Sabahat Khan: Great. And then maybe just one last one. If you kind of take the demand commentary, just a commentary around the labor situation, kind of how would you think about pricing into kind of ’24 and ’25 relative to maybe ’23? I’m not sure if that’s something you’re going to cover at the Investor Day, but just curious how the directional pricing environment is trending.
Gord Johnston: Yeah. I think what — certainly what we’ve seen all through 2023, when you look at our project margin and such, you see that we’ve been able to pass on that additional salary pressure from a fee perspective. Certainly, I think we see that being the case as we move into ’24 and beyond as well that the industry is busy. People — we certainly are being more selective in terms of the projects that we pursue, the clients that we work for. And so I think that does give us a little bit of pricing pressure — pricing support as well, sorry. But this is still a competitive industry. No one gets to write their own check. But we are seeing that we have a little bit of ability to increase pricing as well to cover that salary increases.
Sabahat Khan: Great. Thanks very much.
Operator: Thank you. And one moment as we move onto our next question. Our next question is going to come from the line of Ian Gillies with Stifel. Your line is open. Please go ahead.
Ian Gillies: Good morning, everyone.
Gord Johnston: Good morning, Ian.
Theresa Jang: Good morning, Ian.
Ian Gillies: With respect to employee utilization in the third quarter, can you get it any better than it was? Or was that kind of as good as it gets?
Theresa Jang: I think it can get better. There is always room to move up. And again, when you think about all the different sectors we work in, you have different levels of utilization across different business lines and geographies. So, I would say that generally, there is opportunity to increase utilization. What’s really interesting about the third quarter and utilization where it was the strongest was our Water business, both in Canada, but particularly the U.S. And you saw that in our revenue growth. And that really was the product of being able to import work from — workers from other parts of our business to help address the backlog. So, I think about 100 FTEs that we used from an imported talent standpoint. We — I think we used 50 to 60 FTEs in our Pune office, and that’s really what helped to drive utilization now.
But as I commented earlier, when we go into the fourth quarter, we really want to see some of those folks take a bit of time away because the utilization has been so high. And so again, and we’ll expect some of those folks that maybe have been lent into that business go back into their own businesses as they start to pick up. So that mix is really, really dynamic. But it’s a bit of a long answer, Ian, but I think really we were very successful and have become very successful at how we manage our workforce. And so I think overall, the ability to continue to move utilization up is certainly there.
Ian Gillies: Okay. Thanks. That’s quite helpful. Theresa, maybe bring you back some of your time [indiscernible]. I wanted to ask about cash taxes. I know there’s been some changes in the U.S., which have kept those elevated. Are you seeing anything transpiring on that front that makes you — that could normalize or change in the future here to perhaps even improve free cash generation where it is today? Or is it pretty steady state?
Theresa Jang: No. I mean I think cash taxes, unfortunately has taken a step in the wrong direction, mainly because of this U.S. Section 174 to change in how they allow deductibility for your R&D costs. So I think everybody knows that up until very recently, you were able to deduct them as you incur them. And starting this year, we now have to capitalize them for [tax] (ph) purposes and are only allowed to amortize them over a five-year period. And so with that said, is to actually increase our cash taxes until we reach kind of a five-year time horizon where now we have five years of programs all rolling over together, it will take a dent out of our cash flow to a greater extent than we’ve seen before. But as you saw from our results, we continue to focus on strong cash flow generation, and in spite of that extra bit of taxes we’re having to pay in the U.S., we’re managing to continue to strengthen our cash flow.
Ian Gillies: Okay, that’s helpful. Thanks very much. I’ll bring it back over.
Gord Johnston: Thanks, Ian.
Operator: Thank you. And one moment as we move on to our next question. Our next question comes from the line of Maxim Sytchev with NBF. Your line is open. Please go ahead.
Maxim Sytchev: Hi, good morning, Gord and Theresa.
Gord Johnston: Good morning, Max.
Theresa Jang: Good morning.
Maxim Sytchev: I think you guys have recently added a Chief Technology Officer to your management roster. And I’m just wondering in terms of maybe some of the kind of the road map that this individual is going to be hoping to sort of implement especially on the digital side, I was wondering if you can give us a bit of a preview from that perspective.
Gord Johnston: Absolutely. We’re thrilled with the individual that joined us as our Chief Technology Officer. And so that — as we’ve been talking over the last couple of years about our — some of our digital programs, whether those are internal initiatives to increase the amount of net revenue that we can generate per employee from an efficiency perspective and also externally in terms of the products that we can develop and offer for sale to our clients who are looking for them. And so, we’ve been working through that for the last couple of years. This individual who’s joined us, really his charge is to focus on both of those activities, both internal and external, working very, very closely with our current Chief Information and Security Officer who provides sort of the foundational piece, the cyber, the tool sets and then working closely with our CTO to ensure that we’re focused, we’re getting the highest use.
And I think you’ll see over the next couple of years, we’re going to increase the amount of time and focus that we’re spending on those digital products. So, we’re really excited about it. And I think it’ll — we’ll see some really short-term benefit from that as we go into 2024 and then only strengthening in the years to come.
