow faster than the underlying addressable market and ever-increasing margins. And it starts with kind of what we bid. You can really kind of win pieces of work that have some kind of differentiation such that we can get higher margins associated with those -- the underlying business. And so that's kind of foundational to what we do. The mission technology has uniqueness to some of the capabilities that we have, and we're able to realize higher margins, higher gross margins on those particular types of programs. And then kind of just running the business effectively. CACI is a combination of a large number of programs. And it starts with each program trying to kind of reduce its cost, deliver into the customer and drive profitability on those programs, kind of bringing the workforce, filling open positions quickly, making sure we have the right kind of billable rates that we're charging the government customer, controlling indirect cost effectively and then you mentioned product sales, which are higher-than-average margins, these are all constructive to margins. Dan, anything you want to add? Did I miss anything there?

No. I don't think so. Yes. I guess I could add. It is -- fourth quarter has always been expected to be a high-margin quarter for all the reasons Tom laid out. At the beginning of the year, we guided to the 5.5% organic revenue growth with sequentially increasing margins, and the year has played out very much in line with that. So again, ex COVID, even with COVID, Q4 is a strong quarter from a margin perspective, but that has been, for all the reasons Tom noted, the expectation all year.

I think it's important to also note you guys report GAAP margins versus adjusted. So is there any sort of ceiling we should think about? I know you're sticking to the netting of 10 to 30 basis points. But any ceiling on profitability levels?

That's such a hard question. So I mean I -- you're right. We have -- we can think maybe 1 or 2 or 3 years. And during that time period, with that 10 to 30 basis points feels about right. Is there a ceiling? Trees don't grow to the sky, I'd like to say at some point in time. But I do believe that we have an opportunity to bridge kind of marketplace and our combination of enterprise and kind of mission capabilities being at some kind of more important swim lanes give us kind of reasons to be -- feel positive about increasing margins going forward.

Okay. And then moving on to free cash flow and cap deployment. I think I know the answer to this next one, but I got to check the box. R&D tax change has been a headwind for some. How do we think about it as it relates to CACI in 2022 and beyond?

Yes. Yes. So if we're talking about the kind of recent R&D tax credits, I mean in the last year or so, there was some clarification of what qualifies for R&D tax credit, say, a more expensive definition and so what we've been doing is kind of looking at some of our prior tax filings and our current tax filings, making sure that we are fully taking advantage of the Tax law to ensure that what can be classified for R&D tax credits is, in fact, classified as R&D tax credits. In this past quarter, for example, we realized approximately $5 million of kind of tax benefit by -- for some prior year periods where we had amended returns and we're able to take advantage of those R&D tax credits. And in fact, those audit periods were complete successfully such that we were able to shift those from a reserve to an actual status. As CACI gets more work, which is -- falls under the rules of R&D tax credits, we expect to continue to be able to take advantage of those credits kind of going forward.

And then thank you for that very concise answer. I guess how do we expect the rate -- tax rate to change? Is there any thoughts on that or too early?

Yes. It's too early. As I mentioned, we're in the process of finalizing our FY '21. And at that point in time, we'll be kind of more specific about what we think the tax rate will be for the year.

But it wouldn't be until 2 years from now anyway, right? It would impact fiscal 2022 at earliest.

So I think we're talking -- there's another tax issue involved, and that is expensing R&D tax in a year or deferring those over time. And the current one has been changed whereby instead of taking the full value of the R&D tax credit at time 0, you would spread that over 5 years. That will impact CACI earliest in fiscal year '23. What it's going to do though is it's going to create a difference between our tax and accounting books. So it should not impact our GAAP earnings per share, but it's going to create a deferred tax benefit, and it will be impactful of our cash flow, but not our GAAP tax rates.

Okay. That's helpful. And then on free cash flow, conversion is in the 115% of net income range for fiscal '20, how should we think about trends longer term? I know you guys are a very lean company with low CapEx. How do we think about some of those moving pieces?

