Conference Transcript - PSN 2026-05-13

Operator

For this part, I chat with Parsons. I'm here with Kari Smith, CEO, and Matt Alphilos, CFO. Thank you both for being here. Thank you for hosting us, Marion. So I like on these industrial conferences to start with, can you give us a quick overview for whoever is not familiar with Parsons on what do you do, what are the key markets you work at?

Carey Smith, CEO

Sure. So Parsons reports in two segments, federal solutions and critical infrastructure and it's roughly a 50 50 business we have 21 000 employees throughout the world 25 countries all 50 states and we have six end markets that we like to discuss the company in terms of the first one is cyber and electronic warfare where i would say we're a distinguished player in how you use cyber and electronic warfare techniques in ways such as non-kinetic effects And we also do about 75% offensive, 25% defensive cyber. That represents about 21% of the company's revenue. The second area would be space and missile defense. That's about 14% of our revenue. We are the number one system engineering and integration company with the Missile Defense Agency, a role that's going to be critical for the Golden Dome program since getting to the flight test by 2028 is really going to require integration of a lot of the existing capabilities that we have. We also provide capabilities in space, space situational awareness for Department of War, the intelligence community, as well as Department of Commerce. We do space resiliency of satellite systems, networks, ground systems. We do a lot of ground processing for the intelligence community, and we've done over 170 different ground systems. We also provide the Neptune software architecture ground system for the Space Development Agency, And we're involved in assured positioning, navigation, and timing if you lose your GPS signal. You can still get location information. The third area would be critical infrastructure protection. That represents 9% of persons' revenue. Within critical infrastructure protection, we provide capabilities like electronic security systems, biometrics, and counter-unmanned air systems, where we're protecting 285 MSCs and consulates throughout the world. We're also the number one provider of electronic security for the Army and number three for the Air Force. Next area would be transportation, about 29% of Parsons revenue. There we do roads and highways, designed and built over 10,000 miles across six continents. We performed over 450 airport projects and actually expanded to five new airports within the last 12 months. we've been involved in over 450 rail and transit projects and we have the largest globally deployed advanced traffic management system in the world it's called inet or intelligent network next area would be water and environment water and environment we do water wastewater treatment plants we're involved in sewage and drainage programs a lot of environmental remediation capabilities but i probably say the most exciting part of that market would be pfos pfas emerging and contaminant elimination, which we think is a $40 billion addressable market for the company. The final area would be urban development, also representing about 12% to 13% of the company's revenue. Within urban development, we're involved mostly within the Middle East. We have 7,500 employees that work there. We're on every single gigaproject that's going on within Saudi Arabia. And some of the most exciting projects in the world, like the world's fastest, longest metro ecosystem, the world's largest park, the world's largest entertainment city. So a very exciting project.

Operator

So when you think about those end markets, what is driving growth today? And when you think about like three, five years from now, what are the ones that will drive most of the growth?

Carey Smith, CEO

Yes. Unfortunately, we look at it in terms of a three-year compounding or growth rate. And when you look across those six markets, they're all growing between four to 11%. I would say cyber is going to grow the fastest. That's at about a 9 to 11 percent type of growth rate. Space and missile defense runs about 7 to 8 percent growth rate. Critical infrastructure protection is about a 5 to 6 percent growth rate. Transportation is 8 to 9. Water and environment runs about 7 to 8 and then urban development is about 6 to 7. So we're in all very good end markets. And I would also add that when we focus on our markets we really focus on the growth in areas that we can be differentiated technologically wide and really be one of the top players in each of those end markets.

Operator

So this is a question I get a lot especially because most of the ENC companies that diversified into defense solutions spin off that or are in the process of doing that. what makes you comfortable of like having those two business units and where the synergies you see on having all of these capabilities under the same umbrella so i'd say one thing with us is we've made it work and if you look like 22 to 24 both of our segments we were one of the industry leading growth leaders in both of those segments um and last year without one contract cancellation we were also one of the top industry leading growth leaders so for us it's really worked and we've

Carey Smith, CEO

driven the synergies. Just a couple of examples. If you look at aviation, we've supported the FAA for over five decades and are currently supporting them on aviation modernization. One of our biggest growth drivers, in fact, as we look this year. But we've also done over 450 airport projects. So we leverage a common pool of talent to be able to approach the aviation modernization market. PFAS, PFAS, another great example. We're on the federal side. We're helping Department of War and the FAA, eliminate firefighting foam. But we're also selling to customers on the infrastructure side, including water customers and some of the customers that have been sued for PFAS. I would say another area that I would highlight would be Middle East. When you look at the Middle East, we traditionally had done transportation projects there, tourism and entertainment and urban development. But we've since moved into defense and security. That's going to be increasingly important, particularly as we come out of the conflict, when the Middle East is going to be in need of solutions, such as integrated air and missile defense, critical infrastructure protection of areas like data centers, water, utility, counter-unmanned air systems, which we're currently providing today, and also looking at an $880 billion rebuild. Yeah, that's fascinating.

