Welcome everyone to this fireside chat with CACI. We are here with John Mengucci, CACI's President and CEO, and Jeff MacLauchlan, CFO. Thank you both for being here again-
Thanks for having us.
at the conference.
Thanks for having us.
In these type of conferences, I like to start with a broad question usually, and it's for people in the audience that are more like generalists. Could you please give a quick overview of like who is CACI and what do you guys do?
Yeah. CACI, we're a national security company, based in Northern Virginia. We are a 60-year-old plus company, been publicly held for about 50 years. 90% of our revenues come from the national security side of the U.S. government budget. 60% of what we deliver is in the technology space, 40% is in the expertise space. We serve seven markets, very resilient markets. Size of the business has grown to $9.4 billion, 27,000 employees. Our ultimate measure of the success of how the company's run is by measuring free cash flow per share growth. That's how we make all of our investment decisions. We have a very flexible and opportunistic capital deployment strategy, and that's how we run the company.
Perfect. I struggle a little when I talk to investors about like it's hard to differentiate for what is tagged defense services, right? Your strategy is a little bit different. It's a mix of what you just mentioned, technologies and a services piece, but also overlap with the primes a lot. What do you do uniquely, and how you do differentiate from like the traditional defense services companies that you were before and some of those competitors to the primes, to the commercial software companies that are also trying now to approach-
Mm-hmm
some national security solutions?
Yeah. Every once in a while, there's a company that comes along like ours that doesn't quite fit in all in each of those three neatly, right?
Yes.
Traditionally, defense services companies, government services companies, whatever our GICS code is really a place where companies traditionally provide inputs. They provide labor hours and experts in different areas, and that's how we support what the Department of War or the intelligence mission is. Where we differentiate is right from that first sentence. 60% of what we deliver are software-based technology solutions across the national security customer base as well as DA, DHS. We don't neatly fit into any one of those three areas, which is why some of the confusion. To us, that confusion means we've differentiated ourselves in a manner that allows us to continue to grow better and faster. We're much more relevant to where the fight is today than where it was in the past.
We believed as early as 2014 when the U.S. government moved to low price technically acceptable as it was buying services, which really meant that past performance did not matter, and we found ourselves losing bids based on price, which means that the market was going to commoditize. We've all gone to business school. We all understand that if you only differentiate on price, then it's highly likely it's a commodity business. We moved the company more towards can we use our position to win in our procurements that we've earned with customers for over 50 years at that time? Can we move the company forward? We were always an acquisitive company. How do we buy the right building blocks, acquire those, and build a complete technology business around it? That's what we've done.
We do differentiate from many of our GICS code brethren in that we have mostly exited the buy the hour services business. If you're looking for a buy the hour services company, we're not the right investment for you. If you're looking for a modernized company that is looking to provide exquisite technology solutions that are all software-based, that are driving the business measuring free cash flow per share, not number of hours billed, then you've found the right company. We've been able to grow better than other folks in the sector from a top and a bottom-line growth. Again, I'm gonna focus on free cash flow. That is our ultimate measurement in how we manage the business, whether it's at a line of business level or one of our markets or even at the program level.
We're very maniacal about making certain that every decision we make drives free cash flow per share. That's sort of how we're different. That's why we're different. It's a conscious move into delivering tech. We always believed that there was this echelon of work that the large aerospace and defense prime contractors, they are set up to do a certain thing very well. They're set there to build mission platforms day in and day out. There's a high amount of rigor that is needed in that, quality checks, unionized workforces, production facilities. We just believe that this part of the business that we're needing to be much more agile, but also, deliver with certainty and speed, and that's what we have created.
The fact that we say our technology is all software-based, it brings in a whole another echelon of folks who, you know, do SaaS type of work. We're not a SaaS provider. We just want all of our technology to be software defined because that allows us to change it at the pace of mission. If you're looking at any of the current conflicts today, you understand that with drone warfare and electronic warfare, which are two very large things that we are a part of, that just begs the fact that your solutions need to continually change.