Yes. So those ranges just seem about right. We went back and looked at our conversion by quarter for the past several years. And there is some fluctuations and some lumpiness depending upon certain things happening. But generally, it's fairly stable. The way I look at cash flow is we'll start with net income and kind of we guide today. And when it comes to that, say, every year kind of good number. A number of noncash expenses from CACI, depreciation, amortization associated with acquisitions, stock compensation expense, deferred financing fees, some deferred taxes, those are add backs of the 2 kind of net income then changes in working capital. Typically, growing companies are going to be using more working capital. We've been growing. So typically, we would use a bit more working capital. That being said, we've been doing a very good job of collecting cash. Early DSO was coming down. So maybe a little bit of a use of cash for working capital. And then CapEx, CapEx this year, $70 million, $75 million, higher than the prior year largely because there's some additional expense associated with kind of new work that we're winning that needs some capital. And those kind of noncash items, depreciation, amortizations, CapEx are somewhat stable. And so as a result of that free cash flow conversion rate that you mentioned, Sheila, it seems about right at those kind of MDA levels.

You must have a good CFO and Treasurer on the working capital, what can I say?

[indiscernible] It's a huge team effort to ensure that we're able to kind of build quickly and collect quickly. It's -- yes. Thank you.

And then last question. It's two part. I mean you guys have done -- the free cash flow allows you to do deals. Now where is the market right now kind of getting out of COVID or restarting to? And what are areas you're focused on?

Yes. So our strategy for kind of many, many years is to kind of drive shareholder value through acquisitions. And that strategy is very robust and enduring, and we will continue to look for acquisitions, which add kind of long-term value to our shareholders. There's opportunities out there. Although we're taking a short hiatus in terms of completing transactions, behind the scenes, there's a lot of work going on, kind of looking for companies, having some outbound calls, kind of thinking about where we want to go. And what we are doing is using acquisitions to fill the gaps. And some of the larger gaps are in our kind of mission technology space where technology continues to evolve rapidly. We've been spending some time talking about 5G technologies or electronic warfare or other capabilities. And if there are companies out there that have capabilities, which we do not have that would augment ours, those are significant interest for us. And so our sweet spot, I would say, is generally within that electronic warfare, RF, signals intelligence, cyber technology space.

So it will be a mix of I guess software and both product based on the areas of business.

Yes. A lot of the products that we have are very software oriented. So it becomes very blurry what's hardware, what's software are. So although there's hardware components, it's really the software, which is the enabler to the hardware.

Then last one from the audience, I guess. How do you think about buyer expectations coming out of COVID. And with the elections in November, how does that change multiples? Are sellers willing to sell? And how do you think about your leverage in terms of maximum leverage?

Yes. Yes. So the maximum leverage, we've had this question in the past, we have said that given the right set of circumstances, we'd be comfortable leveraging up to -- in 4.5x. And so again, given the right set of circumstances, I think that feels about right to us. Right now there's a very low interest rate environment at the LIBOR. And so the LIBOR this morning was in 16, 17 basis points, very inexpensive kind of borrowing for us. Multiples are interesting. During the last 60 days, we've seen our multiples swing wildly as our stock price had swung wildly. At the end of the day, the value of a company, often I said, is future cash flow is just powerful. And when we're looking for companies -- if we see companies which have strong growing free cash flow, we kind of discounted that. Right now we're relatively low discount rate. They're going to be worth something, and we're willing to pay kind of the market clearing price. So I would think multiples of that are going to be transacted through government M&A are going to be comparable to the levels we've seen the several years. So I don't see any material contraction of those multiples.

That's helpful. And I think that's all we have. Thank you so much for your time, Tom and Dan, for being here with us and joining this virtual summit. We very much appreciate it. Thanks, guys. Thank you, everyone.

Yes. Sheila, thank you.

It's been our pleasure. Appreciate it. Good to see you and bye.

Thanks, guys. See you. Bye.