Mike Ruppert: Yes. Ken I’ll take that one, it’s Mike. So when we look at the second half, it is going to be more weighted to Q4. We think Q3 prior to the R&D tax and I’ll give you the split between those between Q3 and Q4 but prior to the R&D tax payments, we think Q3 is going to look a lot like Q2 which we expected coming in, prior to factoring to be breakeven to slightly positive. And that’s what we’re seeing in Q3 right now. Now, that’s pre the R&D tax payment, which we estimate it’s going to be $23 million in Q3, it’s going to be 13 million in Q4 to get to the $36 million that we mentioned in the prepared remarks. So what we’re looking at is a free cash outflow in Q3 and the magnitude of $20 million. And Q4 is going to make up the difference, as we see the higher net income, higher up income. And we actually expect working capital in Q4 to release especially in unbilled and inventory, which is driving the cash flow for the year.
Ken Herbert: Yes, that’s helpful. Thanks, Mike. And it sounds like for cash earnings, or cash and earnings, obviously a pretty significant ramp in the fourth quarter. Is there any program you’d specifically call out maybe around progress payments or anything like that, that we should keep in mind as significant or material swing factors in the fourth quarter or they could either be potential risk or that are obviously embedded in what’s going to help sort of hit the full year number seems like a pretty aggressive ramp in the fourth quarter.
Mark Aslett: Yes. Go ahead Mike. Go ahead.
Mike Ruppert: I was just going to say it is definitely a large quarter Ken we do feel good. The good news, as we look at it is we have good backlog coverage right now going into two H2, and into Q4. We’ve got good visibility into the programs that aren’t in backlog that make up the balance of our FY ’23 and specifically the Q4. So we’re entering with strong backlog coverage of majority the remaining are recurring programs, programs for which were designed in on. We also have and I think Mark touched on it briefly, we have improved visibility and coordination into the supply chain than we had in H1. So still risk around it, but we feel better about it. And then we’ve got line of sight into some key execution milestones that drive revenue in Q4 on a couple of key programs.
So there’s still uncertainty in the environment supply chain, contracting delays, things that we’ve talked about. We’re working to control what we can, but overall we feel good about the demand environment in the program’s we’re just cautious on items that are out of our control. And just from a profitability perspective, we obviously expect margin expansion in Q4 and that’s going to drive cash flow as well. Yes, okay. Just following up this kind of things right. So the higher margin program mix in the second half as we talked — we do have a pickup in high margin IP licenses and some royalties on various programs. We are anticipating fewer execution delays and some inefficiencies. We saw supply chain and would say improve incrementally in the second quarter.
And so as the condition stabilized and as hiring continues to pick up, I think we got fewer headwinds there. Impact, I think continues here. We’ve got continued savings relating to our pricing initiatives that we undertook early in the year. We’ve got some procurement savings. And this quarter, we had some facility footprint consolidation. We’ve got further consolidation in Q3 that will lead to savings. And then finally just obviously, better absorption and better overhead and leverage, largely as a result of the higher revenue. So although it’s a big quarter, I think we’ve done the work and we know what’s going to drive the increase.
Ken Herbert: Great, thank you for all the color.
