CACI International Inc (CACI) Earnings Call Transcript & Summary

Terrific. This is our third day of the Cowen conference, and let me welcome you to our interview with CACI. We have with us John Mengucci, President and CEO. John, welcome. Thanks for being with us. Really appreciate it.

Thanks. Thanks for having us here today, Cai.

So like your December quarter revenues and earnings were a little below consensus. And if you take out Photonics and IDT, I mean, your guide for the year looks a little bit light relative to where folks were. Walk us through the causes of the shortfall. Because I mean, Booz saw exactly the same sort of thing. I mean, things like people have been telling me about the occupancy limits at the Pentagon, the CR delays and ramps. Give us some color on kind of what happened.

Yes, sure. So look, it's really been what we shared during our last earnings call: COVID surge, contracting officer shortages and, said another way, reduced bandwidth by those folks to get the valuable job done that they need to do. Some supply chain shortages still. And then of course, we're under a slightly different type of CR. So let me -- under the COVID surge, yes, what happened is when the Omicron variant came out, our expectation is that we would go to a different playbook than what we originally had when COVID was introduced to us. Unfortunately, what a lot of agencies did was they dropped back to 25% occupancy in all of their buildings. And it's not so much our employees, but it's the government employees.

Got it.

And when that happened, it already -- it exacerbated an already difficult position that contracting officers were in to be able to put out task orders, funding orders and the like. To combine that, Cai, with the fact that this is a slightly different CR, right, we're in -- one, we're in a new administration, we're under a CR, at the same time, the government is working through, do we do 100% pivot to China and Russia? Or do we completely leave counterterrorism? We pulled out of Afghanistan. There's a lot of moving parts there. What we're seeing that, in past CR, where the government would spend, as an example, 1/12 each month of last year's budget, they're taking a haircut to that. Some agencies are spending 70% of it, 80% of that. At the end of the day, when those add up, Cai, it ends up driving a different level of funding orders, which then slows our ability to get work done. So we saw this middle of our second quarter. And again, we see this, as you've heard many times, as short-term issues that will eventually recede, right? We will get out of this, right? People will come back to buildings, this variant will end, we'll get funding orders, surely nothing to be tied to any type of demand-driven item. In fact, demand is starting to get pent up because we don't have enough funding orders out there.

Right. So walk me through that, because a number of folks, I think we had Roger on from Leidos yesterday, and he was talking about a lot of RFPs slipped from '21 into '22 and going to take some time to kind of get all of that done. But when we get at some point into '22, I mean, if people aren't spending their funding, there's left funding over. Do we get kind of what -- we normally expect a budget flush in the September quarter. I mean, do we have potential for a strong budget flush at some point here?

Yes, Cai, I'm more looking at the level that the Omicron virus is at and how quickly the government resets how they handle their day-to-day work, Cai. Frankly, what our -- our issue hasn't been RFPs have been released, later slipped. I mean, we had a couple of awards slip, but that's part of any other year, Cai, even you've been on it for a long time. It's more about getting the money that they can spend put on contract. And then secondly, we've got to get a better solution for this CR, Cai. What our fear is that the CR will keep dragging into what is toward -- to the government's fourth quarter. And if we don't have the people there to handle the flush, Cai, we won't see that flush happen. So just making certain we can change some spending rules, get some focus around what we're trying to defend against. We've always said it's a near peer and counterterrorism. But we expect this by the end of our fiscal '22 and to the ending in June, we get into next year, we would expect to be in a little different -- at least a better position than where we were.

Right. So one of the sort of things that's sort of been a little bit puzzling, despite the weak environment, your net book-to-bill was a very solid 1.13 and your trailing 12 was a little under 1.3. And your bids outstanding, expected submits, both up roundly 15% versus Q1, and yet you don't see it through the revenues. Maybe explain this divergence we're seeing between strong bookings and revenue growth, much more modest.