Operator

And I want to double tap on a lot of those things, FAA, Golden Dawn missile but before that I think it's interesting and I've gotten a lot of questions right to Matt on like the dynamics for this year the first quarter was really really strong from growth and then also really strong EBITDA but you're expecting a second quarter that will actually take some hit and then some growth going forward in the second half what are the specific dynamics that drive that cadence into this year yeah so high level to your point came in right on our revenue target for Q1, which was great coming out of a Q4 government shutdown.

Matt Ofilos, CFO

So really excited about the top line performance. On the bottom line, we outperformed margins north of 10% for the first time, really strong first quarter. And so the business performed really well in Q1. We do have 7% sequential growth, but to your point, we're contending against a $350 million headwind year over year on the confidential contract that a lot of you know about. Q2 has about $100 million dollars of headwinds. So Q3, Q4, you're going to start to see positive growth. We don't have to talk about excluding confidential program anymore. We'll be back to growing with and without it. And so I'm really looking forward to those days. But Q2, we have about, like I said, 7% sequential growth, about $100 million worth of growth. Then you look at second half versus first half, we have about $400 million worth of growth from the first half to the second half. And it's a lot of the programs that Carrie mentioned, the ceiling tech acquisition we did a few years back in the joint cyber hunt kits those kits are shifting from low rate initial production to full rate production in the second half you think about the faa work that we're doing the the ramp up on that ramp that were we grew 35 percent in q1 tracking to about the same range for the total year which is amazing on a pretty decent size base 150 ish million dollar base and then um you know some of the munitions programs that we have key milestones in the second half of the year plus some of these recent awards that we mentioned, $400 million worth of OTA awards as of late, and those are quick-turned, those are about three-year contracts, but we've been working bills of material and prepping for those contracts for the past six months, so those will be quick-moving. And so each one of these contributes $40 to $50 million, so you add up to $300 out of the $400 on a very small number of programs. The other one in the Middle East, King Sam and Kadia, and those programs are ramping. And so just very clear line of sight to those program growth. And so, again, it's just a really very strong view toward the second half of the year. And to your point, looking forward to those positive growth rates for the second half.

Carey Smith, CEO

Yeah, I would add we have some really good leading indicators, you know, whether it's 22 consecutive quarters of greater than $1.0 book to bill within critical infrastructure. At the company level, we've always been over a $1.0 trailing 12-month book to bill. Very strong book to bill for Q1, $1.4 for Parsons for both segments, and the Middle East did $1.5. We've got $9.3 billion in backlog. We've got 71% of funded backlog. And then we also have $11 billion that's been awarded but not yet booked to Parsons as single contract for prime contracts. So some really good leading indicators. in a $54 billion pipeline.

Operator

And when you think about executing towards those contracts, what is the main factor or sweet factor? Is it labor? Is it clearances? Is it like that money getting funded? Like, what are you concerned about when you think about actually executing on those opportunities?

Carey Smith, CEO

Yeah, the most important thing for us is always going to be labor. It's hiring and retention. We're really proud of the fact over the last two years we've had the best retention in the history of the company. And it's not just in one group. It's across all four business units. And I think it's a testament that people want to come work at our company because of the culture and because of the exciting projects that they get the opportunity to work on. And then from a hiring perspective, we started off good, but hiring is going to be a critical focus for us as we go through the years, it always is.

Operator

So you mentioned the Middle East, both of you. I was surprised. One quarter was like the first quarter was really resilient considering all the conflict there for your operations. And you just mentioned like 1.5 book to bill. How are operations there? Are there any money getting like refocused to more like defense projects from like urban development? How do you think about that? And then you also have a really strong positioning for anything post-conflict rebuilding. How fast that could happen? How are you thinking about those opportunities?

