And then third, when we think about recompete, the idea here is that our lessons learned across our business in unique domains are applied, which is why we’ve gone to an enterprise business development function. So that we don’t have unique pockets of knowledge but we have a standard higher quality of enterprise understanding of how to best win or recompete. Those are three of the areas that we are moving out on immediately to address the recompete rate.
Operator: Your next question comes from Matt Akers from Wells Fargo.
Matt Akers: I wanted to ask, Toni — I appreciate the comments on M&A. I guess on the flip side, are there any areas you’re looking at potentially further divestitures or maybe areas you could de-emphasize, or are you pretty happy with kind of where the portfolio sits at this point?
Toni Townes-Whitley: I don’t have — listen, in terms of our portfolio, I focused on and just recently responded on where I see differentiation in that portfolio. I’ve indicated that one of the areas I’ve been looking at is to ensure that we’re enterprise scale across. Are there areas that we may need to invest to ensure that, that portfolio is enterprise scale? Absolutely. Are there areas that we invest in our organization that will be around our ability to take to market systematically our differentiation? Right now, I have no plans. It’s not in line of sight for any significant divestitures at this time. We see the quality of this portfolio across the board, and much of our footprint that we have across various agencies where we have unique expertise and advisory capability, we think, is an asset that we can deploy further going forward. So at this point, no divestitures to announce.
Matt Akers: And then I guess for Prabu, you mentioned kind of material sales timing in the introductory remarks. I guess, can you talk about how big that was and was there any impact to the margins? I guess margins have been a little bit better without that.
Prabu Natarajan: Look, we do have some amount of volume every quarter and every year that comes from material sales. And the team’s done a remarkable job on the procurement side and making sure that things get delivered hopefully on time and hopefully even to the left of when it was scheduled to be delivered. And we saw that good performance continue at Q3. I would say it was not an outsized impact on revenue growth in the quarter. I’d say the material sales were right about in line with our prior year performance, our prior quarter performance, maybe a tad bit better than how we plan for it, but nothing outsized. And that’s why we did not see the dilution from material sales impacting EBITDA margins in the quarter. So EBITDA margins were healthy and that’s because we did not really see any outsized material inflows from Q4 into Q3, for example. Hopefully, that was responsive.
Operator: Your next question comes from the line of David Straus from Barclays.
Josh Korn: This is actually Josh Korn on for David. Just a quick one. You raised the EPS guidance but didn’t raise free cash flow guidance. So I just wanted to ask what, if anything, was the offset?
Prabu Natarajan: Look — so the guide for free cash flow is $460 million to $480 million, that’s a $20 million spread. And as I think about it, that’s less than a single days DSO. And so as we think about the cadence of both collections and disbursements, we’ve got the guide currently pretty finely calibrated at $460 million to $480 million. The reality is, as we’ve disclosed, our performance through the first three quarters has been really strong on converting EBITDA into cash. And hopefully, we’re sitting in a place at the end of January where our actual performance is a tad bit better than perhaps what’s implied in the guide. But again, don’t want to get too far ahead of the work that remains. And I would like to remind you that Q4 of last year was a really strong free cash flow quarter for us, but it was also climbing out of a hole that we created for ourselves.
Thankfully, we don’t have that dynamic this year. And so hopefully, we continue to do well on converting EBITDA into cash. And hopefully, that gives us some options down the road. But where we’re sitting right now, I think we’ve got it pretty finely calibrated. And we’re sitting at about four hours of DSO. If I actually did my math right, while I was pontificating here on the call, but we’re tightly calibrated. And hopefully, again, gives us confidence about the out years more than it does about this year. And we’ve got some potential government funding issues to account for sometime mid-January. And so calibrating all that into the guide right now.
Josh Korn: And then I just wanted to ask if you would provide the percentage of GTA in the bookings year-to-date?
Prabu Natarajan: So I would say we’ll get back to you on that specific question, Josh. I don’t have that number in front of me here?
Operator: Your next question comes from the line of Tobey Sommer from Truist Securities.
Tobey Sommer: With respect to your comments about contract awards potentially pushing out of the current quarter. Is that a prospective view and sort of just caution about here as you exit the last two months of the quarter or is that something you’re already seeing? And along with that, could you comment, is it in any particular bucket, will civil defense intel space, anything that’s noteworthy there?
Prabu Natarajan: I would say it’s more generalized than sort of occurring in specific buckets or specific domains or specific customers. I think we are simply cautious about the start of the fiscal year for the government, starting NSCR with some funding discussions yet to happen in the January to April time frame. So we’re just cautious about what that means in terms of cadence for awards booked and specifically to book-to-bill for a given quarter. So I’d say pretty generalized observation and it’s keeping one eye out on history, while we’re looking at kind of our data in front of us here, but nothing too specific to call out.