You just mentioned there's like software-defined solutions.
Mm-hmm.
You also have expertise.
Mm-hmm.
When I think about your technology, what was it, like a fourth of the business, like-
Yeah.
10 years ago? Now it's like it was 50% last year, and you said 60% now. What is the right balance between, like expertise and software?
Yeah, you know, I'm not sure. I mean, clearly 100% of the business being tech is not what we're looking for because there's a strong interplay between the expertise that we provide and the end technology that we provide. Some examples of the expertise work that we have today, we have 1,400 people that are co-located with the five large combatant commanders all around the globe. That allows us to have unique access to every minute of every conflict that the U.S. is involved in, to understand what technologies are working, which ones aren't, where are the gaps, how are we prosecuting different conflicts, what's the EW picture look like there. That's all first-hand knowledge that our 1,400 people. Yes, we do sell that as expertise.
I like to say it's highly legal but grossly unfair that we get to see that on an hourly basis. That expertise in positions like those folks, whether it's in intel analyst, targeting analysts, and I'll provide that constant feedback loop to us. We then invest ahead of customer need using our own balance sheet, not reimbursable through the U.S. government, which then allows us to sell the technology that we create in a commercial-like manner, which is exactly what this administration wants. Invest ahead of customer need. We don't place very risky bets 'cause every bet we place on building the tech is well informed by the experts that we have out in the field. Whether 40% is the right percent or 30%, it's never going to be zero.
What's really important is we're not involved in the work of racing to the bottom, trying to bid the lowest rate to go deliver, you know, Jimmy or Julie or Johnny. It's not very much. We're very tactically focused on making certain every person that we deliver to the government as an input, that they're very responsible to help us driving out outcomes, which is what drives our technology business.
Do you have any examples of, like, work that you have won because of this, like, double-legged type of, like, capability?
Yeah, sure. I mean, plenty. A couple of them that, so if you can imagine, people being involved in a combatant commander's fight or conflict, understanding what the electromagnetic spectrum looks like there and the type of EW effects that work, the type of EW effects that do not work, and the type of effects that a commander doesn't have today but wishes that they had tomorrow, we build very exquisite EW solutions. And again, software-based. So in the area of drones and counter-drones, a lot of field-based experience as to how are drones being flown, whether it's large near-peer countries or nation states. And the lesson that those enemies change their tactics every four to eight hours continuously over a three or four-year period.
Every four to eight hours, the signature that those threats fly in is completely different than it was four hours earlier. For us to understand the nature, when we say we build counter-drone solutions, you know, hundreds of systems, thousands of sensors that are out there with hundreds of real-time confirmed kills in a non-kinetic, low, no collateral manner, that's a calling card that just about every combat commander, everybody in the United States military knows. I know that we're in a very busy time where a lot of companies are claiming they have counter-UAS solutions. I'm willing to say we probably have some of the best, because we have those invented folks there, and there's many more other examples.
Just picture everywhere where the technology could be deployed if you had folks, which we do, in those turn circles understanding what the mission really is and the threat. It unfairly but, you know, responsibly does inform us of how we wanna make those investments.
I would love to double tap on counter-UAS because you were one of the first companies to start talking about these capabilities and now, as you said, many are trying to, like, provide solutions-
Sure.
to that became, like, more obvious of a challenge and a problem. How do you differentiate, and what is the challenge towards actually, like, with a government that is looking for diversity and, like, new solutions and is open to, like, these new entrants, how do you balance that and how competitive it is?
Yeah. Let me start with the last point first. I think what the administration is looking for is the traditional defense contractor, and this is the way the government sees it. There's 100 different views. I'm not on stage to tell you that companies are not doing a great job. There are companies who make large platforms across the federal government. The administration in some areas, their review is they always take too long, they always late, they always cost too much. Always and never are two terms I never use because things are not that, you know, that fixed. Yes, I just did use the term never.
He meant he rarely uses it.
