David Mutryn: Yeah, it’s a good question. I mean, I think in my prepared remarks, I mentioned our current bias towards the low end of that two times to three times debt ratio range. We’ll continue to use that range as the guidepost for what we want to be in the long term. While acquisitions continue to be our priority for capital deployment beyond dividends, they can be — they’re opportunistic in nature, right? So it’s hard to predict when they come, so we will be evaluating over time kind of the benefit of having that dry powder available for acquisitions should they come as well as the interest rate environment and where we are relative to that two times to three times debt ratio. So those are kind of what we consider in that formula.
Bruce Caswell: And Bert, I might also note that — if I might, the corporate venture capital capability that I talked about in my prepared remarks, we envision those being relatively small bets that we have placed. So they wouldn’t rise to the level that it would move that ratio meaningfully. But at the same time, it’s an important other, I’d say, smaller element of our capital deployment strategy to increase our innovation and competitive advantage over time.
Bert Subin: Got it. Okay. That helps. And then just my final question. Could you give us some, I guess, an update on where things stand on the VA exam business. We’ve heard from some of your competitors there. We’ve been really, really strong of late. And it sounds like the incentive fees have been pretty additive and should remain additive into next year. How should we think about VA exam business from here? Is there still a lot more growth in the pipeline? Or do you start to get concerned that maybe that turns the other way in late ’24 or ’25?
Bruce Caswell: Well, I guess I’ll start where you ended, which is I don’t have that concern, but let me come to that through a bit more logic. So to back that, as you know, started in Q2 of FY ’23, and then across Q3 and Q4, we saw a pretty meaningful step up in volumes. So today, we’re operating at significantly increased capacity, and that’s necessitated by the customer, and it’s across the system. If you talk to our competitors or listen to them, you’d hear the same thing. The application rate is significant. The inventory levels are significant. In fact, there’s publicly available data on the VA website that shows the current cases in inventory, and I think I’m correct in saying that that’s a record high, north of $1 million.
You can also follow backlog and backlog would be cases in inventory for more than 125 days. I have found it interesting, and I think reflective of the capacity that’s been building into the system among the vendors, that backlog obviously is not increasing at the same rate as inventory, but inventory levels remain very high. So that means there’s a lot of work that’s waiting attention by the VA and then the examination vendors like us that are downstream. So we see — as we look at FY ’24, the revenue for the contracts that comprise our work in this area, increasing but increasing at a gradual rate over through the course of the year, not a significant spike, if you will, kind of a gradual increase. I want to note that the bulk of the hiring that we feel that we need to do to support that requested capacity has been completed.
And other indicators that we look to really say what’s beyond FY ’24. A good indicator is what’s the VA doing themselves. And they’ve hired a great number of employees, and there’s public information out there about their intentions to further grow their headcount. In FY ’23, they grew their overall head count by 20%, and they intend to hire an additional 4,000 employees in FY ’24. So our view would be that they see the work here and the volumes that are required to get through that work continuing well into the next fiscal year as well. So we’re confident in that. I was just commenting on the incentives and disincentives. I would just say that, that’s a program is that the VA obviously had implemented, but has made adjustments to over time.
And we feel that that’s an area that they’ll continue to fine-tune with the vendor community as they go forward. And so we don’t have a significant reliance in our estimates for FY ’24 on those types of payments.
Bert Subin: Thank you.
Bruce Caswell: Sure.
Operator: This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.
