Bert Subin: Appreciate the color. Thank you.
Operator: The next question today comes from Gautam Khanna of TD Cowen. Please go ahead.
Gautam Khanna: Hi, guys. Two questions. First, on HomeSafe, I’m just curious about your confidence on execution given some of the logistics partners may have agreed to contract terms prior to the runaway inflation we saw last year and for part of this year. Just what kind of contractual — what’s your confidence that that stuff doesn’t have to get renegotiated? And then I have a follow-up.
Mark Sopp: Yeah, I think, Gautam, I think we have support from the supply chain to deliver the initial ramp and the commitments around that. Even if we started tomorrow, never mind in a few months, I think the heat’s come out of that market somewhat and Transcom are thinking that those rates should naturally come down as the heat comes out of the market in the event. So I think in terms of our confidence levels, we feel we’ve got the right partners, we’ve got the right people in the supply chain and we’re feeling really good about that. It’s not really a question that we’re concerned about.
Gautam Khanna: Okay. And then just a quick follow-up, on the 2025-475 target, knowing what you know today, what is the variance, earnings per share variance to that from interest expense, a higher share count, et cetera? Take HomeSafe out of it, which I think was about $0.50, right, to the target when you guys updated for the HomeSafe win. Where do you guys stand? Is it 425? What can you see?
Stuart Bradie: I mean, it’s so tricky because we don’t know the ramp on HomeSafe and as Mark was alluding to in terms of free cash flow we’ll use to do buybacks, there was a big piece of that in the initial calculation. And so I think the challenge for us, Gautam, if you look back, is that when we set our targets initially, I think it was $4, not 425, and then 475 with HomeSafe. There was a base set of assumptions that surrounded that around interest rates and accretion dilution mass around buybacks and things like that and average share prices and things. But ultimately, everyone forgets about those assumptions and everyone just goes and remembers the EPS target. And so I think the things that we can control are probably a better way to think about how we should be measured and I think that really is EBITDA.
And as we’ve come with these external factors and the volatility in the world today, we can’t control interest rates and FX movements and things like that, but our EBITDA generation is within our control as is our organic growth and wins. And I think that’s how we will be, I guess, projecting our future, if you like. That doesn’t mean that EPS, particularly short-term EPS, will not be part of the executive compensation, but longer-term EPS with such volatility and movements is something we’re probably going to move away from and think more about EBITDA.
Gautam Khanna: And do you have an updated EBITDA target for 2025, recognizing HomeSafe as ex-HomeSafe?
Mark Sopp: I think Stuart was very clear in his remarks that we’re ahead of pace by a lot in STS and on pace for government ex-HomeSafe and we still believe HomeSafe is there. It’s a matter of time. So putting a precise date in 2025 in HomeSafe’s contribution is a little hard, but we still are optimistic it will deliver the originally intended EBITDA over time once we get through the first moves and everyone is comfortable that the quality that was intended can be delivered. So the great news is that relative to the original targets, the most important driver, which is EBITDA, is ahead of pace. We haven’t quantified that yet. You can maybe do your own calculation on STS’s run rate and where they’re heading trajectory-wise, which we think will continue, but I think it’s best to wait for the ’24 guide and the investor data to be more precise on that exact level for 2025.