Rarely uses it. I wanna set that context because what the government's looking for is the threats are gonna continually change. You cannot tell me, the administration, that there's not one thing that private companies, public companies can invest in that can help us out. We have been that company since 2017, have been investing ahead of customer need, okay? Where we are taking the expertise we have, we are building 80% solutions, we're putting those into the field. They're also software based. We allow the customer to try a little bit, and then we build some, and then we'll get to an agreement where we can go to full rate production in a much quicker manner, like 1.5 year versus an eight-year to 10-year period. That's what the administration is looking for.
We looked at the counter-drone market. We do differentiate. There's everybody out there today has a counter-drone solution. It's like when AI first came out, I'm sure we're gonna talk about AI at some point today. You know, as soon as AI came out, I went to the Consumer Electronics Show. I'm looking at a cable company who builds power cables, and they're AI approved, okay? Because they run a server that runs AI, right? The latest budget where we have is counter-drone work. What's important about countering drones is distance. How far out can you detect that threat to give you time to take the right course of action?
We all know the economic side of counter-drone work is we as a nation, other partner nations cannot afford to spend $2 million on a missile, take a $30,000 drone down. We've already heard that. If you let that continue, you'll lose the economic war. Eventually, you lose the overall war. Our solutions are at a distance that give commanders 18 minutes of decision time, not six seconds. Majority of what you all hear about today is 1 km-3 km on a small class one drone that gives a commander about six seconds of decision time, and you're only seeing 1 km-3 km. It takes you two seconds for your mind to react. You got four seconds to pick the right button to hit. If you miss it, you're going to get hit.
It's great to talk about low-cost drone solutions. There are low-cost drones, but the way to find them in either cellular or satellite-based or using radar, using passive radar, active radar, using RF. There's a multiple number of sensors you need to be able to track these things. Not only track them, but find them and then come up with targeting. You can either pass to a kinetic kill or you can non-kinetically take those down. A software baseline that learns continuously, it's all AI based. As we find other threats and other cyber bullets that we can send to those drones, we can update everybody's systems concurrently all over the world. It's a very different scale, a very different level of discrimination, and something that is selling very well today, will continue to sell very well.
I still think that market is in the early innings. Like, how much, how large it's gonna be, like, five years from now, if you wanna measure that, and then how are you seeing between, like, I think the problem is clear, and there is a will, and the Department of War identified that. Like, how many dollars are they actually, like, spending towards that to happen as soon as possible?
I think you look to two different budgets. In the reconciliation bills, the part of the Golden Dome, the $150 billion that has multi-year money, a portion of that that we're interested in is left of launch, which is how do we prevent as many missiles that are out there that could come at the U.S. from launching, versus having them launch and having to detect and then use other means to take those down. Then the other area is a counter-UAS layer. A portion of the $150 billion will clearly be spent on that layer. On the DHS side, protecting borders, protecting all the critical infrastructure inside the U.S., protecting all of the Department of War bases within the U.S.
Those are all avenues where the U.S. government is gonna be spending, you know, billions of dollars. We recently took our total addressable market up from around $280 billion- $300 billion based on we expect that across all of our electronic warfare areas has probably added $20 billion to our addressable market based on U.S. government spend. We sell to all Five Eyes countries today, a multitude of different electronic warfare systems. We're in Eastern Europe as well. I think we've got 18 to 20 other companies that we sold to. It is part of that $2 billion of annual revenue, and it will continue to grow.
You have mentioned electronic warfare, the electromagnetic environment, and I think to investors, it was clear the applications for like tracking and like actually targeting like drones and missiles. Like to like explain it to the generalist investor, where else you could actually also like apply these like electromagnetic like capabilities in the war of today?
Yeah. We just announced and closed on a rather large acquisition, ARKA. It was a Blackstone asset for the last five years. It came out of the merger of UTC and Raytheon. It was an asset that we looked at. We're a highly acquisitive company. We looked at it about five years back. We've been able to track it. Their role in Golden Dome and looking at electromagnetic spectrum is to use they build space-based EOIR sensors. Imagery data, creating that, and not only pushing that information down to the ground, but they have coupled that now with an agentic AI solution that allows many models to go into that data streams coming down.
