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[00:00:04] Ladies, gentlemen, thank you for standing by. Welcome to the CACI International first quarter 2021 one conference call. Today's call is being recorded at this time. All lines are in the listening mode. Later, we will announce the opportunity for questions and instructions will be given at that time. If you should need any assistance during this call, please press star then zero and an operator will assist you. At this time, I would like to turn the conference over to Dan Lederberg, senior vice president of Investor Relations for a CACI International. Please go ahead, sir.
[00:00:39] Well, thank you, Chad. And good morning, everyone. I'm Dan Lectors, senior vice president of Investor Relations for CCI International. Thank you for joining us this morning. We are providing presentation slides, so let's move to slide number two, please. There will be statements in this call that do not address historical facts and as such constitute forward looking statements under current law. These statements reflect our views as of today and are subject to important factors that could cause our actual results to differ materially from anticipated. Those factors are listed at the bottom of last night's press release and are described in the company's SEC filings. Our Safe Harbor statement is included and should be incorporated as part of any transcript of this call. I would also like to point out that our presentation will include discussion of nongay financial measures. These should not be considered in isolation or as a substitute for performance measures prepared in accordance with. Let's turn to slide three. Please open our discussion this morning. Here's John Mengucci, president, and chief executive officer of CACI International John.
[00:01:45] Thanks, Sam, and good morning, everyone. Thank you for joining us to discuss our first quarter fiscal 2021 results and guidance. With me this morning, our time, Lutron and our chief financial officer, and Greg Bradford, president of CCI Ltd., who's joining us from the U.K. as we all continue to address the covid-19 pandemic, I'd like to take a moment to thank our employees for their dedication. You all have risen above expectations to continue supporting the important missions of our customers in this company, and you've done so in a safe manner. You've also supported community programs delivering food to hospitals, first responders and food banks. Your commitment to fulfilling customer missions while supporting our communities and neighbors during this time is beyond admirable. I couldn't be more humbled by the positive impacts we have collectively delivered. And I think each of you for your efforts.
[00:02:46] Five, four, please. Now, turning to our first quarter fiscal 2001 results, we delivered significant growth, profitability, and cash flow. We grew revenue by seven percent and net income and earnings per share by almost 40 percent. Compared to a year ago. Profitability was higher than expected, primarily as a result of favorable contract performance, as well as enhanced cost controls in the corporate environment. We continue to mitigate the impacts of covid-19 working closely with our customers to safely return employees to work. This includes creative alternatives such as temporary shifts, redesigning work plans so more work is done outside of classified facilities and utilizing teleworking to the extent possible. We are fortunate that our business has been less impacted by covid compared to other parts of the economy, both by the nature of our work and the specific actions we have been taking. We have less that we have had less than one percent of our 23000 employee populations contract covid. This is a testament to the hard work being done throughout our company to ensure work continues in a safe manner for everyone involved. These efforts have been quite successful, mitigating the overall covid headwinds below our initial estimates as a result of this progress and strong operational performance. We are raising our Fiscal 21 guidance to reflect higher revenue and net income growth.
[00:04:21] Increase the margin expansion and even more robust cash flow. Tom will discuss all of this in more detail shortly by please. About a year ago, we held an investor day during which we introduced our four quadrant framework to describe our business, the framework to fix what and to whom we deliver. We deliver expertise and technology to enterprise and mission customers. What's most important in that split is what we deliver expertise and technology when we provide expertise, we provide talent with specific, technical, functional and domain knowledge. When we provide technology, we provide software and hardware capabilities enabled by innovative R&D expertise, delivers respectable margins with low capital requirements and the opportunity to build past performance and deep customer relationships. Technology is more differentiated with a higher growth addressable market and higher average margins. In order to enhance transparency into our business, we are now disclosing revenue by expertise and technology. You'll notice that in the first quarter of fiscal 2021, we reported growth in both revenue streams and drove faster growth in the higher margin technology stream. This is consistent with our strategy and supports our financial objectives to help grow our addressable market and expand margins.
[00:05:52] Slide six police. We had solid contract awards in the first quarter representing a book to bill of one point three times with wins across all four quadrants and more than half of the awards representing technology work. We also continue to execute against our large and growing backlog of twenty two billion dollars, which is up 13 percent from a year ago. With an expertise, we want to work with the Department of Veterans Affairs to provide talent that will assist the VA in its financial management system, modernization efforts. We also want to work with the Department of Homeland Security to apply our data analytics experts to help them detect criminal activities. Within technology, we significantly expanded our work with DHS to provide enterprise it, utilizing an innovative service model to enhance productivity and efficiency for both CCI and our customer. And we want new cybersecurity work within the United States Army, DARPA, and the intelligence community. In addition, we are continuing to ramp recent large technology awards like Biegel and TCS, leveraging our differentiated capabilities and strong past performance to expand these programs. For example, agile software development is increasingly being recognized for its benefits and being utilized on larger programs, sometimes consolidations of multiple contracts are industry leading edge solutions. Factory and past performance are competitive differentiators that allow us to bring new work onto large marquee programs such as these, which will continue to drive growth beyond fiscal twenty one.
[00:07:36] By seven, please, to ensure CCI remains ready to address our customers most critical priorities. We continue to invest ahead of customer demand. In addition to the higher value our customers receive, this investment allows us to generate intellectual property, enhance competitive differentiation and drive future growth, all of which drive shareholder value. In cyber, we are investing in both offensive and defensive technologies, as well as modeling the simulation environments to enhance training and effectiveness around 5G. We are investing in the capabilities and technologies to collect and process new 5G signals and frequencies, adding 5G capabilities to our expanding number of sensors and developing tools to ensure the resiliency of 5G networks. More broadly, we are addressing the convergence of signals intelligence, electronic warfare, cyber and communications to enable the U.S. to dominate the electromagnetic spectrum. Enron artificial intelligence, we have over 100 projects developing A.I. capabilities across many areas of our business. All of these investments are targeted at well-funded areas of the federal budget, supporting solutions necessary to combat both counterterrorism and near threats. Well, on the topic of investment, I'm very pleased with the performance of our recent acquisition of Essent percent Vision Technologies or about the bottom line is they're delivering in line with expectations. Enhancing EROI, LIRR product offerings and providing value, creating synergy solutions.
