CACI International Inc (CACI) Earnings Call Transcript & Summary

Back to being serious. This is Sheila Kahyaoglu with the Jefferies Aerospace and Defense Equity Research team, and thank you for being here for our third annual IT Services Summit, which is again virtual. We have the CACI team here with us. We have John Mengucci and Dan and George behind the scenes. So don't be fooled, they're still here. John, thank you so much for being here. You're President and CEO of CACI. I'm going to spare everybody your bio and get into just the gist of it, which I know everybody wants to hear. So thank you again for being here.

And maybe just to start off, there's been a lot of volatility over the past few years for IT services with rather tepid growth. How would you classify the market today? And potentially when you expect the churn in growth?

Yes. Well, Sheila, thanks. And thanks to Jefferies for having me here. And I actually like my bio. Look, I think at the risk of stating the obvious, the past few years have been quite a challenge. It's nice to be moving beyond those. We're in the middle of our fiscal government, our government fiscal year '22. Budget funding has rebounded well in April and May, so that's another hurdle behind us. We are still going to work through some issues. The Pentagon is still at -- I think it's Condition Bravo. There's still not enough KOs out there. But like-to-like, we're in a much better shape today than when we were over the last couple of years. If you look at FY 2023, really like what we're starting to see. Defense budget, probably a little north of $800 billion potentially. Looks like the intel market, up about 9%, which is great for us because intel is roughly 30% of our CACI revenue. We're going to see spending come up in IT modernization and in cyber spending come up within space. We've got some great DA DHS programs. We're seeing some great funding growth there. And at the end of the day, the world is an extremely dangerous place. We put a good strategy in place a number of years back to focus on just as much technology as we do on what a traditional IT services company provided, which was expertise. So there's a lot of good trend lines moving us forward and really happy to see things start to get back to some level of normal.

Maybe going a little bit more short term. There were some headwinds in your fiscal Q3 with 2% growth and down 2% organically. How comfortable are you with these headwinds subsiding and the timing of that? How much of it was attributable to supply chain, CR funding, customer access? We've seen April outlays pretty bad again. Do you think that will affect some slowness in the coming quarters?

Yes. So we spent a lot of time on our Q2 and Q3 calls, really talking about those 4 areas: funding, COVID, supply chain and even fewer, fewer contracting officers. Mark-to-mark, funding for us is most important. We had a really tough quarter of funding. We're down about $300 million or 20%. It's probably one of the lowest funding quarters we've had in a long time regardless of budgets. But those rebounded nicely during April and May, Sheila. So we expect that to continue to move forward given that we only got so many months left to the government fiscal year and an awful a lot of pent-up budget that we're going to need to see transitioned into funding. COVID, improving, but slowly. As I mentioned, about 50% of our customer sets are in their office any given day. But that's a 200% increase over what we had, at least during the last quarter. Supply chain, still an issue, but we are working through it. We do have some one-offs, but we're going to continue to see supply chain shortages in areas that we like to call compute, chips and the like. And the fewer contracting officers, that's going to take some time. I mean that's nothing that some of our customers are going to fix overnight. What's really important, we have a very constructive budget. It's really healthy demand signals going forward. We've got great capabilities, awards even though lumpy. We've done a really nice job at winning. Quite a nice backlog, both in expertise and in tech. It's just still going to take funding. So we are absolutely focused on how those funding orders come out. If those continue to come out at even the pace that they were in April, May vis-à-vis January, February, March, then we'll be in nice shape.

Sorry about that. Having some trouble turning on my mute function. Bigger picture, if we could think about your markets, addressable markets and their growth rates associated with them, how do you think about that? And also your recent acquisitions and how they're contributing to that.

Yes. Look, we've got a pretty strong addressable market, and I've said this many, many times, right? We've got a large, growing market, little north of $240 billion and we're a $6 billion company. So we should be able to find places to grow. We've got the government fiscal year President's Budget up about 4%. And we've done some nice acquisitions that have not only strengthened our capabilities in the markets that we were in, but they've also -- we will see when we announce our '23 plan that will have expanded what our addressable market is. We talked about SA Photonics and ID Tech. I'm sure we're going to talk about that today. Bluestone, and then we have a couple of other unnamed acquisitions that are really in that deeper cyber world. So we're watching the Ukraine supplementals. There will be a material amount of funds being spent there. We're not sure on the timing. Some of that will help us. Some of it will not. Right now, our addressable market growth is 3%, and that's over a 3-year period. So if we see the '23 budget come out the way we expect that, plus the Ukraine supplements and the like, will help us. I have to say that the government is still struggling, frankly, with funding against a near and near-peer threat, funding still against the counter terror threat. And now there is the -- there are the events in the Ukraine. I was just going to say how that money comes out. Again, my overall message is, I'm not concerned about us winning business. My eyes are actually focused on how quickly does government turn those awards around and most importantly, how quickly do they get them funded.