With extreme knowledge of the data, which is crucial to AI working, they've trained their models on the actual classified data and top secret data. Secret data, unclassified data all comes down from these assets. It's not as though we're using a frontier model that was trained on the internet and having to modify and make that work. Being inside the circle allows us to build models faster. That's another area where all the information we glean from that goes into a common baseline, and that counter-UAS baseline also does counter space. If somebody's flying a drone using space assets, how do we counter the space link to stop communications from space to the drone and any other unmanned system? A lot of applications for it.
It's part of our $2 billion of our $9.4 billion of our revenue. What we have is we have past performance credentials. We have hundreds of confirmed kills. We're not on a range where everything is fixed. I'm flying my own drone, having to find it. We're actually finding enemy drones, and like it or not, they don't tell us where they're going to be, right? You actually have to find them, and it's why we have one of the only proven solutions to it.
You mentioned earlier we'll touch base on AI, of course, because everyone wants to talk about AI, right?
Here.
in this context, right?
Yeah.
How much of that, like, the LLM models and agents are advancing, like, pretty fast, but they are also starting to be, like, more common in between themselves. Like, when you have to choose between, like, choosing a commercial solution versus, like, doing bespoke things, how you balance that?
The AI solutions that we provide are actually tested on a number of models. We're a partner with Amazon. They have a layer of their infrastructure. We can take the models that we're creating, and we can run them with Anthropic, we can run them in OpenAI, we can run it with Gemini, I think, which is the Google model. We can remove and replace those different items just like sockets. We're gonna plug those in, see how our models run with theirs. The other thing that's different about what's going on in the commercial space and that which is trying to come into the government space is that most models are working on a defined set. It's a defined data set, and it's a defined solution. I'm an insurance company.
I wanna process all of my claims without any more people, right? I do fire, theft, and auto. I go through decades worth of data. A model learns it, understands what actually pays out and all. It's a discrete question to be answered, and that works awesome for them. The issue in national security space is those hundreds and thousands of questions change every week because the threats continue to change. How do you base a model? The best way to build your models is to have it rehearse and understand the actual zeros and ones coming from a multitude of different sensors, okay? Far more data that's being used on the commercial side because it's continually coming down to you. It's never static. It's continually dynamic.
Being able to take some of these frontier models and build our models from those, then have those run on the data, it's a very different setup. The other thing I've heard about AI is it's gonna be, you know, revenue deflationary or deflationary to our revenue. True story. If you are delivering people who create software for another client and a machine can create that software, it's clearly deflationary, okay? The software we create is the software that goes into the outcomes, the technology that we deliver. Every time someone can come up with something that can write software faster, we're more than willing to use it 'cause it gets an outcome to the customer faster. That hits speed. It hits agility.
It also can be delivered in a commercial manner, which means since I've invested ahead of that need, and that investment is ours, I can sell it on a purchase order back to the federal government at much better margins. The government gets a faster, swifter solution that's much more agile. We make an additional margin because we made the right bet and actually invest ahead of time. Last thing I'll say about AI is the last time that technology has come in and disrupted a market, did we buy less technology or more technology moving forward? We all buy more. We can't buy enough tech. In the federal government world, when they save $1, they spend $1 because the list of things they have to go work are endless.
It's not as though revenue overall is deflationary. In our agile software jobs, we have customers who have save millions of dollars, and the day after they save it, they call us right back and say, "On this current program, can you do these kind of tasks for the money we just saved?" And that's perfect for us, right? Because you're getting stickier to the customer. The customer's showing that they like to buy outcomes versus inputs. That's what's driven our growth. We made that change, you know, eight to 10 years ago. Companies who say, "Oh, we're doing tech also," that's your best day, being on this stage saying that now you're gonna start doing tech.
Because the next seven years, frankly, is really tough reengineering an entire organization to not deliver people, but to deliver outcomes. It's a very different business model.