[00:09:16] We have had several joint meetings with representatives from the DOD joint counter U.S. office, or JCO, discussing their desired enhancements to both the ABC Mobile and CCI fixed site offerings internally. We are already working on ways to leverage technology into skys large fixit Cornelius U.S. installed base and vice versa by Hazlitt's. The has been in business for nearly six decades, and during that time we have prospered through many election cycles. One thing we've seen is that investment in defense is bipartisan, especially in times of an elevated threat environment like we see now. Our addressable market remains healthy, with all indications we will continue to see sustained technology investment to support national security and modernization priorities. When we look at the CIA's capabilities against these priorities, we see tremendous opportunity within our 230 thirty billion and growing addressable market. Our awards and backlog are a testament to his ability to enable our customers to modernize its infrastructure and business applications, secure networks, and communications, and enhance offensive and defensive capabilities to enable the warfighter to dominate across all demands. Our alignment to these critical areas makes our business resilient, allows us to take market share, and gives us confidence in going on an ongoing growth prospects. Now over to Tom to provide even more insights into our financial performance and increase guidance. Tom.
[00:10:56] Thank you, John. And good morning, everyone. Let's turn to slide number nine. Our first quarter was an excellent start to the year we generated revenue of one point five dollars billion. Representing overall growth of seven percent in organic growth is six percent with the simultaneous increase in margins. As John mentioned, we have begun to disclose revenue by expertise in technology. Compared with the first quarter last year, expertise revenue grew 2.5 percent in technology, revenue grew over 12 percent. Technology programs, on average are delivering margins about 300 to 500 basis points higher than extricates. Both expertise in technology activities are important to our enterprise mission customers, and we see growth opportunities across all four quadrants. That said, the height of growth in technology is helping us drive our margin expansion. Adjusted EBITA margin of the quarter was eleven point three percent, an increase of 190 basis points from year ago. The majority of this improvement was our ability to drive favorable contract performance on several programs, including our creative efforts to materially reduce costs on certain fixed price contracts while operating under covid. In addition, we were successful in navigating in the new environment in minimize the direct and indirect impact of the pandemic rechange. We continue to drive strong program execution and to control costs. We were able to keep our indirect cost in line with last year, indicative of our ability to realize the efficiency and control costs while investing for growth. Net income of 94 million dollars increased 38 percent from the first quarter of last year, as did diluted earnings per share. By 10, please, first quarter operating cash flow, excluding our facility, was one hundred ninety three dollars million, an increase of 78 million dollars from a year ago, reflective of our revenue, gross margin expansion in effective cash collection in Working Capital Management.
[00:13:07] We successfully invoiced and collected revenue associated with Section 36 10 work, even with a complex requirement. The deferral of the employee payroll tax payments under the act contributed around 30 million dollars to the quarter's cash flow. Do you? So was that 54 days excluding RJR facility down from 59 days from last year? We closed the first quarter with the net debt to trailing 12 month adjusted EPS at two point four times, nearly unchanged versus last quarter, even with the acquisition of about. So I do love the place we are increasing our fiscal 2014 revenue guidance range by 50 million dollars, which implies higher organic growth of around six point three percent at the midpoint as we continually through successfully and safely return people to work. We expect the covid-19 impact through calendar year end to be about 50 million dollars less than initially anticipated. A credit to our team. We also are raising our fiscal 2001 net income and cash flow guidance to twenty five million dollars. Net income range increase consists of around 10 million dollars from the lower covid impact, while the remaining is due to the first quarter one time favorable contract before. We now expect fiscal 21 operating cash flows to be at least six hundred million dollars, driven by higher revenue margin expansion and continued strong working capital management was expected by 21 percent of around 70 million dollars. Free cash flow is expected to be approximately five hundred thirty million dollars. Free cash flow margin, that is free cash flow divided by revenue, adjusting for the 35 million dollar annual payroll tax deferral is a very healthy at about eight percent and full year free cash flow conversion after adjusting for the payroll tax deferral is expected to be 125 percent range as a percentage of net income at the midpoint.
[00:15:18] The midpoint of our FBI 2001 adjusted guidance also implies adjusted epitope margins of about ten point eight percent, up from 10 percent from last year, excluding the items I already mentioned, the underlying margin. This is a change from our initial guidance. We continue to demonstrate our ability to grow revenue organically while increasing market. Given the strong performance, we now expect diluted earnings per share growth of around eight percent at the midpoint. Lastly, our full year effective tax rate is expected to be about twenty two point five percent, with a lower tax rate in the second quarter due to the impact investing the stock awards, which were granted in prior years. So I surplice trying to forward indicators. Our prospects remain strong for fiscal year 21. We now expect 90 percent of our revenues to come from existing programs, six percent from recompete in four percent from new business. We have nine point five dollars billion as submitted did such valuation with over 70 percent of that for new business to CCI and 60 percent of the submitted bids representing technology work. We expect to submit another sixteen point four dollars billion over the next two quarters, with over 70 percent in that for new business to CCI and about 50 percent is expected submittals representing technology endeavors. With that, I'll turn the call back over to John.
[00:16:49] Thank you, John. Let's go to slide 13, please. We delivered a very nice first quarter, growing revenue, expanding margins, and generating robust levels of cash. We are positioned well, performing well, and producing strong results. We are effectively dealing with the impacts of covid and delivering organic revenue growth with margin expansion. Before I turn the call over to questions, I'd like to address a concern that I believe is weighing on our sector broadly, and that is the potential for budget pressure over the next few years. Whether that turns out to be true or not, what I can confidently say is the CSI. That entered the era of sequestration and budget downturns is very different than the CCI of today. We were primarily a company delivering enterprise expertise, mission expertise under local funding, and also had a significant element of our revenue coming from passthrough material buys for efforts in Iraq and Afghanistan. So we had a book of business susceptible to budget pressures and directly impacted by the drawdown in Southwest Asia. Today, our business is remarkably different. We executed a purposeful strategy over the last eight years to add significant elements of technology to our portfolio, an area that is more resilient and differentiated in any budget environment. We provide mission expertise in areas like intelligence analysis, cyber and engineering services. We have moved from enterprise expertise engagements to enterprise technology engagements, delivering capabilities and cloud migration, agile software development, artificial intelligence, and machine learning. In addition, since that shift, we have built a 22 billion dollar backlog, almost four years of revenue of larger and longer duration contracts, that gives us a higher level of growth visibility than ever before. The bottom line is we remain confident in our ability to create value for our customers and our shareholders. Our employees talent, innovation and commitment to our customers missions is at the heart of Sakha strong performance and our success and executing this strategy. The culture of character and innovation is the driving force of our success, not the result of it. I am proud of how our people continue to perform in these unprecedented times, and I am honored each day to work alongside each of you. With that said, let's open the call for questions.