Can we talk about the cyber business? How big it is for CACI? How you vision those budgets growing? What areas we should be looking for you guys versus peers and your competitive advantages there?

Yes. I mean cyber is one of many focus areas for us. We like what those growth rates are. We do a lot of our cyber work in the intel world. We announced last quarter we have about $500 million worth of -- with the classified awards, a significant amount of those are all cyber-related work. It wasn't too many years back where we did the LGS acquisition. That brought us a lot of outstanding cyber capabilities. We talked about it in terms of comms knowledge. But if you're building these stacks, if you're building the technology over which many people around the globe communicate over, then it gives you a pretty good idea of where voices and where video is and where data is and allows us to be very proficient as it pertains to the offensive cyber side. And of course, it goes without saying, but I'll continue to say it. With -- if you understand the offensive part of cyber, then working on the defensive side is much easier. But there's cyber in everything. There's cyber in DevSecOps. There's a lot of cyber when we talk about network modernization, what we're doing with different IT networks out there. The ID Tech acquisition brought us a great CSfC solution set, and it's really putting commercial, off-the-shelf devices where the software solution allows them to plug and unplug into classified networks, which is a large portion of where future cyber spending is going to go. At the end of the day, we win more than our fair share within cyber. Fortunate part, Sheila, is that there's a lot of assets in the intel world, mostly on the offensive side, we just don't talk about.

Did you mentioned how big it is, the growth rate? I think you just said it's good, so...

Yes. What do we use? I hate to talk about how large we are, and I know everybody keeps asking. Look, we win our fair share. If you could take the 30% of our overall revenues done in the Intel space and the majority of our cyber is done there and in the DoD side. Look, we're also on the Fed civil side, right? We're 1 of the 3 contractors on CDM. That's through the CISA folks over at DA DHS. They receive 1/4 of all the federal government funding for cyber. So if you put those 3 pieces in there, it's a size of the business that is the reason why we're able to continue to win a lot of great business there.

May I ask a few more follow-ups? What's the best budget area to look at for your cyber business? You mentioned all budgets, but you also mentioned Fed civ's. So how do you think about the underlying budgets that you look at and competitive wins? Like how do you measure that internally?

I'm going to focus on the intelligence community. And it's really around where they go in the future around CSfC. That will move into the DoD budget as well. But at the end of the day, as we walk through under IT modernization, and we're out there modernizing networks, not only handle unclass data, but base by base, OCONUS as well as CONUS, making sure networks can handle unclassified -- classified, secret and top secret information. Those networks are not worth anything at all unless they have a device that they can connect to it. So we're going to see billions of dollars spent on a number of CSfC programs out there. What makes our solution quite unique is it's software-based. So I don't have to take a device, open the chassis up, put new hardware in, close that chassis up and then deliver it. There's more of a software-licensable solution that sort of wraps that device. I mentioned LGS. About 60% of their business, Sheila, is sole-sourced in very unique areas. You should take that to mean some very unique cyber areas. And that's both on the offense and on the defensive side. I think the spend is going to go on within DHS as well. I earlier mentioned CISA. We continue to get plus-ups. Even during the FY '22 area where we're under a CR, we continue to see better-than-average additional funding there, and they are pushing a lot of funding orders out now. So we're looking at the Fed civ side, the offensive side within DoD and the intel space. And again, once I have the offensive chops, defending against any of those threats is a h*** of a lot easier.

You mentioned offensive cyber a few times. So I'm guessing that's maybe one of your competitive advantages. When we think about overall, stepping back, book to bill of 1.5x over the past year, how do we think about that converting to potential revenue growth in fiscal '23 and beyond?