Carey Smith, CEO

So I'd say the most important thing for us was making sure our 7,500 employees were safe and they are all safe. Our employees are all working at the job sites or in the home offices. And our customers have also continued to award. We over delivered our expectations on revenue and beat bookings and we beat cash within the first quarter. So those are all very good signs. It's because I think we're in the right markets, whether it's tourism and hospitality, transportation, infrastructure, and we've moved into defense and security. In addition to the work that we've had ongoing within the Middle East, we've also beefed up our defense capabilities in support of the conflict. So we're providing support in areas including cyber, electronic warfare, counter-unmanned air systems. Our command and control system is being used for air tasking. We're doing intelligence and operations center operations 24-7. We're providing early warning capabilities from our air base, air defense system in Europe. So a lot of defense capabilities also that we're providing for that just in support of our war fighters. Then post-conflict, we see the opportunities in critical infrastructure protection. There's going to be a need to secure herded and potentially underground assets, including data centers, water companies, utility companies, our air bases within the region there's also going to be continued need for counter-unmanned air system and even at places that you didn't have that capability prior and then the rebuild area we see a significant 880 billion across the middle east when you ask about starting to get involved there's things that we can actually be doing now so we can be looking at anything that would require kind of getting rid of unexploded ordinance we can look at things like master concept planning. We can start thinking about different security aspects. We can look at ramping up in terms of what's staffing going to take, what type of companies do we need to be partnered with. When you look at the duration of the $880 billion, it's estimated that those funds would flow over about a 15-year period. That's pretty similar with what we saw when we did a lot of the rebuild effort in Iraq.

Operator

That effort for us went over about a 10-year period. that's fascinating and you just mentioned air defenses so like that click on golden dome to me because you guys have exposure to a lot of the non-kinetic effects that you can contribute in this like layered structure that is being designed but also you have a strong relationship with mda and you were able to also get down selected to shield despite like the early conflict of interests of being one side or the other like are you thinking about that are you seeing opportunities flow there i think it was in a recent hearing that department of force said just 20 of the reconciliation bill has been actually kind of like awarded so far like it's

Carey Smith, CEO

taken a while like are you thinking about timing of that exposure to that and and how fast could that play out yes so um first starting on the reconciliation bill to your point mariana Department of War is supposed to get $150 billion, and about $20 billion has been spent. So, yeah, there's quite a bit yet to be spent. We are starting to see Golden Dome expenditures. A lot of that work is in the classified space, which we're participating in. I won't discuss that. But I will say we expect our major role to be the integration role. So Golden Dome has indicated that the Missile Defense Agency will be the system integrator for the Golden Dome contract. We are the system engineering and integration company for the Missile Defense Agency. We currently have over a billion dollars in sealing remaining on our contract, which runs until 2029. The other area that we can play in is the non-kinetic effects. How do you use cyber and electronic warfare to stop incoming unmanned systems or missile systems instead of doing kinetic to kinetic? It's much cheaper, and we have ways that you can do things like potentially address swarms if those should occur. We are in a space-based interceptor team. We're on one of the four teams, so that will be another role that we'll play. And then we'll see what ends up coming out in terms of shield capabilities, but we are in that contract as well. So Golden Dome will be a contributor for the company.

Operator

And you mentioned system integrator, and that also sparked FAA to me. after you were not selected for the air traffic control system, like the big contract against Periton, even being a favorite from a capabilities point of view. That hit the stock a lot. But after that, you got an extension, a system integrator, and with your long-term relationship with the FAA, you also got to support Raytheon antennas being integrated. like it's all loss how you think about your role in this FAA modernization that goes beyond that contract that you were pursuing.

Carey Smith, CEO

Yeah so I'd say the most important thing FAA has been a customer of ours for 50 years we've done work at over a thousand FAA location we have hundreds of people supporting the FAA and hundreds of contractors that support us and the FAA's mission our most important focus is to make sure the air traffic modernization gets done on time anywhere that we can help so our current technical support service contract has over a billion dollars remaining on it and the customer to your point did exercise over 500 million dollar three-year option a full year early which i think is a testament once again to our performance and we were rated as the technical superior company in the bid of their traffic modernization so i think we're going to be playing a significant role we've been doing engineering and design we We do site installation. We do a lot of the test capacities and basically work at all the facilities coast to coast. So our work involves all the work streams, whether it's automation, whether it's communication, whether it's surveillance or facilities. We participate in all four of those. We expect to have over 25 percent growth on our core contract this year. But then we're also seeing additional growth. A good example is we had 35 percent growth in the first quarter. and part of that came through the voice communication switches. So the FAA went directly to the voice communication vendors and then they've come to us. So whatever we can do to help the FAA make sure that they meet all their milestones, our company is going to continue to support that as we have for the last five decades.