Yes. So all the stats that you start off with, awesome performance, right? We're happy with our ability to drive continued healthy award numbers. It was about a decade back that we weren't able to say that. So I really like the backlog growth, up 8% from last year, about a little bit over 4 years' worth of revenue, in backlog, really good visibility and a nice way to look at the mix, right, between expertise and tech. A couple of items there. One is we're that company that is absolutely focused on revenue and earnings growth both, right? And our goal has been for a number of years to make sure that we are driving top line growth better than the compound annual growth rate of the market that we serve, so i.e., always gaining market share at ever-increasing margins. So we're that company that's watching both ends of that spectrum. So that's first and foremost. Secondly, because of our change in business, roughly 50-50 worth of expertise and tech, those tech jobs end. We deliver that system. We deliver those devices. We deliver that outcome. And then we're in there working on the next program, a little different model than winning a 5-year expertise job, right, where I'm providing 200 or 300 folks. And that pretty much ramps up quickly, state steady state. The issue we have with that kind of a model, Cai, which is what's behind a lot of the other top line growth, is that I'm going to recompete on that work more and more often. And our long-term premise is that we want to take all that B&P work by dollars. We want to apply that towards new work, in areas where we can differentiate ourselves on something other than price. So that the honor I have of winning a $200 million expertise job is not that I get to bid on it 2 years from now and call folks like you and tell you my margins are going to drop. So that's just not a long-term business possibility for us. And then last, this year, a couple of percent headwind from Afghanistan. Last year, we all had top line issues with COVID clearly. So it's a nice position to be in, where we're not having a problem winning large sustainable business, and we're going to work that backlog off in a manner that we believe we can still drive top and bottom line growth.

So do you see any potential change in your bidding strategy moving forward? I think at one point, you suggested as you get larger and get more capable that you might go after larger contracts. But talk to us if any changes you might be considering in terms of the types of work you go after.

Yes. So it comes down to the comment we've been making for years, right? Bid less, win more, pursue larger opportunities and more differentiated technologies. So I'm not just differentiating on price, right? Better buying power 1.0, if you remember those days in LPTA, we were one of those companies that completely pivoted away from being part of that school. You can see the success that we've had by a lot of triple-digit million dollar awards we've won. And things like BEAGLE, the work we do with NGA in AI-based computer vision, well over $1 billion, and others. The comment around if we're larger, can we bid on larger jobs, we frankly make a decision to not bid large managed service enterprise IT jobs. That's our decision. We made a decision we were a $3 billion company. We're a $6 billion company now. We still hold by that. We just don't see the top and bottom line long-term sustainable growth model in those types of markets. And that's fine that others do. Others do what others do. But this company is focused on areas where technology becomes that differentiator, whether it's IT modernization, electronic warfare, cyber, AI, space. And those are the areas that we're going to play in because it's not margin-dilutive. I don't have to carry a lot of equipment on my balance sheet. I'll use the power of my balance sheet to go do long-term investments, winning new business. So it's just a decision that we've made. There may be one in the future that we may or may not go after, Cai, but it's really a business philosophy of us that may or may not be different than others.

Got it. And which sort of brings me to your acquisitions of Photonics and IDT. They look like something of a change in direction based on what you've told us. It looks like you paid more or less 30x current EBITDA. I know that you're making investments now. But it looks like these are much more expensive on current numbers than your prior deals. These are really investments for the future. What encouraged you to kind of make what looks like a little bit of a change? And when do you expect those businesses to start harvesting their investments?