It's the same with the federal civilian customers. Would you mind touching base on, like, how is the environment there, if there is any disruption? One thing that you mentioned, when you look at your reporting, right, federal civilian accounts are, like, 20%, but then the national security is 90%. How, like, how you triangulate that?
Yeah. Sorry.
We've realigned our reporting earlier this year, the beginning of the year, to highlight, we thought, better the way we were talking about the business. Defense, Department of War, and the intelligence community, we report explicitly. The bulk of our civil work is in the Department of Homeland Security. It's obviously a civil agency. We consider it national security. We're obviously in the middle of a lot of important initiatives related to the border and a number of items. It is national security, but it's the bulk of our civil as reported. We have a little bit of work with NASA and a little bit of work with Department of Justice that we've had for many, many years, and then it falls off really quickly.
It was a conscious decision years ago when we refactored where the company was going to go. You know, I got there in 2012. The company was a 50-year-old company then. You sort of take stock in where the company's at and what are the, you know, competitive forces you're coming into. It's a pretty simple call, right? National security agencies for 40 years prior had bipartisan support. Only 1/2 of the years did the federal civilian citizen-facing agencies have bipartisan support. Rule of growing your own business is go to where the money is consistent, right? You have to have supportive budgets. We can talk about shutdowns and how that can be disruptive, but that's where we made that decision. We have a very unbalanced portfolio.
Current investors and potential investors, that is a clue that having a balanced portfolio is not always the right thing to do. It may look that way when you look at a pie chart, but from what we deliver, 60% of our business delivering technology, that is very much a high-end called-for item in a $300 billion TAM market without having been involved in the federal civilian area. Our customers, national security, have been shown to move faster from buying labor hours to buying outcomes, and that's what drives margins, it drives growth, and it drives productivity, and it gets solutions out to our customers faster.
Those shutdown dynamics that John referred to, I think are particularly important for a couple reasons. When the government was shut down for 42 days, we had only really modest disruption in the second quarter, tens of millions of dollars of revenue, and we actually raised guidance for the year. We talked about it being timing. DHS now, which has been shut down since February 14th, also is gonna similarly have very minimal disruption. Most of the more important activities that we do are covered either in the reconciliation funding or deemed essential. There's a little bit of administrative, sort of corporate DHS, I'll call it, that may be minimally disrupted in the quarter. Doesn't change our view of the year.
Maybe a little bit of chatter when we report the third quarter. Again, largely unaffected as the broader shutdown did, which really goes to underscore the point that where we've deliberately pivoted the portfolio are in areas where we see really durable demand impulse in areas that, you know, are gonna be relatively unaffected.
In general, how is the award environment, right? Because you have, like, the shutdown. You talk about the reconciliation bill and Golden Dome, but, like, to be fair, it took, like, eight months to actually say where that money was going to be spent. Like, to your expectations, like, how that award environment is actually, like, performing?
The award environment generally has been a little bit slower to restart. I think we're close to getting back to sort of a normal rhythm. If you think about the timing of the shutdown in the middle of the quarter, we were sort of moving into the holidays. There were rumblings about government employees worried about losing their vacation by the end of the year. A lot of people came out of the shutdown, went to vacation. Those and other things have probably contributed a little bit to that sluggishness. But I think what's important here to note is, first of all, it is getting back on pace, and also the fact that, you know, we're really not in a hand-to-mouth sort of mode anymore. We have about 3.5 years revenue in backlog.
Over the last two years or so, the average duration of a contract we've won has been over six years. We had a soft awards quarter last quarter. The quarter before that, it was over two. We talk about awards being lumpy, but really, we sort of keep an eye on the trailing 12 months, where we still feel really good to around 1.3 or so and, you know, confident we'll be in the posture we wanna be as things continue to revert to normal.