Operator

And I'm going to switch gears a little bit towards infrastructure. The infrastructure bill is about to expire in September, end of the fiscal year. And if this new surface transportation bill is not introduced and actually authorized on time, there's a real risk of that flow of funds to actually slow down. How do you think about that? How much is the political risk? How much funds could be awarded from now till September and actually give visibility for multiple years? Where do they put some takes on that risk?

Carey Smith, CEO

Yeah, so the Infrastructure Investment Jobs Act was passed November 2021, and to your point, it's a five-year bill, so it does expire this fiscal year. $1.2 trillion out of that, $550 billion of that was new dollars. There's only been, as of the end of January, about 60% obligated and about 40% outlaid. So that means there's still a lot of money remaining within that bill. Our estimation is that the peak of outlays is not going to hit until the 27 to 28 timeframe. then you're going to have three to six years expenditure beyond that. So a lot of money remaining from the current bill. The next surface transportation bill, we're expecting the surface transportation component of that to be somewhere in the range of $500 to $600 billion, not too dissimilar from what it was in the IIJA. That bill, I'm not sure, will be passed on time with the upcoming elections. However, we do expect that it will get passed somewhere in the 2027 timeframe. So you're basically going to be looking at a case where IIJA is still ramping up, and then you'll be adding to that new surface transportation funding.

Operator

Perfect. And you just mentioned this timing and midterm elections, and what is the risk for that? We get that question a lot. Investors today are concerned about a continuing resolution, an extended continuing resolution going into 27. What is the new spending level for that continuing resolution? How are you positioned to that? Because on one end, there is a high risk of that continual resolution to be a long one. But on the other end, you have the reconciliation bill, the reconciliation 1.0 money flowing through the system. They enacted 26 money flowing through the system. A lot of that outlay is still out there.

Carey Smith, CEO

To what extent you need that money to get appropriated versus not to actually keep growing? next year yeah so i'd say we're very used to running through crs it's unfortunately been going on half of my career for decades um so we know how to live through crs and the biggest thing for us i'd say first 50 of our business is not federal government so that helps us quite a bit from a portfolio perspective the 50 that is we've won some good ceiling level contracts great example are the two other transaction agreements we were just awarded that we announced on the first quarter call for 400 million so we've got these contracts that have ceiling values that we can drive work to within our 11 billion of awarded not booked half of that amount is ceiling value contracts so we have 5.5 billion plus the additional 400 million so we can just continue to drive work and we don't expect a CR impact from that point in time perfect and when I think about all these multiple factors you are also a super acquisitive company when you think about the pipeline and your appetite what are you looking for in terms of capabilities or access to markets how what are you looking for when you look at the m&a yeah i'll hit on that and then i'll talk a little bit about our balance sheet and the position that we're in for that so we have an excellent pipeline we've done over 17 acquisitions since 2017 the majority of those have been in the federal space when we buy a company in one segment or another it doesn't really matter because if we buy a company in federal and we it has cyber cloud artificial intelligence capabilities we take those technologies and we use it as an enablement across the entire business so we've got a very good pipeline we already closed one deal this year altamera 330 million deal with a 45 million earn out that capability adds to our signals intelligence our golden dome capability for missile tracking, missile warning, our ground system processing capability for the intelligence community, as well as other efforts. So very excited about that acquisition. So I would say expect to see us do a couple more deals as we go through the year.

Matt Ofilos, CFO

Yeah, and I just add the balance sheet's obviously in great shape, you know, two times levered at the end of Q1 after a $330 million acquisition, all cash acquisition in Q1. So, you know, with $450 million of free cash flow So over the next three quarters, I'm in really great shape, a lot of capacity to continue to do more.

Operator

What are you seeing from a pricing perspective? Because defense and defense tech, you just talk about like signals intelligence, exposure to golden dome. I could imagine that's way more expensive. How do you manage that?