Yes. Terrific question, Cai. Look, as you know, for us, M&A is strategically driven. It's driven to fill capability and customer gaps. And SA Photonics and ID Technology are some of the best examples of that. When we look at where the market is going, where the need is, because we're investing ahead of customer need, we're using the expertise work that we have to actually drive our technology investments, and those investments, be it internal acquisitions or partnerships. So SA Photonics, this is a company that is, other than us, is right in the heart in the U.S. market that look at optical comms and photonics. If you look at what we picked up from LGS, we have large-scale, bespoke, very scientific, very exact-type solutions for space-based missions in the MEO and GEO belt. SA Photonics, a light-sized weight and power, lower cost, can handle all of the LEO DoD, intel as well as commercial missions. They are U.S.-based as well. Together, we form the largest optical communications company in the United States. So when you take a look at whether the DoD or the intelligence community or other very selective users are going to want their information flowing through our optical comm link or through somebody else's optical comm link outside the U.S., we're going to bet more times than not, they're going to go over to a U.S. solution. And that's where we used to be building these type of cross-links. That purchase is great technology, great people. And that was one, Cai, that it was a scarcity value. Other than ourselves, there is one other company that has a proven, flown in-space technology to address that market. When do we see that market exploding? '23 to '24. That's why we're looking at another 1.5 years, Cai, of further investments. And so we're very happy with that one. On the ID Technologies one, this is at the CSfC, right? So this is as we look to make networks more resilient across the federal government, where they can handle not only unclassified data but classified and top secret and secret data. You need to have devices, right? You need to have laptops and phones and devices that can use that network. We have two choices to say. You can build a type 1 crypto-based type device that's 3 years and going through NSA cert because it's a very important device, or the way technology has moved, use things around Agile and provide a software solution you can wrap a commercial device in that allows you to ride on that more resilient network. You brought up valuation. And it is true, the one thing that is absolutely true is that my history is that I love buying acquisitions to provide capabilities and customers and are immediately EBITDA margin-accretive. It is a fact that these two are not. So the only thing that you see different is that, that near term, next couple of quarter measure and the multiple paid is a little bit steeper than what we paid in the past. At the end of the day, they -- we're a present value acquirer. The IRRs are north of 20%. And frankly, we've got a long-term track record of delivering shareholder value from long-term-focused acquisitions. The only difference here is that the multiple may be a little bit higher than what I'm used to seeing. And they're going to be 10 basis points dilutive to this year's EBITDA margin. That's a tiny, tiny, tiny, small penalty to pay for two outstanding acquisitions that are right at the heart where the government is going to spend billions of dollars, going forward.

Got it. So you make the point that you have been one of the more active consolidators in this sector and -- so going forward, should we expect you to do more of these growth-focused product deals, maybe higher valuations, or go back to your bread-and-butter accretive service niche fillers priced in the 10 to 14 area, something like that?

Yes. I think that since we did the Six3 acquisition, which is now 7 years behind us, less the L-3 NSS acquisition, I struggle to find something that was in the expertise area. Everything has been in the technology area. Everything has been about going forward. I never bought $1 of service revenue because I just don't believe in it long term. It's a commodity-based world. There's thousands of competitors out there. And whether it's managed services or whether it's providing consulting or labor hours, direct labor, I just don't see that as a long-term growth model. Again, I'll get it back to we're strategically driven. Strategy is a place where we come from. I'm not looking in the next year, where I can pick up revenue and focus on scale. We're really focused on long-term capabilities and customer relationships. So it's been a long time since I've looked at us as a pure government services contractor. It's been the last 7 to 8 years, and I believe we're going to have a nice mix to make sure that we're moving up that chain, where technology is going to differentiate where CACI plays and where we don't. And we're a disciplined acquirer. And on top of that, I think as we look forward in talking about shareholder value, an opportunistic and a flexible capital deployment structure is what we've been talking through. Last year alone, Cai, we did -- I think we spent $600 million on acquisitions, all focused towards long-term growth. We spent $500 million on an accelerated share repurchase, also focused on long-term growth. Both of those, whether it's a numerator or the denominator driving free cash flow per share, better than anybody else in the sector. And just about everything we do centers on that metric. And so whether it is share buybacks, whether it's doing more acquisitions, whether it's investing in intellectual property internally, those are -- that's how we run and that's how we roll. And it's been what has driven consistent growth year-over-year.

Got it. So speaking of growth, your revised guide looks like it's suggesting organic growth 4% to 5% area by the June quarter, something like that. And if you look at next year, you won't have the 2% Afghan pullout headwind. So should we be thinking potential for mid- to high single-digit growth? Or how should we think about the potential for next year?