[00:19:29] Thank you, sir. We will now begin the question and answer session to ask a question. You may press star then on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys to withdraw your question, please. Press star. Then two, we please ask that you limit yourself to one question and one follow up. If you have additional questions, you may re-enter the questions you at this time. We will pause momentarily to assemble ours. In the first question will come from Robert Spingarn with Credit Suisse. Please go ahead.
[00:20:08] Hi, good morning and thanks for taking my question. John, you actually just hit on what I wanted to ask about, which is this disconnect, I think, in the stock and the backdrop. And it seems to us that the stock's discounting almost a 30 percent decline in free cash flow over, you know, the next presidential administration. And you did talk about how your position, it would seem to us that even if there's budget pressure, there'll be a lot of focus on cyber and unmanned and on near pure adversaries. Could you talk a little bit more again about your portfolio and how you address those and whether that 30 percent type number is even remotely possible?
[00:20:56] Yeah, Rob, thanks. I guess first off, you mentioned cash, which is an absolute focus of everybody throughout this company. I'm very, very proud of what the entire team has done driving GSO down with an absolute focus. So we are in a much better position today than we were even one year, one year back. Now, let's talk a little bit about that. Yeah, Rob, you know, we're all watching what happens with our stock. And we're looking at, you know, are we positioned to the best of our ability as we move forward within? This is some people are saying within this next era. Absolutely. So we are invested in things like artificial intelligence, intelligence and machine learning and everything, the electromagnetic spectrum, you know, things around investments placed very wisely in over a long period of time because we are a strategy driven company. Strategy is a place where we come from. We have always watched the electromagnetic spectrum.
[00:21:59] We firmly believe that whether a counterterror attack or a near peer threat, we're going to be best served by quick to field technology. So we have invested heavily in EWR, we've invested heavily in A.I. and machine learning and in 5G, both offensive and defensive measures as well as withinside or so as for where the government will continue to spend money, whether we're talking about reduced budgets or not, those are five to seven areas that both parties, both candidates have been very specific upon. Both want a strong national security and where CCI is focused and where we deliver more times and not technology versus talent, we are absolutely focused on those areas and we believe that is the key for our continued growth. If I if I look at the intellectual property that we've picked up in the patents from our acquisition of G.S., from the capabilities of actually building devices and products from both Ebbitt and Mastodon's, those are all very well thought out strategic remedies to ensure we had the right capability, the right customer gaps for us to persevere in any budget environment. I want to talk a little bit about cash.
[00:23:18] Yeah, cash that I mentioned is a focus of us. We've seen strong cash flow in all of our best interests. These kind of drives value to our shareholders. I can be very proud of the efforts to kind of reduce DSO. And I will note that under the covid Cures Act kind of regime, we've been successful in navigating some complex invoicing requirements, in collecting you very effectively and efficiently with very, very low invoice, reject or rework rates. So happy with that, you know, cash flow conversions by any metric know free cash flow or free cash flow as a percentage of revenue or net income, et cetera. You know, we stack up quite well and very proud of that.
[00:24:09] So as a follow up to what you both said, you know, given that you're growing EBITDA twenty nine percent this quarter, the stock is trading at 10 percent cash yield, at least the way we do the math. And based on the comments you both just made, is there a point where you say that your business is a better value than one you might acquire, and you start to buy back stock?
[00:24:34] Yeah, Rob, thanks. Clearly, our capital deployment is something that Tom and I look at and we review with the board on a quarterly, quarterly basis. You know, we've always been focused on M&A is our number one priority for capital deployment. I'd also say that it wasn't more than seven or eight years back when we looked at that capital deployment strategy and we looked at the ability for us to find any other properties out there that would quickly grow our capabilities and our customer relationships. And we bought back, I believe, 25 percent of our stock. So, you know, given where stock prices are today, you know, as the CEO of this company, I, I always believe that it's undervalued. But we will continue to do they'll do those looks, continue to run our models, and always evaluate other investors investment options.
[00:25:35] Thank you, our next question will come from Tobey Sommer with Truist. Please go ahead.
[00:25:42] Hey, good morning, this is Jasper Beard filling in for Toby Snow on the corner, ranting on Biegel and takes us curious what your experience has been there with hiring and working around some of the kind of covid related challenges with starting new projects.
[00:25:58] Josh, thanks so much. Talk about Biegel and ticks, both two of our larger, more recent awards. I think we won Biegel second quarter last year and then we picked up Cheek's fourth quarter of last year. On the Beagle side, we've completed all of our initial transition mile milestones. So that's pretty much the work that we do when it's to take away work from someone else. So all those transition milestones that have taken place are our complete and also states. The majority of those were during covid and we continue to ramp up staff. We're continuing to bring new work on this program. And, you know, began is a great example of what I shared to my during my prepared remarks. Our annual solutions factory is proving more and more each and every day how resilient it is and what a valuable asset it is and capability that we can bring to many customers. We're not into full swing there. But from what we've seen, we've been able to generate the applications and do the software development that our customer desires in a very small amount of time. On Cheek's, if you remember, about 50 percent of that was new, about 20 percent, about 20 percent of that was a competitive take away. All of those transitions are over. We expect to see even more growth on that over the longer term. TCS is a catalog type program where we deliver hundreds of different catalog services to our ANGA customer set and that ramp up will pick up over time. So one very agile based, one more of a catalog based contractor that's been going well, you know, staffing in general. You know, our portfolios products are geese and protect. So some of our elements are less dependent on hiring levels. If I looked at our hiring and our onboarding pretty much on pace to what we expected. Clearly with covid, our attrition is down. But I think that would be a metric that I'd be hard pressed to say that we were unique there.
So, you know, but it's not so much of talent acquisition. Josh and our in our Intel work, as we mentioned, we certainly get people cleared and get them to the right facility or into the right country. And we're still struggling there. But we made great strides.
[00:28:47] And then kind of you mentioned speed to market as a priority earlier, so just with respect to opportunities in the mission tech vertical and the deal completed last quarter, I was hoping you could speak to how you think about, you know, buying technologies to fill those gaps in your portfolio versus developing a solution in-house.
