Dan Batrack: Well, a good question. It’s probably one we get quite frequently. It’s ever since both the IIJAs passed into law I would say when the CHIPS Act and even the Inflation Reduction Act and then some combination of the special legislation this past we get different varying comments. We do believe it will have a contribution, primarily late in the year. We have it been quite de minimis overall. The growth rates that we’ve had in our state and local, which we expect one area to be contributed to the funding. We’ve seen our clients begin to get some of the funds or grants provided to them but they haven’t necessarily flowed at any material level to us yet. I expect in late Q2 but really Q3 and Q4 these projects to start.
It’s mostly going to be on the very upfront planning, the initial outline even conceptual design. And so I expect many projects to start in the second half of fiscal year 2023. But what’s exciting for us about it is not the financial contribution in 2023, but it’s when you start a program they start at a small level and they begin to build up like a bell curve. And these are projects that start with small conceptual tasks and assignments. They move into permitting the detailed design. And so they’ll build and really contribute over many years. So these programs that will start in the second half of this year are going to build for multiple years and they’ll contribute for three to five years or more. And then, of course, owners engineer and oversight during implementation by the constructors.
So it’s a de minimis contribution during 2023. Really had no contribution in our first quarter and is not included in any material way in the second quarter. You’ll see it begin to build in the second half. And I’ve not seen anything that would cause it to be delayed or pushed out to the right. And we’re now seeing what’s appropriate the funds go to our clients, which will then trigger their ability to procure and you’ll begin to see it in backlog. But I’d also say not only did it not contribute to the revenue in the quarter, I do want to make the note IIJA and the other funding sources did not contribute to our backlog growth in the first quarter. That was excluding anything that I expect €“ and really will come later in the year for backlog.
So the sequence, of course, is — it goes into contract capacity then it goes to backlog which we report in detail then converts to revenue. So we’re still a few quarters out from seeing that contribute to the revenue side.
Alex Dwyer: Got it. And second question you guys raised the margin target ranges for both of the segments last quarter. And this quarter was interesting with the GSG margin coming in well above the high end of the range even when you back out those three items you called out in the prepared remarks. I was just wondering, if there was the latest message on the timing of CIG margins potentially catching up with GSG margins. If this is still the case or what the time line could be?
Dan Batrack: That’s a great question. It’s a great question. Every time I speak with our CIG leads and executives, and they say, they’re going to close the gap GSG widens the gap by additional performance like you saw this last quarter. I will say that we expect that GSG as an overall range for the year to be between an EBITDA margin between 13.5% and 14.5%. GSG thought they were beginning to close that gap by being 13.1% in the first quarter. I keep saying, I expect that to close and then GSG puts in a 17% margin and what they would say to me and have said to me is we can do better. So, I guess, what I’ll say at this time is I expect both the GSG and CIG margins to expand. We included a 50 basis point increase in 2023 over 2022.