Yes. I think from today until close to the end of June, I want to focus on getting through 2022, Cai. Look, your -- it's fair to say that the comparison in FY '22 is a bit easier than it was before. There's no doubt about that. I think I'm just going to reiterate that we continue to expect to grow organically faster at our -- on our top line at ever-increasing margins. That's a little different dynamic. So it's why we never compare top line growth to where everybody else is. One, I don't care where everybody else is because people aren't investing in us because I'm trying to do what everybody else is doing. Secondly, we're very focused on making certain that the quality of earnings works, right? And how that works even better for us is that as we bid on less over time, right, this has been a long-term knob, not just [indiscernible] switch. The more we look at work we have in-house that's going to recompete every couple of years, that's just not sustainable, Cai. Not in today's market, where our customers' threats are in our different areas. We're just as much technology as we are expertise. We don't see technology drive the train over often, right? It's not many times on the technology side, you ask somebody to build a ship, and 5 years later, you actually stop that and you go recompete building that ship. A lot of the technology that we build rides on those platforms and will be on space assets. More of that work for us is the right model for long-term growth. We'll recompete less. We'll take the funds saved on that and put that towards more capabilities and more technology that will help us differentiate. So we have that focus on free cash flow per share. We're going to grow at the rate we're going to grow at. We're always going to be very mindful of quality of those earnings.

Terrific. So I guess, technology is now roughly 53% of your revenues. Margins, you've made the point above average profitability. Where do you see this mix going, I think, like 3 to 5 years? What -- how should we think about the mix going forward?

Yes. Cai, look, we're never going to get to 0 expertise and 100% tech, right? Because to us, all four of those quadrants that we have in our investors' deck are very, very important. Clearly, when I talk to investors, they always drop down to the technology line being 300 to 500 bps better, right? So the immediate thought is if 100% of your business was there, right, there'd be endless earnings. But in reality, how the model works is expertise informs tech and tech differentiates the expertise we still want to be a part of. And that's what makes our model so unique is we have people embedded, whether it's in the fed civil market and the DoD market and the intel market, to know what the battle rhythm is, to know what they're trying to solve. And those contracts inform the engineering folks, "Boy, if we had this type of technology, we could do that job with less people," which is for a number of reasons, positive, right? Talking about building density, COVID, lack of available talent, but then that also drives margins. So they're sort of symbiotic. I had, at Investor Day, [indiscernible] tell me, I think in the second quarter, expertise was down kind of roughly 6% or 7% and tech was up 9%. Isn't that a great day? Well, the great day is expertise is going up 9%. It's growing, right? So we're going to continue to watch that mix.

Got it. But do you have any rough -- we think out 3 to 5 years, I mean, I wouldn't expect expertise to go to 0. But if tech is growing faster, that in 3 years, it would be 60%, 65%. You have any -- maybe you don't have a specific target?

Yes, Cai, I don't have a specific target in mind. Because my fear with those targets is that then we'll get off of our absolute perfectly aligned strategy across the company, bid larger programs, keep building a differentiated technology, show us where the gaps are, tell us where the customers are spending money in the future. And that's going to be our guidepost. And Cai, I believe that over time, since you want to be more of a tech company, less of an expertise company, we should always expect tech to continue to grow. But then every once in a while, you get a $1 billion award in a different box. And it sort of does move those numbers around.

Right, good point. So if we think about profitability, others have mentioned that you've had lower billable travel. And things like that have sort of enhanced the profitability. Is that an issue for you going forward that as kind of you get more folks out traveling more, the billables go up that, that's going to be a margin headwind?