Yes. I mean I know long peers would salivate, frankly, to have a 1.5 book to bill. Look, we're consistently and successfully winning new business, but it all comes back to funding, right. We have a great looking backlog. It's a nice mix between technology and expertise. It's a nice mix between enterprise and mission customers. We just need the funding, and I believe it's starting to flow. At the end of the day, awards are lumpy, which is why this -- trailing 12 months to us is the best measure. We've had 0.9 quarters and we've had 3.2 quarters. What I like about it, though, is back to our strategy, which is we're going to focus on expertise and mission -- expertise and technology work, the frankly, areas where we can differentiate in. Areas that we're not risking our financials and risking future investments, I don't have to work. They're just going to recompete 12 to 18 months later. We've been very focused. 50% of our business is tech, 50% is expertise. That means at least half of our $6 billion worth of revenue, we're able to take investments, invest ahead of customer need versus spending that money just to win last year's business. It's really tough in the expertise market today. When we look at a shortage of folks and STEM graduates and the like, we're quite blessed because we put a strategy in place almost a decade back, which was to really make sure we have more control over our workforce. And given that we're able to do that, we just need funding. We'll have the right people in place to be able to continue to grow top and bottom line.

And on the last earnings call, you talked about a very bottoms-up process program-by-program level, which Dan and George shared with me after the call. So maybe if you could highlight for everybody else what the programs were and how you think about the opportunities to outperform.

Yes. Look, we're in the middle of building up our FY 2023 plan, right. We're a July-to-June company. So yes, it is this -- this is the Matterhorn climb of program by program, customer by customer, what are we going to deliver at that level? So it's a well-oiled machine of building our FY 2023 plan. Look, I'm looking a lot in the IT modernization area. As I mentioned earlier, we do a lot of network modernization. We're not only doing the networks now, we now have the end-item device solution with our CSfC solution. Cloud throughout the U.S. government, still the early innings. We've been talking about cloud forever. But I'd say we're in the third inning of a 9-inning game. There's so much more that has to be done and so much that can be done. I like the IC space overall. Why is that? Because a lot of great opportunities for us, and it's very well-funded space. And we've got a great offering in space based on our LGS acquisition as well as doubling down with our SA Photonics one. I've always been a huge fan of sticking in the EW and the RF spectrum. It's not going to go away. The world's a really dangerous place. There's a lot of people out there squawking over RF, and a lot of information on operations work across the DoD that really counts on us not only being able to find signals but actually geolocate them and then give them courses of action. And then, of course, we've already talked about cyber. I mean how can we not? It's pervasive in everything that we're out there doing.

Maybe if we could talk about the risks or opportunities on executing on that 1.5x book to bill. You mentioned competitors would salivate over that. So given the mix of new business, what are the sort of opportunities to try to accelerate some of that or program ramps?

Yes. I mean I hate to be redundant. It's going to come back to funding, right. There's a few overhang items that we mentioned. COVID, those restrictions need to be lifted. The contracting officer resources, they need to be replenished, and our supply chain issues need to be resolved. Easier said than done. But that is not a high bar for us to finally get beyond so we can "get back to some sense of normalcy." I'd also tell you that we're working very hard with our classified customers, both in the intel and the DoD space and some even in the Fed civil area, that we've got to take a relook at what work is done inside of SCIFs. There is so much software development being done today. And frankly, during COVID, we found great still-protected ways to do a lot of great software development work not in a SCIF. We're just coming out, we hope, of our -- one of the only generational pandemics I've been on the earth for. But I'm not naive to think that there's not another black swan event where that can show up. And this is the time, as I told every one of our classified customers, this is the time to sit here and remember how hard it was to get that work done. There's got to be better ways. And as we do that, potentially new solutions -- because the younger workforce today, frankly, is going to want to have access to their mobile phones, even though they're doing national security work. And so there's so many more solutions and ways that we can SCIF -- make SCIFs -- I hate to use this term, but a more pleasant, a more employee-friendly place where we have to protect a lot of the work that we do. But we don't need to shell them off from the rest of the world. And I think that's just more of a supply and demand around the workforce out there and how they want to live their work life. There has to be a much better balance there.

I'll stick to my script because you gave me a lot of topics to talk about there, but I'll stick to it. $10 billion of submitted bids over the last quarter, I think you disclosed, and another $20 billion over the next 2 quarters. 90% of those are on new business. What does that maybe say for the level of recompetes you have? And how are you thinking about some of these bigger pockets of opportunities and win rates there?