Yeah, it's definitely an environment where we're not using it as a reason that that happened to us, and therefore we can't hit our revenue guide that we provided. We actually said, "Here's the hit that we had in the second quarter." We raised guidance, okay? Just to show the resiliency of the markets that we're in, and we're very much on track to finish the year within that guide. Again, it's a very different business. We're not as impacted as we may have been eight to 10 years back.
When I think about you guys, I also think that it wasn't only like, okay, national security versus civilian or like services versus tech. There was also a really disciplined and focused determination what type of like, contracts you are going to go after. In terms of investments, you are investing towards capabilities and not just like the contract work that was about to be awarded. Like, when you think about like bid and proposal, will you please discuss like that? Like you talk about duration and size, but in the calls, you also talk about like new awards. Would you mind discussing like that strategy and how it plays out?
Yeah, I mean, I can start. Part of the strategy to move the company forward was you had to change what a good opportunity looked like. We, as I said, when we said we're gonna make this pivot to more tech focus, and we had to update every single function. Business development and sales were the very first team, right? That's where sort of reality hit. The people who used to sell 35 people or 65 people on a specific contract now being told, "Sell a counter-UAS system as an outcome at 65% gross margin and understand what the threat is." Well, how do I sell that? Well, you don't without an awful lot of training. We had to retool our business development team. We came up with a few measuring points.
One is to bid less and win more. We're gonna also go after larger, longer duration jobs, 'cause when you do that, it stops the chatter, and it stops these quick whips from left to right of this customer. I heard this customer has a job to bid on. If we ever heard of it 1.5 year earlier, we traditionally not always or never, but we rarely bid a job if we haven't had 1.5 year to two years to go shape it. You should see that as a positive because a $9.4 billion company with a $300 billion total addressable market, you have options, you have choices, okay? You have choices in how you approach a job. You have choices in how you invest ahead of customer need.
You can show them the art of the possible, so the customer is a much better buying customer. Trust me, I love the smartest customers out there. The ones who aren't at that level, really tough to work with. They take a lot of leadership time away from managing the business. Therefore, how about we not chase that kind of business? Which is why we're not hand-to-mouth, which is why we're looking at longer duration jobs. You can't decide to do that on a Wednesday. You've got to decide that over a three-year or four-year period, you're gonna get your entire workforce into that model where you shape the opportunities. The addressable market's large enough. We can walk away from just about any new bid and really position yourself differently. That's what we've done.
The proof is in the level of backlog and the duration. Jeff, anything else?
Yeah. I think another thing that's interesting about this restructuring and the business contracting environment is the rise of the use of OTAs, other transaction agreements, which have really ballooned here recently. In the last two years, we've had 2.5 x as many OTAs as we had in the previous 5x. This is really an artifact of the industry segmentation that we talked about earlier in our discussion here today, because it really enables us to work collaboratively with customers in a way that gets sort of 80% answers, solutions fielded quickly, and then lets us continue with the customer to iterate and refine and evolve and get a better answer more quickly. It's a really interesting arrangement, I think, to deal with the changes that we see in the speed of the fight and the technology implications that that brings.
I'll add one other point, which is another differentiation point back to your very first question around how do we differ. Our company was intentionally set up early last decade to really position ourselves to be, to deliver under FAR Part 12 and FAR Part 15. FAR Part 15 is cost accounting standard, disclose all your costs. The government can scrutinize costs, and they can decide what kind of fee structure they wanna put on top of that. The other part, half of our business is commercially set up. It's a cost of goods sold business.
It cannot do time and material or cost-plus work because they don't have certified cost and pricing rates, which, with a government that's been moving more towards buying commercial like, not buying from commercial companies, buying commercial like with same terms and conditions, that's allowed us to decide which part of the business we wanna make bids from. The customer wants an 80% solution, they wanna buy it from a purchase order, we're not gonna debate fee, but I'm gonna bid that out of one of my commercial companies, and that allows us clear, clean division and clear, clean access to customers based on how they wanna buy. I don't have to drive a firm fixed price arrangement.