Yes. I mean, I don't see it being a margin headwind, Cai. I mean, clearly, last year was an anomaly year, right, for earnings. We normalize that out. So when we gave our final tally for FY '21, went into FY '22, what looked like 11-ish percent was more like 10.7%. And then we were looking to grow to 10.9% this year. We still see bottom line growth. But beyond travel, which I do think, Cai, to some extent, travel is going to -- will not return to what it used to be, Cai, I think we've all learned how to have a lot of meetings and a lot of visits in a slightly different manner. But the one variable that I don't hear others talking about that is prominent with us is health care costs went up, right? And to the general public, they're thinking, geez, during COVID, that would be a really high health care spend. Then after COVID it would come down. In reality, what happened to our employees is people didn't go to the doctor. That drop in health care cost, being extremely transparent here, was -- because that's not something somebody would naturally think about watching the news each night. So our health care cost last year were very, very low, far nearly low. And those are coming back up to normal levels. So some of these are going to be "indirect cost win" for a longer time. Real estate costs, those are never going to go back to what they were in the past. So it's a nice give-and-take game. But I wouldn't look for any of those to strongly move what our focus is, which is to always drive ever-increasing margins.

Got it. And so you mentioned Photonics and IDT will be below average near term. But once we get to '23, '24, they should be getting better. So I mean, you've always talked about improving margins relative to the peers. I mean, are you kind of set up with those two acquisitions that it's going to be easier to kind of get the improvement? Because usually people look at companies and they say, "Well, they bought this business, margin was better in there. That's why the margins are better." Do you have sort of potential for organic margin expansion, given these acquisitions?

Yes. I mean, we're always looking at that level, right? But the other answer is after 12 months, everything is organic, right? So I think specifically to where SA Photonics and ID Tech is, yes, we're looking, what will drive the margin growth on SA Photonics is volume. And we're looking back in that '23, '24 time period. We're already involved with DARPA. We're already involved in all of these preliminary programs that are sort of going through SDA Tranche 0, Tranche 1, and having our assets on those spacecrafts. So they've got a great track record. They are on their business plan. And that's the timeline. On the ID Tech side, part of that business is a value-added reseller and part of that business is working on CSfC. And so what their model is, as CSfC revenues come up, those are coming at 300, 500 bps higher margin than what they're doing in other areas. And that is another driver to margins in that '23, '24, '25 time period, Cai. So yes, when we did these acquisitions, one, we're looking for where the government is going to spend. But just like we look at on core, right, we're looking for these two businesses to contribute to bottom line growth as well. And we do see that in their nearer-term business cycle.

Right. And so you've increased -- and maybe this is not the right way to think about it. But as you move toward technology work, you've also increased the share of product-related revenues. Is it meaningful to say what percent they are of your sales now? And is that percent going up?

Yes. I think it's more relevant to talk about the amount of technology we do as you asked in an earlier question. I think it's 47%, 53%, something like that as of noon yesterday. But we look at technology being more broadly defined. We build satellite ground stations. That's not a product that's natural -- a large ground station as other larger OEM primes do. We deliver ISR systems. We deliver podded systems. And then we deliver what some people call products. We don't have an actual call-out of it. In general, technology covers all of that for us. And what really drives those margins, Cai, isn't the fact that they are prodigious. I hate to use the word own, but I own that workforce that does that work, right, I haven't found an individual to meet an expertise spec on behalf of the federal government in the old government services model, where I'm measuring their direct labor and I've got to hire somebody with every exact skill set. Those people are fungible, so they get to work across the business, different projects. And even that, Cai, allows us to squeeze more margin out because I get to deploy those folks in different areas. Whereas in a traditional government services expertise job, those 200 people working for that customer in their facility and they're not doing anything else. So there's a lot of variables there. So no, we don't look at the number of handhelds that we're out there selling. But I can tell you, in the signals area, in the electronic warfare area, that's 5,000 to 7,000 devices a year that actually go out there and provide great national security for DoD and intelligence customers. And that's a number out there that isn't to try to convert back to how much profit comes from those things. That's just -- we do deliver products out there, clearly.

Got it. So you've made the point that you've been an acquisitive company over the years. What are you looking for today? What -- if you're going to acquire something, how should we think about what the targets are?