[00:29:06] Yeah. So when we when we look at our investment strategy, we look at it in three different areas. Right. We either provide internal investment, we acquire, or we partner for things that are more commodity based. You will see us partner, HWC, Micro, Microsoft, and others. Those are well-established, very well-run commodity type offerings that we're able to partner with those companies for us to deliver both our enterprise and our mission. Mission Tech. When you talk about speed to market, what we're looking at when we were really looking for there over the last three years, if you go back that far on some of the selective amnesia, what we've done, we continually hear our customers, whether it's Army, whether it's Navy, whether it's Air Force around, speak to the field. So speed to fleet and such. So much of the current counterterrorism battle and the up and rising near here battles are going to be around the ultimate magnetic spectrum. We really wanted to find a way that we could build software, definable anything, products that could be delivered to either special operations force or across the larger green army or across every Navy. You're playing a Navy ship to make sure that they had the best signals protection that they could ever ask for. And the way we deliver that is through filling some of the capability gaps without legs and mastodon LGS understanding the commercial electromagnetic spectrum better than anybody out there on the planet. So anything operating over 2G, 3G, 4G and now 5G networks are well understood and well characterized by those by the folks within that business. And the more often we can take signal changes and threats that are that in the electromagnetic spectrum, we can get those out to the field quickly via software change versus a whole new device. That's what speed Diffie means, and that's why we need to have absolute speed to market. So I like where we are on about where we are on Mount Macedon. We've done some great things with analogous. We've expanded even deeper into five to 5G. And I would see many of those products and those services and offerings find their way into a broader, broader, and set customers over the next three to five years.
[00:31:32] The next question will come from Ben Orenstein with JPMorgan. Please go ahead.
[00:31:40] Hey, good morning, everyone. Good morning. So I wanted to kind of follow up on Rob's question, maybe he's kind of asking this a different way. You know, how do you kind of think about your top line growth profile against a backlog and against some of the total addressable market growth rates that you outlined in the slides? And I mean, is it kind of reasonable or unreasonable to think about you being able to maintain, you know, mid-single digit growth beyond this year?
[00:32:15] Yeah, Ben, thanks. I'm going to come on my answer differently, Ben, as we watch line organic revenue growth, just like everybody else does, but I think we do it a little bit different, different differently than most. We're also combining that with bottom line growth as well. So, you know, can we maintain a mid-single digit revenue growth rate based on our backlog? Absolutely. So can we achieve a higher single digit? Could we get into the double, double? Double digits, perhaps. But what I would ask is that every time we look at the growth that's most important to shareholders and to our customer sets, because increased margin, increased profit allows us to invest ahead of need to drive customer capabilities that they want to see faster, better and cheaper.
[00:33:10] So when I look at our growth model and our strategy that we put in place about eight years back, it was let's get a deeper technology focus that will not only grow topline, but will grow bottom, bottom, bottom line. So that combination of top and bottom line, I think is very unique in our sector. I think it's even more unique during the times that we see ourselves in. It's why we're so focused on this year's performance because we can generate top and bottom line growth during the environment that we sit in today with a generational pandemic. And one would have to say a quite unique election coming up, then we're very confident that we can sustain our top and bottom line growth with a 22 billion dollar war chest worth of backlog in very key investment areas across this federal government space.
[00:34:02] Got it. Thank you. And then just quickly, how much of a covid-19 impact do you have kind of baked in for Q2?
[00:34:14] Yes, so are we. This is Tom spoke about a covid impact initially of between 100 and 150 million dollars off for the first half of the year in based on of recent performance. We reduced that to by 50 million dollars. And so we're expecting 50 to 100 million dollars of revenue impact, in fact, for the first half of the year. Would say that's heavily weighted in the first quarter, in less so in the second quarter. And this is really a testament, you know, as I mentioned in the prepared remarks, which is the team's efforts of trying to navigate the current situation, kind of getting people back to work very, very closely with customers, you know, program managers, you know, contract organizations trying to find creative ways to minimize, you know, that covid impact at the peak sometime into April, May time period, around 10 percent of our hours were associated with, you know, Kris hours. In a second, 36 tended to Kharza. Last time we spoke, who was down to about five percent, now is approximately one percent. So a relatively cut to reduce the impact to some of those direct, you know, covid impacts. I also will say that there's some indirect covid impact as well. Harder to quantify, but there is a sense that, you know, sometimes task for modifications are delayed or the ability to get clearances are delayed or approved. Overseas travel is delayed and that is having an impact as well. But to answer your question out of the quarter and the first half impact, most of it is in the first quarter versus the second quarter.
[00:35:58] Thank you. The next question is from Gavin Parson with Goldman Sachs. Please go ahead. Hey, good morning.
[00:36:06] Morning, Gavin. Guys, on the organic growth bridge or guidance for the year? The six point three percent full year guidance implies pretty much the same rate of growth throughout the rest of the year as you had in the first quarter. Even though Tom Petty comments, the covid headwind goes away. And then in the back half of the year, you lap some of the covid headwinds that you had in the second half of fiscal 20. So I think last quarter you indicated growth would improve throughout the year. So did anything, anything change there, or could you still see some sequential improvement if the pieces fall into place?
[00:36:38] Yes, so, Gavin, this is Tom, you know, as you know, we for the 40 year reign, you know, oftentimes do some shifts between quarters. And so, you know, we're competing with that full year guidance. The first quarter turned out better than we thought. You know, it had a really nice performance, you know, in a number of areas. I highlighted kind of sort of one or two. But, you know, for modeling purposes, I would assume that, you know, organic growth is somewhat flattish, you know, plus or minus, you know, 100 basis points. You know, quarter two, three and four years seems like a reasonable, you know, kind of way to look at the models. You know, that being said, you know, we're providing a revenue guidance range, you know, getting in plus or minus, you know, two hundred million dollars. And so we're within that guidance range and we could be at the upper end. You know, things kind of go our way. We're able to accelerate some activities in the like. So there's kind of, you know, upside to that midpoint kind of by definition.
[00:37:38] That's obviously still early and things are probably still evolving, but any initial thoughts on whether or not covid is having a structural or more permanent impact on how work is done or how contracts are awarded or focus areas of investment or anything along those lines would be great.