Carey Smith, CEO

So we've been continuous between about a 10 to 13 times EBIT off range. We have one that was about 7.7 times, so it was on the infrastructure side. But I would say our valuations have been pretty continuous. One reason is we do preemptive deals generally. We like to work with companies in advance, make sure we have the right mission focus, same culture, and then we'll discuss having an acquisition. That way you have a much better probability of success. I mean, it's neat when you look back over some of our recent acquisitions and some of the awards we've gotten as a result of those. We won a $1.2 billion contract with General Services Administration that largely came through our Black Signal acquisition or our Black Horse acquisition. We've moved into highly classified space work through our Black Signal acquisition, which was very helpful. The two OTAs that we just announced, those came largely through our Chesapeake Technology acquisition. Our PFAS-PFAS work over the last two years has grown by 38%. that's through TRS acquisition. Our Applied Sciences acquisition in less than a year has already helped us win a lot of water work, which has been our fastest-growing and most profitable market. So I think we've done an excellent job of not just buying companies but really being able to drive the value out of those companies in a very short period of time.

Operator

And then on the critical infrastructure side, you also made critical acquisitions to position to key markets. Do you see in the U.S. any state where you're still looking for a bigger footprint, or how should we think about that?

Carey Smith, CEO

Yes, we've identified Tier 1 states, and for us those are California, Texas, New York, New Jersey, Florida, and Georgia. So those six are really where we're focused. And the reason is, based on demographics, they get the most allocation out of formula funds, and there's an effort underway to do more formula funds and less grant funds as we go into the next reauthorization bill. So we'll continue to double down in those states. It's important if you're in a state that you're also in the right cities. So, for example, our BCC acquisition, we didn't have a very strong footprint in Miami. So we bought BCC so that we could strengthen our footprint in Miami.

Operator

Perfect. And sticking with capital employment, M&A has been like the priority for you.

Matt Ofilos, CFO

But how do you think about repurchases, especially with the price being literally like half? from like the early 25 peak levels yeah without a doubt repurchase have been a bigger part of deployment we've uh in over the last two quarters we've bought back almost 100 billion 100 million worth of stock 95 million dollars so 35 million in q1 and so uh you know we're very interested in the stock at this price of course and so balancing the you know the pipeline of acquisition opportunities and leverage and the price it's just a great opportunity with um you know last year we did $125 million, so clearly feel this dislocation and feel like it's a great return on And you mentioned before in capabilities

Operator

AI. Sometimes defense services are put all in the same bag, or IT services in general, and people are like, okay, AI agents will take over all these jobs, and I'm like, this is a risk. But on your side, you see it as an advantage because you can actually implement these things as part of your solutions. What are you doing with AI? For how long have you been working with the different versions of AI? And how that makes you more competitive versus less competitive?

Carey Smith, CEO

Yeah, so for us, AI is an enabler to deliver mission outcomes. If we can help our customers get solutions on the federal side more quickly to the firefighter, on the infrastructure side, to improve quality of life through efficiency of transportation systems, that's a big asset. We've been doing AI for two decades. We first developed a system that could detect counter-improvised explosive devices and video graphics. And then an early open source intelligence search tool for the intelligence community. I personally, my second job out of college was working in an AI laboratory. So I've been personally doing AI forever. Then you fast forward to today. I'll just give you some representative examples. Cyber, we've been investing research and development on how can we do more autonomous cyber. How do we determine an adversary's next move? How do we figure out if a circuit board's been tampered with? We use it for counter-unmanned error systems. How do you identify, detect, track, and defeat a UAS that's incoming? On the infrastructure side, we've applied AI to our intelligent network solution. So for advanced traffic management solutions, how do you do it? That's a great example of where we've been able to increase our revenue while our headcount has gone down. And it's really been through the use of AI and improving our software development capability by 25% productivity. I'd say on the infrastructure side of the house, you know, when I graduated, I was drafting by hand. After I got out of school my first year, I was using computer-aided design. Then we went to building information modeling, 2D, 3D, 4D, 5D. Eugenic AI is just your next step along that journey. It's really a tool. It's an enabler. I always like to say if a customer has $5 to spend and we can deliver a product or an offering to them with $4, that's great. We just gave them another dollar to spend. And that's important because the demand is there in every single one of our markets. And if we are always solving our customers' emerging challenges, more than likely that dollar will come back to us in another form. So for us, AI is critical. It's embedded throughout the entire business. We have trained our entire workforce. We developed internal training several years ago. That's been a focus for us. We have our own instantiation of ChatGPT. We have over 6,000 of our employees that are users on that. So it's a critical enabler to win more business. In fact, if I look at the last 10 wins that we just announced, since the end of Q4, there were over 100 million.

