David Constable: Yes, I’d agree with you. I mean I would expect that about 80% reimbursable to would be there or higher by the end of the year based on what we’re seeing, right? We’ve just had very few — the current $35 billion we’re chasing in the next 4 quarters, I think there’s just a couple of lump-sum prospects in there. So the reimbursable prospects — projects will continue to go up in backlog, and we expect a higher margin profile to continue. Obviously, ATLS, we talked about it a lot today as far as cadence across the segments and the businesses, ATLS remains very promising and the significant opportunities in data centers and chips and pharma, but also in mining and metals. They’re in a very good place right now. We have key chemical projects out there and energy transition markets across all the entire portfolio continues to be very strong.
So we’re going to see awards coming in across Urban Solutions, Energy Solutions supplemented by recompete awards or extension awards in Mission Solutions.
Natalia Bak: Okay. That’s helpful. And then just 1 more question from me. If you could just give us a little more color on what you’re seeing in terms of demand by region? And how do you think about geopolitical risk? Do you see Middle East is a good source of bookings in 2024 or prospects more weighted towards Americas?
David Constable: Yes. We’ve been booking a lot of work internationally recently. Geopolitical — our clients — our major clients, not the developers, but our key clients, for the most part, tend to look through short-term economic and geopolitical challenges, right, which — and they’re operating as multinationals globally. So if they didn’t, we would not have $32.7 billion in backlog, right, with all the challenges out there and the uncertainty. So their CapEx plans and their capital allocation business model returns, they’re able to play the long game. So we’re not seeing any reduction or challenge with our clients’ CapEx plans due to geopolitical risk. Certainly, they are diversifying out of certain regions and countries.
For example, the whole China plus One derisking scenario that we’re all in the middle of right now and supporting. But yes, our top dozen customers, they spend between $160 billion, $165 billion in CapEx, these are commercial customers, $160 billion, $165 billion in 2023. Their ’24 CapEx is $155 million to $165 billion, so up slightly. And beyond 2024, it’s $165 billion to $180 billion. So their CapEx continues to stay at least flat, but for the most part, is actually increasing when you look at our — again, our primary — that’s just the top 12 customers that we’re looking at. And then obviously, you’ve got — that doesn’t include our government budget, right? Request for the U.S. Army is about $186 billion this year for the Army. Department of Energy is $52 billion and FEMA is going to probably spend $26 billion.
And TxDOT here in Texas where we do a lot of infrastructure work is up as well. All those numbers are up. TxDOT’s up to $16 billion this year. So yes, that’s how I look at it. I see the markets still continue to be very strong, and we’ll continue to grow backlog.
Joe Brennan: If I could add, I think we’ve seen significant traction on bookings in the United States, which is quite helpful. If you’ve been following the story, we have not been profitable in the U.S. for a number of reasons over the past 5, 6 years relative to some performance prior to David and I arriving and that has put us in a loss position in the U.S., which has created some tax friction. We’re starting to see a very clean pathway to getting back to profitable in the United States, which will have some other kind of tag along benefits related to our effective tax rates and our use of value VA sitting on our balance sheet. So that’s a long-winded way of saying, yes, we’re starting to see some traction and growth in our backlog here in the United States.
Operator: Your next question comes from the line of Michael Feniger of Bank of America.
Michael Feniger: Just when we think about operating cash flow guidance, obviously, this year, started a use of, I think, $110 million better than what it was a year ago. Just to get to that positive full year guide, I know there’s a level of seasonality. Just any guardrails you can kind of give us as we kind of prepare of Q2 and Q3. Is the bulk of that cash from ops? Is that mostly Q4? Does it kind of inflect as we go into Q2? Just try to give us some guardrails on preparing how that cadence plays out through the year?
Joe Brennan: Yes. I think you’ll see the more significant and, Mike, on — towards the back end of the year, there will be some lumpiness as it relates during the year in Q2 and Q3, but with the majority of that a little bit more back-end loaded related to some of the dividends that we’re looking to repatriate in the middle part of 2024. So it’s — it will reasonably kind of flat between Q2 and Q3, and I think you’ll see an uptick as we get closer to the end of the year.
Michael Feniger: Great. And just my follow-up. On the $150 million of legacy funding, I believe that hasn’t changed. Just any guidepost of how that could potentially move better or more through the year? Any catalysts that we should kind of keep our eyes out for as you kind of progress through the year? And just that $150 million, just directionally, how does that kind of look as we enter 2025 and some of these projects start to wind down or come closer to completion?
Joe Brennan: Yes. Let me talk about heading into 2025. I think we’ll have de minimis amounts of funding requirements on loss projects in 2025. I think the bulk of what we’re trying to achieve relative to the completion of those projects will kind of come to fruition and in 2024. And on the legacy funding of the project, that’s the starting point. And if you look at historically what we’ve been able to do over the last couple of years, is that signpost at the beginning of the year relative to cash flow requirements on lost projects we’ve been able to significantly reduce that number. And our expectation is that $150 million will be driven down to its lowest common denominator here for the year. And we feel comfortable based on historically how we’ve been able to achieve that.
Operator: That concludes our Q&A session. I will now turn the conference back over to David Constable, Chairman and CEO, for closing remarks.
David Constable: Great. Thank you, operator, and thanks to all of you for participating on our call today. Given our performance over the last few years and our strong position in the marketplace, we expect to continue to generate substantial value for our shareholders in the future. Appreciate your interest in Fluor, and thank you again for your time today.
Operator: This concludes today’s conference call. You may now disconnect.