[00:37:57] Yeah. Gavin, Gavin, thanks. Yes and no. You know, we this is this is you know; I can really tell my own my own team. This is generational in nature, you know, so a lot of us don't have that play playbook. You know, I honestly think we're sort of in inning six or seven of nine of nine innings. But what I can tell you is this is that I believe that ourselves and our customers have worked very well together to make certain that one, people stay safe, too. And I'll say it close to is that we have a mission to protect this nation. And, you know, just like folks who enter war time battles, you know, you'd like to keep them safe, but they're going into battle. It's why our entire workforce was deemed essential as soon as the nation went into this covid realm. So, you know, as long as we're in it, we believe we've taken the right measures. I like the way we have entered this phase. I like the way that we've been executing shooting during this phase of building temporary skiffs. You know, literally when we say that terms, it sounds so, so easy. But taking a floor of two hundred people, boxing all their information up, clearing their cubes out, redoing an entire floor, bringing security comes in and having the government approve that in a span of about three weeks, that's an incredible measure. So, you know, what I start to think about is covid is an impact. covid is an opportunity as well.
[00:39:36] And that's not meant to disrespect anybody who has suffered during this, but from a from a pure company customer stand standpoint, you know, I don't expect Kobe to be gone by December 30, 31st. I think our mitigation efforts have been quite successful. But we're looking at picking up additional work. We're doing a remote work capability set up for the Army, the National Guard. We brought in about a twenty million dollar award to quickly put telehealth support in place for NIH and CDC. From a business standpoint, for post covid, I think enterprise technology, building more resilient networks, delivering even more mission tech faster is going to be the wave of the future. You know, often these things like covid, they don't set a trend, they actually accelerate it. And we were already in many places working out how do we do more software development work that's classified in nature and unclassified manners in in a in a way that we can build code outside of a Scheft but bring it together in a skiff. So how do we do what we like to call unclassified classified work? I think that is getting a very positive and a very honorable look by the intelligence community out there. I think we'll see forward changes there. So all in all, against those changes and how they come out of covid very happy with how we are positioned. And it's nice to say that we've already been working many of those items with our customers.
[00:41:19] Yeah, and this is I'm going to add in terms of our indirect workforce, you know, what we have learned is what you said, you know, corporate America has learned is that we can, you know, accomplish the activities of, you know, to facilitate, you know, supporting the organization while working remotely. And so certainly we and again, in most every other company are looking at ways to kind of work going forward in terms of, you know, facility footprint technology. You can get video conferencing, workforce flexibility and the like. And it opens up a whole slew of possibilities instead of looking for employees within the greater Washington, D.C. area or, you know, pockets where we have, you know, folks, you know, we can kind of look broadly, you know, for talent to support, you know, Unisys. And that should be powerful voice supporting, you know, our customers as well as kind of indirect activities.
[00:42:25] And thank you. The next question will be from Cai von Rumohr with Cowen. Please go ahead.
[00:42:33] Yes, thank you very much. So I'm joining a little bit late, but. Your bookings were good, but the book to bill one point three is a little below your normal average. And I think, Tom, you alluded to subtask order delays. They did give us a little bit more color, if you could, in terms of what did you see in and end delays in this quarter and maybe looking to the second quarter. Do you expect it to catch up or maybe some color in terms of what we should look for in the second quarter? Thank you.
[00:43:08] Yeah, sure. Thanks. Look, you know, first off, I'm very pleased with our Q1 backlog of 22 billion, about 13 percent growth year over year, as you mentioned, one point three times book to Bill. And what I like to watch is one point six times trailing 12 months. Look, you all heard me say many, many times awards are lumpy. It's why I didn't shout from the mountain tops on a four billion dollar order. It's why I don't get, you know, overly worried based on where we are today. There's a lot of trends that are out there changing. Right? Traditionally, I'd say we're in a mode of anything but being traditional. Our first quarter is sort of our largest quarter. I don't think that's going to be how this this this year plays out. We saw a few opportunities slide to the right, pretty much covid related. But also keep in mind, we always see slippage. We just have a finer point on.
[00:44:07] There was a point that Tom made earlier on some of our larger task order work and some of our classified customer areas, since they're so directly impacted by covid because they're in, you know, skiffs and the like, some of those classified test scores and not come out at the pace that we would have expected them. Well, we see those in the second and the third. Third quarter. Absolutely. So we also had, you know, a couple of bits that just didn't break our way. And that happens every quarter. You know, as for what we could see in the second, third and fourth quarter, you know, some of the slips that came out of first quarter will most likely show up. Second, we've got I think we only have three jobs that are out on protest and we just had to solve this past quarter that were both were both resolved in our favor. So, you know, I don't I don't have a crystal ball quarter to quarter. What I can tell you is that I would expect CCI to have another very strong awards year. And clearly the awards we have in the first quarter joined with our twenty two billion. Our backlog has been more than sufficient for us to raise guidance in the first quarter. And we believe that that kind of mix will support both top and bottom line growth as we get towards the end of the year. We start looking forward to that flight. Twenty two.
[00:45:30] Terrific. Thanks very much. So you mentioned some of the covid opportunities in terms of the new business picture, but when we think in terms of the cost side, were there any other any pluses, near-term pluses from covid to your PNL? Well, I'm thinking specifically of, you know, less travel than you budgeted because of covid. And as a result, there's less cost. And if it's a fixed price contract, you can pick that up. Has that been a net plus to any extent?
[00:46:06] Kiva's this time, yes, it is, you know, I mentioned, you know, our indirect cost control, indirect costs are flat versus last year. You know, the fact that his employees are not traveling, you know, I'm not quite sure to many investor conferences in person in saying kind of New York and Chicago hotels, you know you know, all of those that stayed in it helped to drive, you know, profitability of kind of less conscious expense. And so those are some short term, you know, positive cost impacts. We also saw a bit of a reduced kind of medical spending know. We saw that in pronounced in the fourth quarter of last year where, you know, people were reluctant to go to doctors or hospitals because of, you know, certain fears of going into areas which were potentially higher infection rates. And we continue to see some of that trend. So we're seeing some kind of reduced kind of medical expenses. Now, there could be some pent up demand for those services, and they could rebound in the next few quarters. But that had some positive impact on the first quarter.
[00:47:18] And the next question will be from Joseph DeNardi with Stifel. Please go ahead.
[00:47:24] Yeah, good morning, Jonathan. What can you provide a little bit of commentary around the margin profile of the two new revenue buckets between expertise and technology? And if you could include some numbers in your answer, that would be helpful. Thank you.