Yes. Look, I think every year since I've been here, recompetes fill about 10% to 15% of our next year's revenue. I would expect, Sheila, based on what we're seeing now, FY '23 to be on the lower end of that, if not even slightly lower. FY '22 was a rather large recompete year for us, so we expect FY '23 to be less. And over time, the more technology business that we're bringing into CACI, the less we should, over a long period of time, be out there recompeting on work. And the minute we do that, we're able to take more of that bid proposal money and our IRAD money and actually plow it into new horizons for us versus just winning yesterday's revenue. We're looking at a good range of technology opportunities, again, in the cyberspace and the C4ISR area network modernization. I continually mention those areas because those are areas where we invested ahead of customer need. And some of those investments, frankly, were in acquisitions. Doing the LGS acquisition was not only on the cyber piece, but it was on the network build-out piece. They have a great OCONUS network build-out area, but they couldn't become cost-effective enough to take that same technology, get that into all these hundreds and thousands of different CONUS bases. A recent Air Force win and our recent Army win going base by base, re-architecting networks clearly provides us a nice avenue to put the end item devices onto those networks. So we like what we see. The expertise jobs, frankly, Sheila, going to continue to be about price. I don't see price competitiveness in the expertise part of our business changing. But that's why almost a decade back, we foresaw that when LPTA, I don't know, 1.0 came out and said this is going to become a commodity market in some areas. So we adjusted for that. At the end of the day, expertise is great as it informs our tech investments. But as for business that we're out there, happen to continually win, that's tough one as we move forward and the availability of a qualified workforce is going to be harder and harder and harder.

So you mentioned technology and expertise. What are the growth rates associated with each? And on technology, you mentioned that you don't have to recompete as much going forward. So how are those contracts potentially differently structured to enable that?

Yes. So I'll talk about it in 2 different tranches. One is, I'll talk about -- and I hate to use the word product, but it's technology deliveries versus larger systems build-outs. So if we win a contract as we did 3 or 4 years back to do satellite groundwork, you build the initial system and the O&M tail comes after that, then the enhancement tail comes after that. So there's very, very low recompete risk there because you built that initial system. And its traditional to be providing the enhancements beyond that and then the O&M efforts after that. So those are 10- to 15-year programs. They continually get funded because needs and missions change. There's a lot of great satellite assets up in space. There's a billion ways you can preprocess and post process all that information. And once you win programs like that, traditionally, you hang on to those programs for an extremely long time. On the flip side of that is mission technology deliveries, items from Mastodon and LGS and others as well as soon-to-be SA Photonics. We will get a mission tech award. It comes in. 60 days later, you're delivering that asset. So those are very quick turns. A lot of that -- those awards frankly never see our backlog because they usually turn within the same quarter. One is a feast, right, the longer-term systems work. The other one is you got to -- you have to continually win. So there are ups and downs in that business. But on the technology portfolio, the fact that it's got a much larger addressable market for us -- I mean, tech added $90 billion addressable market to CACI that we had 8 to 10 years back. So that $240 billion addressable market, $150 billion is still in expertise, but $90 billion in tech. Tech is growing about 4%, expertise is growing about 2%. That's how we get to our 3% compound annual growth rate. And technology has much more stronger margins. It has a little higher CapEx spend, but 300, 500 basis points margins is worth making sure that we're doing everything we can to win slightly more technology work than we do expertise work.

Then you also have a higher product and solutions business than peers. How do you classify that? How big of your portfolio is that? And how do you think about how that go-to-market strategy, whether it's in technology or expertise?

