Rand Blazer: Well, Ted, let me start and then you can jump in. Serrano, the first thing I would say to you, though, is — when you’re on the staffing side, you don’t always know what the project is. It’s an electronic world where they have requisitions, they published the requisitions through BMS and you respond to them. Do our account managers have a sense of where they’re deploying these people. The answer is we have a sense, but it’s not a project you’re not hiring people for projects, you’re hiring people. Where the company puts them is, to some extent, through the electronic media means a little invisible to us. Now having said that, I think it’s just a question of when they’re rotating people or that they just are taking a pause in when you start a new person back up.
And I think they do that because it’s a cost control measure. That’s why companies have staffing programs. that they — and with the full visibility from the top down in the organization, remember, 15 years ago, they didn’t — 20 years ago, they didn’t really have all these programs. There was a lot of independent one-off hiring people. They’ve really put great programs in place. They’ve made it electronic, which all of us have responded to, and we benefited from in the sense of transactional flow. But having said that, I think what they see is they know that this is a way that they can control costs, at least in the short term. not a long-term answer. It’s a short-term answer just to bridge the gap until they decide to continue to move forward.
But you can’t run your service centers, for example, which is where some of that staffing goes. Unless you up the productivity of that team or you just limp along for a while because there’s a general lower level of action going on in that service center. I’m using that as an example. If it’s project oriented, it’s more coming through the consulting program and I think our backlog and consulting revenues talk for themselves.
Surinder Thind: That’s helpful. And then as a follow-on for Marie, can you maybe talk about M&A at this stage, given the color around the limited deal pipeline, is that by design here? Is it a valuation issue? How should we think about that part of the commentary?
Marie Perry: Well, I mean, from an M&A perspective, I mean, it’s really around trying to find that right deal, to your point that meets our value proposition. So we’ve said that or use of capital that M&A is the first and best use.
Theodore Hanson: But you know where we are Surinder, let me add 1 more thing. I think it’s opportunistic, right? And so what we’ve always said if there wasn’t the next right opportunity in front of us, that we would then turn to share repurchases, which obviously, we’ve done here during the last quarter, and intend to continue with, with the new share authors repurchase authorization and continued free cash flow here as we go forward. So look, we still would love to find certain properties that fit our shopping list that we have defined, both in commercial and GOV. We continue to talk to various targets and that doesn’t stop. It’s just slower now and kind of nothing at the lip of the cup. To your point, I think one of your — the last part of your question was about valuation; and there’s still not a discovery evaluation today because they’re — a seller is not willing to sell a really good business into a marketplace where the buyer is not willing to pay what he perceives or she perceives the multiple to be.
And so you’ve got a little bit of a stalemate going on still. And until the financing markets and the equity capital markets are working in a way that supports a normal amount of deal flow in that discovery can be made. We’re at a little bit of a lagger head, I would say.
Operator: Our next question comes from Mark Marcon with Baird.
Unidentified Analyst: This is Andre on Mark. So my first question will just follow up on the last one. Can you speak about how you feel about your current debt levels? And what are your thoughts on increasing leverage if the right opportunity did come up in this environment?
Theodore Hanson: Sure. So great question, Andre. I mean we’re still very modestly leveraged, I think, on a senior basis, secured where less than 1, about $0.9 million going to total leverage basis, it’s under 2%, 1.9%. We’ve always said that when we’re below 2.5, we’re kind of under levered, if you will, if there are good M&A opportunities in the marketplace. In normal times, we’ve leveraged up to about 3.8x about and we’ve done that on 5 different occasions, I believe, to make a larger acquisition. And the margin and free cash flow characteristics of the business certainly support that. But these are normal times. So obviously, we’re wary about leverage and how we think about that with so much uncertainty in the market. But we have dry powder.
We have free cash flow. We have $460 million revolver that doesn’t have anything outstanding on it. We purposefully increased it about 2 quarters ago, so that if the right M&A opportunity came along, we could take advantage of it. So I would say we’re willing to take on a little bit of leverage for the right thing, but you won’t see us up at 3x and 3.8x leverage metrics until we have some certainty in the market.
Unidentified Analyst: Great, that’s very helpful color. And then my follow-up will be, you spoke a little bit about the new multiphase procurement cycles on the federal side. Could you provide some more color on that? And any initial thoughts on how that could impact strategy or go-to-market operations on the federal side?