[00:47:42] Yeah. So, you know, in the prepared remarks, I did mention that, you know, technology is coming at higher margins on average than expertise, approximately 300 to 500 basis points. You know, a relatively wide range I'm giving there, you know, for a couple of reasons. Every quarter, you know, it may fluctuate. And so I want to have a range which is kind of long term sustainable. And I don't have to adjust those numbers. But if you look at the midpoint of that, that's, you know, 400 basis points, you know, improved kind of margin between the two in in. The question is why? And I think, you know, John, in his remarks, you know, explained why, you know, expertise is often more commodity, like we're providing very capable individuals, but we don't have a lot of intellectual property concepts behind those, you know, technology, both expertise, technology and mission technology. You have barriers to entry in terms of more sophisticated, you know, solutions. And as a result of that, you know, they command, you know, higher kind of markets.
[00:48:58] That's helpful, and then can you just remind us, just from an M&A standpoint, what maybe the top two or three capabilities you're interested in acquiring would be. Thank you.
[00:49:09] Yeah, Joe, you know, we are based on strategy. We look at each of our markets twice each year. And when we look at that, we are going to focus on the technology side first, you know, whether it's on the enterprise side or on the mission side. So anything within that area. And I'd also say that as we look at our portfolio, you know, we always look to bring in new customers. In some areas, it's tough to break into customer sets. So, you know, we may look at companies out there that have a different customer set than what we have where we could move our and our enterprise and our mission technology to them. So I would say in a short very much on the technology front, very, very not very deep looking at, you know, companies that can give us more of the same that we have in our expertise side, especially on the enterprise expert, expert expertise.
[00:50:18] Thank you. And the next question comes from Matt Acres with Barclays. Please go ahead.
[00:50:25] Hi, good morning, guys. Thanks for the morning. I wanted to touch on a kind of a key investment areas you guys mentioned on slide seven. Is it possible to kind of size those and maybe talk about how fast they're growing relative to the whole addressable market? Either, you know, either as kind of standalone like products in themselves or, you know, to the extent that they kind of touch some portion of the two hundred thirty billion addressable market.
[00:50:56] Yeah, sure, Matt. So let's see, I've chart seven up now. Let me let me talk about them. I'm not sure I've got growth rates and you know how each one grows, but I'll focus on the things that I'm focused on. First off, if they're on the chart, they're extremely important. Second, they garner the majority of my time and attention, as well as the majority of our investment dollars. Cyber, cyber is going to be going in, going to be out there. You know, I don't think any of us can turn news on one night without hearing something about cyber and really understanding what the news is talking about is there's a lot of battles going on today that are in the electromagnetic and electromagnetic spectrum. When I think about cyber, for us, it's more it's just as much offensive as it is defensive. You know, we are keeping networks resilient up and running. We're keeping inboxes clean of spam. But we're also looking at, you know, mission data links. So, you know, think about commanding control of satellites and munitions aboard flying aircraft. You know, we understand how to where to drop those munitions and how to prosecute war because we understand we understand, Navan, timing. So a lot of the cyber work is out there focused on driving more resilient networks.
[00:52:31] And I would tell you that post covid, we expect to see a material amount of growth within that area, because I honestly believe that across our customer set and across industry, we're going to need more secure networks for more of our folks to be home, teleworking, more days. So they are in one of my facilities or in one of our customer facilities on the 5G side. I mean, that's a technology explosion. You know, we're working with our federal government customers as to how do they operationalize 5G. But having brought in the deep domain knowledge and, you know, multiple patents around how we connect devices wirelessly, we see quite a lot of growth there. Electromagnetic spectrum is an area, frankly, that that's a broad item. And I share some of those examples earlier. Artificial intel. We've been doing, as I've said, artificial intelligence long before we actually called it Helbert, that I throw machine learning in there as well, that, you know, all up we are spending a little north of one hundred million dollars a year in both R&D and bid and proposal funds focused on these four areas here. So it is very important. It's very important to us because it's very important to our customers and it's very important that they continue to fund those areas which they are. And if it's important to our customers and they fund them, well, it's important to us as a publicly traded company that it's absolutely important to our shareholders. We're doing all we absolutely can to sort of change the game as to how companies deliver to the federal government to sort of get back to that speed to field and make absolutely certain that our investments are in the right area. And thus far, we've been right more times than we've been wrong.
[00:54:24] Thank you, that's helpful, I guess just one more on security clearances in that process, I think there were some delays earlier in the year to give us an update on how that's done.
[00:54:36] Yeah, sure. You know, we are starting to see that pick up. You know, just as we're returning to work in our customer facilities are our customers. Employees are returning to us as well. I don't think we're near, you know, full up, full of pace. But, you know, if we were at 10 percent when we last talked, we're probably in a 50 to 60 percent range from now, which is about what we should expect through the month of November and December. And I'd like to hope that by that point, many, many more. And the government security clearing offices are, you know, fully back to where we can get back to a more sense of, you know, quote unquote, normal.
[00:55:16] Thank you. And the next question will be from Sheila Kahyaoglu with Jefferies. Please go ahead.
[00:55:25] Hey, good morning, guys, thanks for taking the time and just the disclosure around technology and expertise I thought was pretty neat. Three questions on that topic. First, I guess if you could talk about the differences and the bill that you're seeing in this business comes back in time. I know you gave a few comments a little earlier on the margin differential, but maybe if you could talk about the margin difference thus far and the potential looking forward, given it already represents 50 percent of sales. And then last one, I think this is just a clean-up item. But at the Analyst Day in 2019, you guys provided Pams for these markets a little differently with quadrants. You said mission with a 90 billion TAM at six percent. Kager versus technology today presented as 90 billion, growing at three percent. So just that and I think you continue to see a different quadripartite. But if you could provide some clarity on those three items, I. Thanks.
[00:56:21] That's OK. Well, Sheila, thanks. Well, you know, we just start providing expertise in tech and you are all over this, which is. Which is which being good for us. Great. Thank you. Look, let me let me give you some broad comments and we'll do our best between Tom and me. You know, if I look at growth and the growth that we expect, you know, we honestly haven't split out our backlog yet. The expertise and touches that would be going back, you know, four or five years we've been trying to be very, very careful about allowing people to sort of follow new backlog along with us. You know, in the way that we put press announcements out there, you know, the fact that, you know, Tom is sharing that three to five hundred bits, you know, it's really to show why we're confident on growing margins year over year. Now, that sort of gives you what it looks like, what it looks like. And that's why 20, I wouldn't be able to go back any further than that. But we would expect, you know, similar margins for similar work delivered.