Operator

I would say nine of those had an AI contribution. and how you mentioned about like being more efficient and cost efficient how that impacts your margins in the long term and that's a mix with like how you do M&A if I were to think about the company like that like three five years from now how margins should look like because of these dynamics yeah I'll talk generally about margins we over the last two years we've seen 110 basis points of margin expansion that's on the back of really the critical infrastructure business has come out from underneath some, you know, challenging programs and delivered 10 plus percent margin five quarters in a row.

Matt Ofilos, CFO

So we're seeing really great performance there on infrastructure. Within federal, the margins are typically a result of contract mix. So we've seen faster growth in cost type. So you think our FAA contract, you think, you know, ABAD, you think, you know, all these different missile defense agency, all these contracts that are more cost type oriented. That puts a little bit of downward pressure on the margins within Fed. But as we get toward the latter half of this year and we start to deliver more on products, you start to see the contribution from Altamira at full scale. And the acquisitions that we've done that are all 10 plus percent margin, you'll start to see Fed trend in that double digit direction as well. So continue to see opportunity within margin, probably North America within infrastructure will continue to contribute additional margin expansion. And then on the Fed side, we'll see products become a bigger part of the portfolio. And then, you know, there's a possibility of shift to a little bit more fixed price, and you'll see additional margin expansion.

Carey Smith, CEO

And I would also say through operating leverage, we're able to get margin expansion. All the acquisitions we do are greater than 10% EBITDA. And then back on artificial intelligence, we're not just applying it for external customer solutions, but it's also how we automate and make ourselves more efficient. Matt uses AI, for example, on cash forecasting. Dave can use AI to tell how Matt and Keri are sounding on an earnings call. Do we sound confident, more confident, or less confident than the last quarter? We're using it for legal and contracts. We're using it for proposals. How do I make sure that my proposal is more compliant? How do I produce proposals more efficiently? We're using it for hiring. We're using it for recruiting. We're using it for all of our marketing communications. So AI is really going to help us as well.

Operator

So between what you mentioned about a higher products-oriented portfolio and this way of incorporating technologies that fast, I was always complaining because we always complain on defense. It's never enough. It's like continual resolution, but actually there are things that are changing and are changing way faster than they used to. How do you think about this fiscal year 27 that asked for $1.5 trillion for all the acquisition reforms we're seeing, the OTAs you mentioned before? Or how can you benefit from this more agile, growing defense spending?

Carey Smith, CEO

Yeah, so I would say for us, again, half our business is more commercially oriented. So I like to look at us as a non-traditional company. And when you look at our federal business, it was purpose-built starting in November 2016. At that time, we really only had the missile defense business. So our cyber business that I mentioned, 21% of the company's revenue today didn't exist. space and missile defense, 14% of the company basically has grown up since that point in time in the critical infrastructure. So because we're purpose built, we built a company that is very agile, that is very commercial oriented and non-traditional. So we're in the best place, I think, to capitalize on things like OTAs. We currently have over 30 other transaction agreements across the entire company. We're advertising our product offerings on commercial solution offerings. We believe in all the acquisition reforms that are underway in terms of how do you streamline the FAR and make things more efficient. But I would say we're a commercial company at heart, and our focus is getting solutions out as quick as possible for our warfighters.

Operator

And do you think that the signal towards where the requirements and needs are are strong enough for you to actually put your own dollars and investment towards those?

Carey Smith, CEO

Oh, absolutely. I mean, you know, when you look at the defense budget, $1.5 trillion in the base that's proposed for FY27, whether it's $70 billion that's going into drone dominance, counter-unmanned air systems, $60 billion going into space, $58 billion going into JADC-2, artificial intelligence, $48 billion going into critical minerals. We've got $20 billion that's going into cyber. We've got $11 billion going into Pacific Deterrence. It aligns perfectly with our portfolio, and they're all areas that we have been investing in, many of them since we started research and development investment back in 2016.

Operator

Perfect. And to close, I always like to know what gets you most excited about the future and what actually keeps you up at night.

Carey Smith, CEO

So I would say most excited about the future are the strong tailwinds. We're very fortunate to be in two growing, thriving segments that have bipartisan support and global demand. We're also in 6N markets that are growing between 4% to 11% over the next three years. We have a proven ability to show that we can be one of the industry leaders in organic growth within both of those segments. What keeps me up at night? I think it would be mostly any unknown unknowns or unpredictables. well thank you both very very much for for being here thank you we really appreciate it marion