Yes. Look, we've been investing ahead of -- not technology, investing ahead of customer need for quite some time. And that's not a reckless investment. That is either investments through acquisitions or pure IR&D investments where we believe owning that intellectual property will open us up to a much broader market over a much longer, longer period of time. Software is core to us. Software-defined everything means something to us. We've done a lot, as you mentioned, over the last 10 years purposely around our technology business. We're a 50%, 50% business today, tech and expertise. As technology, most of that you can touch, the rest of that is in software-defined. And I like to talk about our technology push because I do hear others getting involved in the technology area and the like. The way I've shown how we're differentiated in the -- in our sector is as follows: It's always been tough to hire people. It's been tough for 15 years. The number of STEM graduates continues to come down. I'm a big trend line person, and that trend line hasn't improved. So the issue really becomes if I'm the CEO who's out there talking about how hard it is to find people, then it's probably time to change the portfolio business that I have. Because that's never going to go away. In the technology space, I can hire people to my requirements. I don't have to have somebody that has 3 to 5 years' worth of experience. I have to have somebody who's really sharp to do good, high-end tech work. And frankly, that doesn't come from the traditional sources. Most college graduates today in the software and engineering domain have 3 to 5 years' experience coming out of college. When I was a college graduate, I had 0 years of experience, after probably 3 years of contract work. But it really differentiates us because at least half of our $3 billion of revenue comes from an area that's quite stable. Do we need to still find great people? Yes. Is it still tough to find those great people? Yes. But our expertise versus technology balance is such that I'm not out there saying I can't generate revenue because we can't find the people. I can find the people. I just need funding. And the bigger portion of our backlog that becomes more tech-related, in a long-term growth business, that only portends much better and better things out into the future. It may mean some lower top line growth rates because we're being very discriminating of what we want to go after. We're not going to let the market direct how we go about growing this company. We're going to grow it in a methodical way. And the only way I can guarantee to our shareholders that we do that is we have to have a better mix than always talking about not being able to find talent at the right price with the right skill set. So it is how we differentiate. It's why we spend so much time talking about tech. It's why we spend so little time talking about direct labor and how many people are on our bench and the costs that don't go in our EBITDA because of people on our bench. We just run a very clean, very transparent business. And it's our mix of business, which is why we're able to continue to grow.

One question for you I'm throwing in there. How do you differentiate with technology and expertise when you're bidding on contracts? Are you the person that nixes it and says, this is not what we want -- have our business bid on?

Yes. On the tech side, we differentiate because we're not looking at large-volume production runs, right? We're sort of looking at building, I hate to say, simple. They're very complex. But at the end of the day, they are simple because we can stamp them out one after another with a lot of computing power that requires a lot less power. And we can put devices out there, boxes, handheld, rack-mounted systems that allow you to do that, and they're all software-driven, then that is a very highly differentiated way to attack our spectrum in EW and SIGINT and radio comms and the like. On the expertise side, we're really looking at how does our expertise inform tech. So how do we bring tech into our expertise bids? BEAGLE was a perfect example of a customer that had an expertise job of 300 to 500 software folks being directed by the federal government. We bid BEAGLE over a 2-year shaping period which was, let's bring Agile in. Let's bring DevSecOps in. Let's bring cyber build in. Let's bring repeatability in. Don't talk to me about how many people you want me to hire. Tell me what your outcome needs to be. You've got 1,200 or 120 or 12 apps across customs in border. Let me keep those updated. Here's the technology we're going to bring in. At the end of the day, those customers where we've been successful, and there's probably -- there's been 1 or 2 each year, some large like BEAGLE, some smaller. Where a customer has changed an RFP and said, here's what I need. Tell me how you're going to go about doing it. And you can't do that with viewgraphs. You can't do that with walking them through a lab. Or a museum of things that you're calling tech. You have to be able to prove that you can deliver more output at, at least the same cost, if not lower. And that's been driving growth, Sheila, on our expertise work growing margins as well, right. I want a customer to pay less in price. I want it to cost less so I can make more. We don't spend our time talking about is this 6% or 8% cost plus. I want them to say, here's the price, here's the budget, stay within that budget, what I make is mine. And that's what we've been able to do with Agile. We've got the 2 largest Agile development software programs with the United States government. They are very, very happy customers. Their budgets are pretty much fixed and flat. We make slightly more than what everybody else would, but the risk model is very, very different. So we do still differentiate our expertise business and our technology business. Frankly, again, I'll have to say, we actually differentiate because we have tech. And then beyond that, how we go about delivering that technology.

Then can we talk about your Products business a little bit? How big of the portfolio is that? You recently acquired SA Photonics last year. I actually got to see the product at an LHX facility, which was kind of cool. So maybe if you could talk about that one in particular.