[00:57:30] So if I look at a book to Bill in each you know, when we had our Investor Day and we're looking at the amount of work that we've been, we're sort of around the 50 50 mark of expertise and technology in our recent bookings. And I would expect that to continue for the near future. You know, margins. We do believe tech is always going to be higher than expert experts expertise. I'd also say that expertise is in paid work. So I want to make absolutely certain that when we talk about one being better than the other, if they weren't good for long term shareholder value, we wouldn't be in those markets at all. So addressable market, I think it's 145 ish. And the experts agree, 90 billion in the TAM and we're showing that compound growth rate of about three percent. You know, that's looking at where the government spending money, what their future flows are and how we expect those things to grow. You know, this is an outsized piece of information that we get each and every year. We're very happy with a 90 billion dollar general market when we're barely doing three billion worth of, you know, work there. So I would see us to continue to grow faster in tech than an expertise. I would expect us to continue to see higher margins of tech than an expertise. That's because there's a higher risk model when we do technology work than when we do our expertise work. It's not that the work is less valued, it's just that there are more folks providing expertise. It's tougher, as Tom mentioned earlier, to differentiate. And the risk model is I'm delivering talent. I'm not creating hardware and software in the light. Tom, anything you can add to those.
[00:59:16] Shela in the prepared remarks that just say that for the submitted bid, 60 percent of those are for technology in the bids to be submitted over the next six months or more, 50 percent of our technology. So I think, you know, 50 50 ish, very similar to the current breakout of expertise in technology. And as John mentioned, both areas have growth opportunities in pursuing those. Now, we're not providing windbreaks, you know, which will give future books and build on those. But if you assume we're going after programs, which we think we have a good probability of when otherwise we would go after them, that it would be similar characteristics in book to build would be a fair way to look at that in Jordan. Didn't mention our press releases every time you put a new word out in your press release. We're very careful in the last a year or so to specify which quadrant you know, that works in. And so that should be helpful to you trying to understand relative growth. So those two areas.
[01:00:23] Let me just follow up also. The spirit of your question, you know, we continually look at what information can we push out there when No. One, we always have to balance that between you all who actually follow us and model versus competitors who are out there listening to, you know, what kind of margins do we expect within these quadrants? So it's as I know you know, it's always and it's a down dance and it's a balance. But we did make some guarantees at our last Investor Day that once we could confidently track these quadrants, just like it was a gap measure to make certain that, as we did comparisons, we were treating it just as if it was a gap. You know, we're right now showing what we can show today. It doesn't say that we're not going to look for other ways to, you know, share more. So we very much appreciate in the spirit of your question.
[01:01:20] And thank you for the next question will come from Louie DiPalma, William Blair. Please go ahead.
[01:01:27] John, Tom, Dan and George, good morning. Different reports suggest that unmanned systems will continue to be a focus area under a potential new presidential administration in June. The army named your sky tracker and the Ascent Vision El Matisses, two of its. Preferred counterintuitive solutions. Does your expertise and track record in this area give you high confidence that you can win like larger new awards in this space and also renew your one point seven dollars billion for task order when it comes up for renewal next year?
[01:02:15] Yes, Louis, thanks, I'll take your last question first. I'm will provide too many comments, but we have provided outstanding support to both the country, U.S. officers and the like on our FSD contract. I think that was initially awarded around 800 or 900 million dollars. And the team sent an outstanding job, a growing that one by adding additional scope. So all I'll say there is that we're well positioned, and we have performed extremely, extremely well as to where the current administration or a new administration goes. Yeah. On the unmanned side, you know, we're more on the counter side, which is tracking on unmanned assets. And as you mentioned, our fix on our mobile ones.
[01:03:08] We have quite an installed base today on the fixed side. We really can't talk a lot about customers who have bought it and you know where they are. All I can tell you is that we like what the what the installation rate is of our fixed systems and as well as mobile. And the more quickly we can take modalities such as LIRR that are very prevalent in an ABC solution and get those LIRR assets onto our fixed site solutions. Every time we have a new modality, meaning a new way, we can look for counteraccusations. You can do that in the large spectrum. You can do that area. You can do that with binoculars. You know, I mean, there's a plethora of ways, but the more we can bring all that information in, it actually presents a much clearer picture. Now, where I look at unmanned systems and that to me, my mind moves to payloads that are on unmanned vehicles out there. And, you know, that brings to light what every team does on the other side. We would expect a portion of their growth to be supporting vendors who build those types of platforms. Well, here in the US and across our five I's country, partners know when we did the acquisition, they have a small group in Australia. They are done. They're developing software and the like, which is exportable. Back here to the US, we also have a group of folks who are indigenous to Australia, which means we are allowed to go through that work as well. So all in all, every dollar they can spend, either in the unmanned vehicle world or countering those is a dollar of absolute perfect addressable market dollars for CBS.
[01:04:58] Great, John. So are you saying with that Paillard commentary that you think that you could play a role in the skateboarded program that, you know, they've been trying to develop over the past month or so?
[01:05:11] Yeah, Louis, as far as our reach is that we believe we will be a partner player as unmanned systems continue to get not only developed but continue to expand. You know, I've been reading on where the U.S. Air Force is looking at man plus unmanned. You know what I like about what we have on a vet? It's a full digital device. It does all onboard processing. It has A.I.M. machine learning. And, you know, when you're looking at OIRA turns and analysts would much rather have the EROI, our Gimbels and that system pre-process and learn as much about the terrain that the eyeball is actually flying, flying over, because that's less burden on, you know, intel analysts want to take all that information, sort through it and look for areas of change. So I won't single out Cyborg, but I will tell you anything that is flying on unmanned as well as manned is a great potential new customer for what ABC delivers.
[01:06:19] Thanks. Thank you.
[01:06:21] The next question is from Mariana Perez Mora with Bank of America. Please go ahead.
[01:06:28] Good morning, everyone. So if I may first out, I'm going to do a follow up to that question and then on the money front. So first one, I understand it, is this like Sunday, you say from third party, but what do you think is the main driver for an average outlook on the next five years? Growth on American markets to be about half. It was a year ago.
[01:06:55] Ok, I think the question was around of five year, five year growth rates, marijana.
[01:07:03] Around five years growth rates, because once you shared today is one percent growth expectations, two percent. That's technology. And that is about half in a different place than a year ago. In Investor Day, you shared two percent growth of enterprise and six percent growth expected at the market.
