Jan-Frans Engelbrecht: Perfect. Thank you. And that’s really helpful. And just a quick follow-up, just at a high level, if we look at some of your more recent sort of multibillion dollar programs, can you just walk us quickly from a topline perspective, sort of the cadence on maybe not each one, but if you could, sort of EITaaS and NSA and the Navy program, just sort of how the revenue went that peak over the next couple of years?
John Mengucci: Yeah, sure. So look, on our large expertise award, which is the large sizable cyber intel award, you all know the name, I’m not allowed to say it. Look, we’ve ramped ahead of plan. We will continue to ramp that at a reasonable rate as we go through ’25. So we’ll get to full ramp when we get to start off our fiscal year ’26. So there is a number of items that are in our current scope that just started later after award. So, I like how we ramped that one up and really good positive feedback from our customer. On our EITaaS, that also ramped ahead of plan. That’s going to continue to ramp and grow in 2025 and beyond. If you all remember, that was a BPA, total value of $5.7 billion over a ten-year period. We recognized about $2 billion of that in the first quarter of ’23.
So that starts with upfront planning. We’re doing some design work there, you know, a picture of lower volume. The customer did ask us to take over from the small-level incumbents, take their work over sooner because they want to see that work improved. So we’re able to do that as well. So, you know, customers are very, very pleased. Last one is Spectral, right? That’s a real gem technology program, we did ramp ahead of plan. Connected to my prepared remarks, you know, we’re looking at what that first delivery looks like to the fleet. I spent some time during the last week with some of the Navy seniors talking about this program extensively, that the threats are continually changing. And, you know, what a refreshing discussions — what refreshing discussions we had, because we could talk about the threats changing, how do we make changes to this large technology program, you know, without the ACAT I kind of follow-on that’s a four-year delay.
You know, we’re sitting there working alongside shoulder-to-shoulder, hip-to-hip with this customer who frankly has the responsibility of protecting their surface fleet from the things that you’re reading about in the news today. So, you know, great work there. We would see future expansion definitely into ’25 and ’26. So hopefully that provides some of the color you were looking for, Jan.
Jan-Frans Engelbrecht: Perfect. Thank you. I’ll jump back in the queue. Really appreciate it. Thank you.
Operator: Your next question is from the line of Mariana Perez Mora with Bank of America. Please go ahead.
Mariana Perez Mora: Good morning, everyone.
John Mengucci: Good morning.
Mariana Perez Mora: So, my question is a follow-up on the international opportunities and how should we think about M&A and partnerships there. I really think that AUKUS gives, particularly in the Pillar II of AUKUS, you see opportunities for electronic warfare and C2 capabilities. Like how do you think about positioning there, kind of like going solo, partnering with someone in the region, or even doing some acquisitions in strategic areas?
John Mengucci: Thanks, Mariana. Asking for all of our secrets. All right. So, let me try to unpack that. Look, on the international front, it’s no secret that on the electromagnetic spectrum, given everything that we’re seeing today, it’s a very dangerous world and everyone needs electronic warfare equipment. Many allies around the globe are talking about expanding their budgets. We, as I mentioned earlier, currently deliver technology to a number of Five Eyes countries. As we expand go deeper into the Five Eyes, into NATO, Eastern Europe is going to be one of our absolute focus spots. We have made a number of trips with our software-based technology sales team, Poland, Latvia, Lithuania, Romania and the like. And we had two of our folks spend about ten days in Ukraine, buckled down in Kyiv, frankly, talking to on the ground commanders about what they’re seeing and what they need as we go forward.
And it really related to the supplemental comment I made during my prepared remarks that we can have all the meetings we’d like, but the supplemental helps. In addition, a lot of those Eastern European companies are spending their own defense dollars, including in the Ukraine, to look for faster-paced solutions to what they’re seeing. You asked about M&A. I don’t today see us doing international-based M&A. That’s a tough one for us. There’s a lot of different skill sets that we today in our company don’t have. But we’re able to reach all of those customer needs with international sales reps and our own sales team. I would mention when we did the AVT acquisition, you mentioned AUKUS, we have a small branch of what was AVT in Australia. It does allow us to qualify in a different manner to go after Australian programs because we have indigenous capabilities within the country.
So, a lot of avenues there, a lot of decisions we’re still in the middle of making, Mariana. But there, and in other areas, we’re going to continue to drive growth. We’re going to drive all four of our sales channels for all those products through current programs or records, direct sales, and then international. So, excited by that. As we talk about ’25, and as we go forward, we’ll continue to be very transparent and share what we’re looking to do there.
Mariana Perez Mora: Thank you. And sorry if I’m oversimplifying this, but like, is it fair to think that you will, kind of like, target the international budgets and like the growth in international budgets mostly with your technologies portfolio versus expertise?