Yes, I'd tell you IT modernization clearly. We've got a great hold in the digital applications world through BEAGLE. We're the #1 provider of Agile software solutions to the federal government. We are driving and we are the sole contract or the prime contractor on the two largest Agile programs across the federal government. So we have that space covered. It's going to be electronic warfare. It's going to be comms, whether it's radio comms, space-based comms, comms links. That really started with Six3. It was enhanced with Mastodon and LGS, buying somebody who could build devices, buying somebody who has very explicit algorithms. You can add SA Photonics to that mix as well. So those are the areas that we're very focused on. And as always, we're not looking for a certain size acquisition. We're looking at who can fill those gaps and where the customers are going to spend money. And in a broad sense, customer-wise, space is a domain that CACI has been in. We have been in it deeply. But 3 to 4 years back, everybody looked at space saying, "Where can we have a role in space?" We could have bought small sat companies. We could have gotten in different areas. We just believe that the comms piece of that, which is very synergistic with all of the INTs that we do, SIGINT, ELINT and those type of algorithms, we believe that, that was the right investment for us. And that's why we're in space as you look at comms.

Got it. So you've been the acquirer. Have you ever thought of portfolio-shaping? I mean, I look at your portfolio, you have this U.K. operation that really has done pretty consistently pretty well. It doesn't really look like it's a direct fit with all the rest of your thrust. Any thoughts of portfolio-shaping at any point?

Yes. I'll use the same comment I use, Cai, when I about capital deployment, right, flexible and opportunistic. We're always looking at pieces that fit, pieces that can grow, pieces that are no longer going to drive long-term growth. So I wouldn't put it specifically to the U.K. business. What the U.K. business gives us now is some level of entree into the MOD customer. Greg runs a fantastic business there. They're very deep in the IT space to win in their fair share of work. But more to come across the entire portfolio. I mean, we have done divestitures in the past. We've always portfolio shaped. Probably the biggest portfolio shape was really over the last number of years is removing ourselves from some parts of the market, Cai, that were more commodity based and then turning that dial towards things that we could differentiate on more. And under my last few years, we've done that even more. Because that's just work that we don't need to have anymore. So how do you balance the growth we have, the expectation that our investors have on top line growth? When do we plainly get out of some of those lower margin businesses? So not a direct sale or something in the company, but a runout type of a model.

Got it. And one of the questions I assume you get asked all the time is, clearly, you do M&A. You've done share repurchase. You've never paid a dividend. Any thoughts that you might add a dividend at any point?

I'm going to stay with flexible and opportunistic, Cai. Look, right, we've done M&A. We have done share repurchases. At the end of the day, a dividend doesn't drive free cash flow per share, right? It doesn't do anything on the numerator or on the denominator side. But we do recognize that some investors look for that. There's some funds that only we'll invest in dividend-based stocks. So we're always looking at that, and it gives us a way to open up our ability to be owned by other folks. But we're going to continue to discuss and weigh all options. But no, I don't have the right answer for you today.

Got it. And then -- so you've done acquisitions before. How should we think about what's the limit? I mean, like what's the highest net debt-to-EBITDA you'd consider for a deal that looked like it's really attractive? Or describe it in the terms that you think make the most sense.

Yes, Cai, we've always said in the time that I've been here, 4.5 is sort of that number that we'll always have our eye on, doesn't say we wouldn't go to 5 if something was -- scarcity of asset and very, very crucial to our long-term growth. But 4.5 is sort of that measure. At the end of the day, we're going to look to make sure that in a measured manner, we're a disciplined acquirer, right? So in the last couple of years, there's been a lot of properties out there, Cai, frankly that have come at very high numbers, not very favorable terms and conditions. And we've done 80 -- almost 90 acquisitions now. So we're a pretty disciplined acquirer. So to our shareholders or potential investors, we have the right models. We are looking at the right numbers. We're looking at it very strategically. We're not looking to just generate near-term revenue. So 4.5 is sort of what we keep our eyeballs on. We just went out and raised some additional capital. We're in a really nice spot. I think we're around $3.1 billion. By the end of June, by doing nothing, we'll probably be in the $2.8 billion area. So plenty of dry powder there for us to go out and continue to look for great properties or internal investments that are going to continue to drive long-term growth.

