Chris Cage: Yes, I mean, big picture, Seth, I think you’re thinking of it right. We hit our leverage target. We’re happy with where we are. The interest rate environment could be vastly different in 2025. So, that’s something we’ll pay close attention to, but I think you’ve got it right. We’ve got a dividend program. Tom just talked about an increase that uses a little over $200 million a year of cash, a CapEx program at around 1% to 1.5% of revenue. And then we’ve got a lot of excess cash that we’ll generate, not only in the fourth quarter, but next year. Delevering further at this time is not a priority, but it’s always something we’ll evaluate relative to the interest rate environment much.
Tom Bell: It’d be a nice problem to have.
Seth Seifman: Thank you.
Operator: Our next question comes from the line of Louie DiPalma with William Blair. Please proceed with your question.
Louie DiPalma: Tom, Chris, and Stuart, good morning. Within healthcare, you referenced how DHMSM could be stable going into 2024. How should we think about the VA healthcare exam volumes going forward with the tailwind of the PACT Act? And has there been any changes in the competitive dynamic there?
Chris Cage: Yes. Hey, Louie. Again, just a clarification on DHMSM, stable relative to our Q4 kind of exit rate, right? It’ll be – it’s been trending a little lower as deployments have ramped down, but the good news is we, at this time, don’t see a significant of a step-down in 2024 as we once did. So, that’s great news. On the VA side, listen, I mean you always have competitors that are highly motivated to ensure they are stepping up their game to capture as much of the allocation as possible. And the VA wants a robust competitive dynamic because we need to keep the throughput high and give veterans the benefits that they deserve. At this time, it’s hard to predict 2024. we’ll have more color in a few months, but we see that stable and it’s been a growing part of the portfolio.
And there’s other good things going on in the VA too. The RHRP program – sorry, in Health, the RHRP program will continue to be a growth catalyst for us as well. So, it’s not just the PACT Act volume, but right now that’s trending very favorably, and we’re very pleased with the performance of the Health leadership team and really delivering great results.
Louie DiPalma: Excellent. Thanks.
Stuart Davis: Thank you. Shamali, looks like we have time for just about one more question.
Operator: Sure, no problem. And our last question comes from the line of Ken Herbert with RBC Capital Markets. Please proceed with your question.
Ken Herbert: Yes, good morning, Tom, and Chris, and Stuart. Thanks for squeezing me in. Hey Tom, maybe just to take a step back, I appreciate all the details you’ve outlined here in terms of the sharper focus, and obviously reflected in the backlog and the wins and everything else. But as you think about the business now transitioning into 2024, what do you think are the biggest opportunities from a cost standpoint as we think about sort of the margin opportunity? Obviously, not looking for specifics in guidance, but how much of a cost standpoint do we think there is in the business, which obviously should support what you’re doing in terms of the higher quality bids and business opportunities?
Tom Bell: Yes, well, I can’t put a number on it because we’re only now at the point where we can start to imagine the opportunities that are in front of us. But I’ll call your attention to the three functional leaders that I talked about enhancing their positions. First and foremost, the Chief Technology Officer. Bringing LinC into our Chief Technology officer is going to help us become more efficient and more effective at creating and deploying technologies for the benefit of all of our businesses. I am really excited about focusing our R&D pipeline on those areas of technology that will propel our current business, enable us to compete and win and insert technology in those businesses, and win new businesses going forward.
So, I think there’s great opportunity for us in the CTO office. In the CPO office, the Chief Performance Officer, that is the internal wheelhouse of everything that makes Leidos an efficient, effective corporation. I mentioned real estate, procurement, IT, program management, are all going to be in that. The new leader of our Chief Performance Officer will have the responsibility to not only make sure we are best-in-class when it comes to the quality of the product we put on the field to make Leidos as effective as possible, but I’ll also be asking that individual to ensure we are world class as a cost of doing business at the corporate level. And then last but not least, aggregating the complete value stream of growth, strategy, sales, marketing, communications, government relations, all in the Chief Growth Officer, will put us in a prime position to ensure we have unparalleled customer understanding for where the customer’s going and how we’re going to skate to the puck of where it’s going to be, as opposed to just chasing RFPs. So, the net sum of all of that, Ken, I believe will make us a more efficient and effective corporation.
But again, as Chris said, it’s not – this isn’t a cost-cutting exercise, this realignment. This is aggregate the capabilities of Leidos in a better way to make us more effective and efficient.
Chris Cage: Yes, and I’d only say, I mean, we’re already seeing and feeling kind of a leaner ongoing operating environment now, and that’s showing up in our results. Clearly, we are focused on next year’s 10.5% plus margin target. That’s an area that I think we’re demonstrating that we have line of sight to delivering on that. And that’s still a goal the corporation’s rallying behind.
Ken Herbert: Great. I’ll leave it there. Thanks for the color and nice quarter.
Operator: And this concludes our question-and-answer session. I would now like to turn the conference back to Stuart Davis for any closing remarks.
Stuart Davis: Well, thank you, Shamali, for your assistance on this morning’s call, and thank you all for your interest in Leidos this morning. We look forward to updating you again soon. Have a great day.
Operator: And this concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