Yes. I probably won't talk about it in terms of Products. Because that work gets me into talking about how I'm going to outproduce other product vendors, and I'm not really looking for that fight. Look, we I love what the SA Photonics people are out there doing. I love what our LGS photonics business is out there doing. We've made some pretty good investments in SA Photonics. They've only been with us about 6 months, Sheila. We've probably got another 1.5 years worth of investments there, and that's right in line with the date we announced it. What I said is that this would really contribute revenue in the late '23, '24 time frame. We would see margins come along slightly after that, because there is a fair amount of invention that we're still out there doing. And I made no secret about I want to buy that company at the crux of that curve. So they are requiring more investment than maybe a more mature company would. But I wanted to jump in on being the only photonics company in the U.S. that can build both bespoke solutions, think about far Earth and interplanetary work as well as commercial and military LEO builds. We've got the entire land -- lakefront covered over there. Yes, we are partnered with the folks at L3Harris. Our optical comms are going to be on their birds as we go forward here. They've been a tremendous partner, and we've got product out there. And we recently announced on the land track program that both of our optical sensors have actually made contact. And just -- since you've seen some of those small little gimbals, imagine being on a satellite spinning and being able to find another one of those devices that same, small, miniature size and get a light beam to not only find each other but sort of connected. Sort of get the pin to find a very specific pin in a haystack full of pins. So I like what we saw there. We're still early in the technology growth side. We're going to continue to invest there. Because that will be our play in space, Sheila. We are not looking to be a satellite builder, building buses. We recently announced we're looking to put some payloads on. But beyond optical comms and very specific payloads, that will be our space play. And there are billions of dollars being spent there, and I'm convinced that as more and more information is found in space that has to be piped down to the ground, optical comms is the best cyber-protected comms. It also handles much higher bandwidth. So I really like what we have there and really looking forward to future growth.

I think that covers your space portfolio. Moving to sort of counter-UAS, what types of opportunities are you seeing there? And what are some of the competitive advantages you have?

Yes. We've been in counter-UAS for quite a long time, frankly, probably 20 to 25 years, if I'm being very, very honest and very transparent. It came along with the Six3 acquisition. They had some very market-leading technologies as how to counter-UASs out there. They still are the market leader. We have capabilities across the smallest roots of UAVs to the largest and nation-state ones, and that's an we're here at Group 1 through Group 5. We've got the largest library of signals of interest in the world. And that is not small because that means that every signal set that the majority of drones put off out there, we understand it. We understand how to decipher it, but also understand how to find it. And we have a large operational focus with over 1,200 counter-UAS systems out in the field today. We are the Army's joint counter-UAS office. We're 1 of 3 preferred fixed systems. And with the acquisition of AVT and their MADIS systems were 1 of 3 preferred for on-the-move systems. That's a market that's going to continue to change. Enemies of us are going to find new ways to launch drones that don't squawk anything at all. So how do you find those? So you're going to need great optical systems, also comes from AVT. You're going to need radar systems that come from tremendous partners. What I'd tell you is that we are building the best, integrated counter-UAS threat systems that are out there because they have to work in very different domains. Some of those domains, I don't mind renting. Some of them, I might want to buy because they're so crucial and that's why the AVT acquisition. So we look at very small gimbals, just like you saw of the SA Photonics area. But they're out there in an EO/IR footprint, very, very low cost, very high efficiency. And EO/IR gimbals that are the size of a tangerine that are doing phenomenal work in that counter-UAS market. So there's a lot of players out there. Some are going after very low-end solutions, which is great. I'm not going to play in that low-end market. Mine is in the intermediate and larger market areas, and we see some, again, continued growth there as well.

Great. And then switching gears to profitability. How do we think about margin mix going forward? And maybe what that means for margin expansion given the technology business is 300 to 500 bps above it? And some of your investments also on the Products side, what that means to margins?

Yes. Look, we've been on this road for quite some time about growing better than our addressable market at ever increasing margins. That's a huge, tall order, frankly. And we're -- coming through COVID, and not every quarter goes perfect, but year over year over year, we're looking to continue to grow. I like the mix of business that we have. We're in the middle of putting together our '23 plan. We're in the last month of our FY 2022. So we'll see how we come out there. Again, we're going to be looking at better-than-addressable-market top line growth. Look, both of those areas, both expertise and technology drive margins, right. It's harder in the expertise area but... we've got a lot of expertise work. It's at double-digit margins as well. Hail back to a comment I made about 30 minutes back, a lot of the LGS business, a lot of that is sole-sourced, some very bespoke, national interest areas. And that portends better margins for us to keep that workforce in place. So a lot of levers for us to go throw. There's a lot of headwinds as well, right. I mean we're in a mission tech business, means we're going to continue to win business, we need to continue to execute on it. On the supply chain side, we're going to have to have a couple of things move better, break more positively, Sheila, versus in the opposite direction. In the areas of compute, we use a lot of compute. And I'm not just talking about Cisco routers. I'm actually talking about things that we build, true tech. We are going to have to slug it out over the next year, frankly, to make certain that the cards that we need and the GPUs and the chipsets that we are going to count on are going to be there for us. At the end of the day, it's a tough problem for us to solve, but it's very small and small duration in nature to a company that's going to celebrate its 60th anniversary on July 9. So I'm not a next-quarter company. I'm not a next-year company. I'm a year-over-year company. We're going to continue to focus on bottom line growth as well as respectable top line growth that allows us to continue to grow in a more predictable manner. And that's why we moved so much towards that.