Got it. So I mean, you had great record. You have obviously some peers who have done well. PM comes to you and he says, "I like this area, why should I invest in CACI versus any of the other guys in your space?"

Yes. So I always answer that in a couple of ways, Cai. One is it's a strong sector. We have an enduring customer, all of us within this sector, great expertise, great technology, alternatives to the large aerospace and defense primes. So just coming to the sector, that makes a lot of sense. Where the budget is at, yes, that always wavers, and it's going to be $720 billion or $750 billion. Within this sector, we're a $6 billion company. We've got a $240 billion addressable market. I'm not watching the top line DoD spend, frankly, right? It's not that kind of a model or a watch item for us. Now when you get into the sector, the best house in a great neighborhood, we've got a strategy focused on investing ahead of customer need. And everything in this company is driven by doing that. We're not driven by next quarter's revenue number. We're driven on year-over-year, going after those things that are going to be long-term buying areas, some in the expertise, we hope more and more in the technology side, where customers are going to invest decades of dollars in. And that's what our focus is. We're a company that's very much focused on bits and bytes versus bombs and bullets. I firmly believe that as this nation goes forward, the national security threat, just as it was a lot of times during the last set of wars, was much more non-kinetic than it was kinetic. There are a lot of dangerous things during wartime that can happen in a highly non-kinetic manner. We should watch what goes on in the Ukraine today, okay? We've heard the Secretary of Defense, we have heard others mention, this will highly be more of a non-kinetic battle than it will a kinetic. And those are the kind of battles we in the U.S. need to be winning. So we're investing in the right place. We've got organic growth ahead of our addressable market. We've got continuous margin expansion. And every investment we make is focused on free cash flow per share. And that is by far a very material measure, and we outpace everybody else within this sector. That's how I'd answer it.

Got it. Great answer. I mean, we're almost at the end. But you mentioned Ukraine. And as you know, Putin and Xi recently signed sort of a mutual support agreement of some sort. So what do you see from this environment? What -- like what is the opportunity in -- what is the business that could be created from the situation in the Ukraine? What should we be watching for?

Yes, Cai, I mean, I would hope it peacefully gets resolved and that we're not looking at that for business growth. Having said that, the world is still a dangerous place. And the fact that counterterrorism hasn't gone away as much as we'd like it to, unfortunately, terrorists don't stop doing terrorism because we decided not to spend enough -- any amount of money in it. We're not 100% pivoted away. We're going to have to do counterterrorism and near peer threats. So when I look at that, if I look at Iran, if I look at North Korea, there's a lot of counterterrorism, counterintelligence missions that have to be performed. I'd also point people towards the countries that we're no longer in or that we've exited. We still have a need to know what's going on there. President Biden 4 or 5 months ago talked about over-the-horizon intel, right? That's OSINT, that's open source intel. How do you [indiscernible] open sourcing intel? How do you make sure that if you don't get an ISR overhead image, how do you collect bits of other data that sort of give you that ISR picture? Over the long term, for us, signals intelligence, electronic warfare, cyber, data collection, secure comm, that's what we have to do going forward regardless of who the enemy is, whether it's near peer or it's a nation state, so -- and cyber so many other avenues into IT modernization, protecting things that go on within this company each and every day. More protected communications is everything that we do within our borders. So how do we keep all of that more protective? So it's just not related to an incursion outside of our borders. A lot of what this company builds today is focused on making sure that we're able to do things in a more secure manner, whether it's our folks working from home, doing software development work for DoD or intelligence missions or whether it's government customers, having a different work location for a number of reasons. So we're extremely relevant in both cases. There's a long-term growth model here. Again, a $6 billion company with a $240 billion addressable market and a budget that's usually in the $700 billion to $800 billion range, we're very excited about where we go, driving top line and bottom line growth.

Terrific. Well, thanks so much for being with us. Really interesting discussion, greatly appreciate it, and good luck. Thanks again.

Yes, Cai. Thanks so very, very much. Appreciate it.