I can invest ahead of need, build an 80% solution in a software-defined handheld device or a box or a rack, a mobile fixed unit thing, and sell that as a, you know, quantity 10 times price X, and that's how we deliver. That is completely 100% differentiated from the majority of the companies in the aerospace and defense area, not just those who are in the defense services area.
How is that impacting margins and how that's gonna continue to impact margins?
Yeah, well, it generally contributes. It's consistent with the increased technology content where we've said margins on the average are 300 basis points or so better than the expertise side of the business. Generally, that efficiency is good for customers and good for us. It lets us move quickly in a more streamlined way, which generally contributes to better margins.
Drives free cash flow, right? Allows us to manage top and bottom line. We have opportunities to go, you know, juice margins. We're gonna go juice margins 'cause we're able to sell more tech. In other times, we have a hotter hand on the revenue side. Maybe we hold margins consistent. Every operational decision is made around how does this increase free cash flow and free cash flow per share.
Now with strong free cash flow generation, the next good problem to have is capital deployment.
Love that problem.
How do you prioritize it?
I think probably ARKA is our best recent example. I mean, we have said for a number of years that our approach to capital deployment is to be flexible and opportunistic. We do not pay a dividend. We really are looking at share repurchases, which we've done a fair amount of over the last five years or six years. I think we bought in 12% or so of our shares and acquisitions where we've obviously been very active and are serial acquirers. We've used that environment to sort of seesaw back and forth between where we saw the best opportunities and the best near-term ways to allocate capital.
We like to be 2.5x-3x trailing twelve months EBITDA, and we're prepared. We've said to pop up a turn or so above that, which we have with our ARKA acquisition. I think over the next six quarters or so, we expect to be back around 3.1x or 3.2x. Just our latest instance of executing on that capital allocation approach.
Another thing to be aware of also is we talk about M&A's very, very frequently because we are a highly acquisitive company. We've been doing acquisitions for the better part of 35 years or 40 years, probably done just under 100. What's really important is we are in seven markets across the federal government. We do a strategic plan every year and look at it twice each year to look for gaps. It is only those gaps we look for acquisitions. There's companies who will go out there and never do an acquisition for a long time until revenue growth is tough, and then they're gonna be serial acquirers for a quarter. You know, frankly, if you're buying revenue, it's not a way to grow organically.
We really look to buy those assets that are gonna fill a capability or customer relationship gap. If there's a capability gap that I can fill by investing, I'll do that 100% of the time. Most times you don't have that timeline. Somebody else thought of a better idea quicker, and they've actually productized that. Most of those smaller companies we know by name. We've subbed to them, or they have subbed to us, so we understand their, you know, cultural rhythms, and it works very well. Our ability to provide certain closure is well known across sellers out there. We get a lot of, you know, directed calls that say, "Hey, I've got this asset.
Why don't you come take a look at it?" That's really the true report card, right? If we're treating sellers in a fair-like manner where they come back and have other manner, where they come back and have other properties, and those previous owners are still with us or they're a great reference for us, then that model works. But we don't just go out to buy revenue for revenue's sake. It has to fill a capability or a customer relationship gap, you know.
Do you think in what I would liken as a really competitive M&A environment for critical capabilities, is the cultural piece, what is it that attracts those targets to come to you?
Yeah, you know, it's our absolute myopic view of mission, how we support the national security mission. 40% of our workforce are veterans. They understand the mission very, very well. People like that, they understand that we have great connections across the entire buying community. We've been a, you know, a company for 60 some years. It helps. We do keep good tabs, and we do earn value and build value for those folks who actually sell to us. The fact that we are an exquisite provider, we meet our contractual commitments, the culture is right, and the relationships that we've built across the industry at times breaks ties.
You know, we're not always paying the highest price, we're not always the highest price buyer, but we are the one that's gonna guarantee certainty of closure and guarantee a good future for that asset, so.
Perfect. I could stay here, like, asking you questions, like, all day. We only have, like, this many minutes. Thank you so much for being here.
Yeah. Thanks for having us.
Thanks, Arianna. Always a pleasure.
Thanks, everybody.