John Mengucci: Yes, we will address the international market with our technology portfolio. Now, at the same time, expertise informs tech. So, a lot of the information we get about what other countries are doing, if you look at our expertise that focuses on SOF support on folks out in the field on the wrong side of the wire in a lot of these really dangerous countries, we do get a lot of expertise information that then tells us who we should go target, where and in what order. And that is the beauty and the strength of delivering expertise and tech and how those two parts of our business support each other. Thanks for the questions, Mariana.
Mariana Perez Mora: Thanks so much.
Operator: Your next question is from the line of Matt Akers with Wells Fargo. Please go ahead.
Matthew Akers: Hey, guys. Good morning. Thanks for the question.
John Mengucci: Good morning, Matt.
Matthew Akers: I guess, John, how should we think about kind of the long-term growth rate for this business? I think back when you guys did the Investor Day with the quadrant that you’re kind of laying out like a 4% or 5% kind of market growth, and you’re doing more like double-digits this year, it sounds like there’s a lot still to come. So I was just curious if that’s accelerated a little bit.
John Mengucci: Yeah. Look, we are at the point where we’re a reliable mid-single-digit growth company over the long-term, right? We’re still in the ’25 and future year build out. So I don’t want to show too much, because frankly, that will end up kind of changing. But at a macro level, look, we’re a solid better than mid-single-digit growth company going forward. And it really does harken back to how closely we watch free cash flow per share, right? We all talked about margins for a very long time, which was the right thing for us to be talking about, because it takes an enormous amount of topline growth to drive free cash flow per share when our EBITDA margins were sub 8%, okay? We’re excited that we’re actually talking about high 10s.
And 10.7%, 10.8%, 10.9% all count as high-10s. So at a macro level, how we’re driving the ship, which is long term, we’re extremely excited and also encouraged from where we were, frankly, Matt, at that 2019 Investor Day. What we’re focused on as you look at future investments and future growth, it’s going to be near-peer and the counter-terrorism mission. You’ve heard me say so many times, folks, this was always going to be an and case, even though we tried to will it into an or case. It is an and. We’re going to focus on network modernization. We talked about that in the very early, early days after that 2019 meeting. We talked about the importance of electromagnetic spectrum, SIGINT, EW, counter, Counter-UAS. Turn that page five years later, everything, it’s a signal — a signal.
Near-peer threats are going to drive urgency for increased speed and flexibility Spectral. We’re the leading Counter-UAS provider out there today, and the threats are in their infancy stage. I’m not trying to sell fear, but fear is out there because it is a dangerous world, and that’s what we all see. And then, space, right? We talked a lot about on the photonic side, we’ll start to build backlog. We’re the first to launch, first to interface, first to connect, and the US supplier that does design and production fully in the US. So, you know, as we look at how we go forward, there’s plenty of room for us to grow a really nice addressable market for us. And so, if you take a look at where we’ve started, mid-single-digit, topline growth company, focused on margins, ultimately focused on free cash flow per share.
Matthew Akers: Great. Thanks. That’s helpful. And I guess one for Jeff, just the CapEx guide for the year, $80 million, I think implies a pretty big lump in Q4. Just curious what’s going through there.
Jeffrey MacLauchlan: Yeah, there are a couple of things in there, Matt. I would say that the preponderance of it is related to some more efficient facility strategies and some footprint consolidation and management of our kind of physical infrastructure. It’s not at all related to program or growth specific kind of projects.
Matthew Akers: Great. Thank you both.
Jeffrey MacLauchlan: You bet.
Operator: Your next question is from the line of Tobey Sommer with Truist Securities. Please go ahead.
Jasper Bibb: Hey, good morning. This is Jasper Bibb on for Tobey.
John Mengucci: Hi, Jasper.
Jasper Bibb: Really nice growth in the civil business this quarter. Last few quarters, I think that has been, I guess, flat to down with the transition in the background screening contract with DCSA. So, just curious, I guess, what’s driven the acceleration in civil now that it seems like the comps from that contract have rolled off?
Jeffrey MacLauchlan: Yeah, sure.
John Mengucci: Yeah. Go ahead.
Jeffrey MacLauchlan: You’re talking about DoD versus Fed/Civ and sort of how those parts move. Some of it is, if you all remember a number of quarters back, the government, we reclassified our background investigation work. Our DCSA program, that was a Fed/Civ program and that transitioned to DoD. So that was the majority of why you’re seeing some of these deltas. Some of our longer, older re-compete losses, even though that doesn’t happen very often, TSA impact ramped down in the second half of ’23, the anniversary is the fourth quarter of ’24. So things like that, there isn’t any one item or a difference in our strategies, how we’re bidding. So, hopefully, that provides some of the color you were looking for.