Maybe 1 or 2 more questions for you, John. You've been fairly acquisitive over the past. How do you think about the return hurdles for some of these acquisitions? And is that something you want to continue in terms of your capital deployment strategy?

Yes. So look, we are not going to be balanced, but we're flexible and opportunistic. And those shareholders who follow us for quite a long time, that's some material change, "change". It just so happens that last year, we did about -- we did a $500 million ASR. We spent $600 million on acquisitions, and we did a little over $100 million on internal investment. So to me, that's the right capital deployment model that we need to continue to grow the company going forward. And frankly, continue to improve quality of earnings, which is why we have that bottom line metric always. I would see us doing more of the same. The M&A market today is very frothy. There's a lot of companies out there. But at the end of the day, we're looking for things that don't give us immediate revenue bumps. We actually buy for capabilities and customer relationships. We've had that tagline for about 35 years. Some have had it for 3 months, but we've been at it for a really long time. We've done 89 acquisitions. We know how to not destroy value. We understand what makes a smaller company acquisition work for us. We also understand what a larger company acquisition does. So you're going to continue to see us be active. You're going to just see us be much more flexible and much more opportunistic. And when we believe that our stock is undervalued, we're going to go take measures to go fix that. At the end of the day, it's all about free cash flow per share. And to me, mathematically, top line growth drives that, bottom line margins drives that, capital deployment does that, share buybacks do that. Buying the right technology gets us into future work, and growing our addressable market does that. I'm not distracted by what everybody else is out there doing. I'm really focused on how this company is going to grow. We've been on a good 60-year run. Frankly, if you look at the S&P and you look at CACI's returns from the day we went public, it's a astronomical. So we like with that strategy. The strategy is we're going to continue to deploy that. We're not going to focus quarter to quarter. We're going to focus year over year and hope to drive great growth in shareholder returns as we move forward in a more flexible and opportunistic manner.

I'm glad you keep Tom occupied. Maybe one last question for you. What are sort of 1 or 2 takeaways you want people to walk away with? I feel like it's 3% growth with technology growing the piece, which we all know. Margins could be flattish given some investments, but also better mix. And then capital deployment is strategic, and depending on what your share price looks like, and a material change from what you've done historically.

Yes, I would tell you a flexible and opportunistic capital deployment, check. I would tell you that a nice balance of expertise in tech in what's still called an IT services world, check, check. I'd also tell you that it's a dangerous place out there, so budgets are trending well, check, check, check. And the last thing is four check marks, I'm not going to say check 4 times, is around our people. That's what drives where this company goes. And if I become the CEO that says it's really tough to find people, I'm not sure how you grow. You're going to have to find a way where you get a better say of the people that you hire and their skill sets that they need because the world has changed. And the way people want to be treated has changed, and where they want to get their work done has changed. And you've got to also support national security customers. It's my job to work on both sides of that and make sure we can come to some different solutions as we go forward. I spent awful lot of my time doing that. So we're the company that's trying to do all of that while driving top line growth potentially not as high as some others in the sector, but I want to be higher quality earnings. Work that 5 years from now or 10 years from now, I'm not out there talking about recompeting for. I've always said I can win a $200 million services expertise job in 15 days or less, and it will disrupt our margins, it will disrupt how we hire. It will be a distraction. And every 18 months, we'll be talking about this recompete I have to go find people for. So it's a well-balanced company. It's high on integrity and ethics. I wouldn't be here, starting our 60th year, if we weren't. Very proud of being able to say that, and we'll see where the future goes.

Thanks, John, so much for this, both the stock pitch and the pitch to hire people to work for you. Because I can't tell which one it was at times, but we appreciate you diving into it and everybody for joining. That would conclude our session, operator. Thank you so much.

Thanks, Sheila. Take care.