[01:07:23] Yes. Yeah. Gotcha. Thank you. Yeah. So when I look at these numbers and as I think we might have mentioned around Sheilas area as well, you know, we're looking at compound annual growth rates over a five year period. You know what I what I'm focused on is last year as a company, we were about 230 billion dollar addressable market. Now we're at about two hundred and thirty five dollars billion total addressable market. We end up picking up more in both of those areas because of some of the acquisitions that we've done. And that actually allows us to go after more and more work. You know, those compound annual growth rates. You know, when we look out five years, we have federal government budgets for about three. So some of these are estimates. And when you get out to year four and five, the actual shape of that curve is more like, you know, turtles, turtles, the shell. Right. And sort of jumps up and then and then, you know, gradually comes down. So, you know, we're actually looking at the of four or five year growth and we disclose five year CAGAR. What's very relevant to us is over the next two to two and a half years, what is that growth rate looks like? Because our fees come out about two years ahead of when we're looking to bid on this work. So all in all, two point thirty five dollars just so market six dollars billion company. You know, I won't say it doesn't matter what that what that tag is, because it does. But we've got plenty of new business. We can go out there and chase.
[01:08:57] Thank you. And then on the money front, I wonder if you could speak about in my native land related to this yesterday there were some remarks about a defense fund willing to divest its technology services business. Would you be interested in pursuing such a large acquisition? What are the lessons you learned from this historic experience?
[01:09:20] Yeah, I mean, you know, it's not our policy to comment on specific M&A items, and I believe the question was around, am Amazon looking to divest some of their things? You know, I mean, at the end of the day, you know, Amazon is the number one priority. Our M&A is a very strategically driven. We use them to fill gaps to which enhance existing capabilities. We use them to expand our, you know, our customer base for everything which is out there for any deal that that we end up doing is got to fill gaps and expand our customer base. It's got to meet our strategic criteria. It's got to, you know, is it financially compelling? If I had those capabilities and those customer sets, would that drive long term shareholder value? Sort of so many things that, you know, we assess and, you know, we continue to assess with on a daily, daily basis. At the end of the day, they all have to pass some very stringent measures and things that we're interested in. The fact that it's a number one use of our capital means it's an extremely important feature and focus by both Tom and I and the rest of the rest of the team here. So and whether they're large or small, you know, they have to meet all these criteria. And, you know, we're very confident in our ability to execute and integrate Tom.
[01:10:47] And yeah, and I will continue to put up with John said, you know, education is simply put, when we look at an acquisition, the key question is he's just going to drive shareholder value on, you know, Sheerest, you know, CCI, in the absence of the acquisition with a theoretical price trajectory over time with the acquisition, you know, will we drive value again, you know, to our shareholders? And we use that same criteria. Whether we're looking at small opportunities for large opportunities is that is something that we take kind of very seriously. And there was an earlier question with regards to the possible share repurchases. You know, within that context, there's always alternatives. You know, how do we drive that value? And, you know, that is what the team and the board of directors, you know, are primarily focused on.
[01:11:45] And thank you. Our next question will come from John Raviv with Citi. Please go ahead.
[01:11:52] Thanks for filling in. So just for me on talking about the blogs and I head of CustomMade, just give us a sense of how that's different from five or even 10 or 15 years ago. I'm thinking of the IRA CapEx. What does that mean? First profile then really roleplayed here is known could that approach some of the linearity out of your preference. Is a big competition, a big win in a given year by that margin or cash flow that you're in your business?
[01:12:22] Hey, John, I hate to have to do this, but your answer your question was breaking off. Would you mind giving it to us one more one more time? So we're answering the right thing.
[01:12:31] That's my fault. I apologize for that. Can you hear me all right? Yes. Yeah, we got some big storms coming through the area here, you know. So the question is about the investing ahead of customer need. How is that different from five, 10, even 15 years ago, talking about IRAD as a percentage of sales capex, as a percentage of sales? And importantly, could that approach take some of the linearity out of your growth, for instance, a big competition or a win in a given year, potentially setting excuse me, margin, or cash flow back on year in year basis?
[01:13:06] Ok, John, thank you and sorry to have you repeat that look. Yeah, yeah. So we this this focused on investing the head of head of the clearly the percent of IRAD spend over the last five to 10 years, you know, you could you could draw quite a quite a highly slope curve as well as CapEx right now. But we've tried to do that in a balanced manner. Right. You know, we didn't we didn't triple CapEx and double I read. You know, what we really are doing is we're always looking out two to three years and saying, where's the threat? Where are the threats? How will we play within those threats? Are we apply more Asaba? We have technology provider to someone larger or we go at these things on our own.
[01:13:55] You know, linearity is tough, right? I mean, I don't today look at a situation where we would come in and, you know, fall prey to I have to invest so much money to grow that I've got to take my margins down. OK, you know, now if we win a multibillion dollar device production job, we have to do some, you know, near-term investments, perhaps. But in the normal course of business, all things being equal, we're going to continue to invest ahead of need in a very responsible manner because our focus is to grow top and bottom line and never sacrifice one for the other. I think I've said many, many times I could grow top line pretty quickly, but I wouldn't have very happy shareholders because to us it's a balance. You know, at the end of the day, margins on work and quality of earnings matters and that drives cash. So nothing that I see in the foreseeable future that would cause us to do anything different than what we have done.
[01:15:01] This time. I will add that what we're able to do is focus, you know, kind of control, indirect costs in investing. Rossano Casely and, you know, some of the cost improvement initiatives this year, service center and other types of activities provide some flexibility for us to simultaneously make kind of various investments. And so, you know, as we get larger in terms of an organisation, you know, it gives us more optionality to make those types of technology investments while delivering kind of margin enhancements, which we are committed to. So, you know, that's one of the differences today than we were, you know, a few years ago. We didn't have that luxury or the wherewithal to make those kind of larger investments. John mentioned over 100 million dollars would be in R&D. And again, we're able to do that in the context of increasing market.
[01:16:02] Larry, thank you so much, everyone. Thanks, John.
[01:16:06] Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to John and Gucci for any closing remarks.
[01:16:16] Thanks, Chad, and thank you for your help on today's call. We would like to thank everyone who dialed in or listen to the webcast for their participation. We know that many of you will have follow up questions. Tom Lutron, Dan Lemberg and George Price are available after today's call. Please stay healthy and on my best to you and your families. This concludes our call. Thank you. And have a great day.
[01:16:37] And thank you, sir. The conference has not concluded. Thank you for attending today's presentation. You may now disconnect.