Brent Thielman: And I guess, maybe on Mission Solutions, as you mentioned, kind of a lower level of backlog relative to the other two business groups. But any update on the timing of Pantex decisions and any other opportunities outside of that to build up the backlog in that business group. Obviously, that one is a bit lower here this quarter.
David Constable: Yes. Mission Solutions can be very lumpy with these massive long-term 10, 20-year contracts, of course, we hit one in late 2022 with Savannah River that was a very large program. So that’s, again, that was a lumpy year because of ’22, but those will continue to come around. I think on Pantex to your question, we’re expecting an award I’d say second quarter to third quarter 2024, but before the election. So maybe that’s the best timing I can give you there. But we’re really excited about Mission Solutions and the future that we’ve got being such a strong Department of Energy contractor and picking up speed in the defense space and our LOGCAP work in Africa and supporting the troops out of Germany, we see really great opportunities in DOE and DOD.
And of course, FEMA comes along. We’ve just been awarded that Eastern U.S. East Coast FEMA contract as well, which will continue to, as things occur, drive revenue. So I think that’s where we’re at with Mission Solutions. And like I said, very positive, and we’ve moved towards national security and brought in some new management capabilities in national security in the defense and intelligence space, where we’re pretty excited about some prospects there as well. Those are prospects we don’t talk about publicly, but they are very exciting and quite sizable. So that’s where we’re heading in Mission Solutions.
Operator: Your next question comes from the line of Michael Feniger from Bank of America.
Michael Feniger: Just your debt to cap is in your range, you have your target for 2026. It seems like you guys are really making progress on the targets you laid out positive cash from Ops in Q4, you’re guiding for good 2024 free cash flow. So just with the mega trends you’re seeing out there, are you starting to reinvest in the business? Should we see you guys maybe kind of look organic investment, but even M&A wise, just curious how we should think about that since we’re starting to see that — where we’re seeing the cash flow move?
Joe Brennan: Yes. Maybe I’ll take the kind of the cash flow movement up to M&A. What you’re seeing in 2024 is not only a servicing of some of the legacy, it’s the tail, the cash flow tail of the P&L at the end of the day, but you’re also seeing in there an organic investment in our business as resources have become the number one criteria in order to kind of support this growth trend that we see in front of us, there’s an investment in the infrastructure. And there’s an investment in talent development and onboarding of individuals and training. So that is the organic investment that we’re making happily into the business as we see the kind of the demand curve increase for our services. So there is some of that, but we believe that, that will become the baseline to support the growth into ’25 and to ’26.
And also when you get into a 75-plus reimbursable environment, we’re not working off of mobilization payments or big advances that you find through maybe the lump sum more risk more risk profile. So there will be some costs to continue to kind of ramp up the reimbursable activities. But it’s all done relative to supporting the infrastructure to appropriately address and execute the projects that are coming our way.
David Constable: So I’ll just add to that, Michael. And again, yes, as Joe said, organically, we’re just investing in our people, right? And attracting training and developing, but also our systems and by way of example, offices, this growth, we’re going to be opening a Delhi satellite office. We’ve got three new offices in Houston. And so that will continue. On the M&A side, really just think about it as niche bolt-ons to further the business as appropriate, potentially in Mission Solutions as a first wave. So, that’s where we’re at right now. And as things continue to go in the right direction, as we’ve been seeing here, then we start, of course, talking to the Board about dividends and share buybacks and things like that.
Michael Feniger: And just thematically, there’s always a worry with rates still kind of high that some projects will get pushed out to the right. It doesn’t seem like that’s what you’re seeing based on what your backlog is? Do you need to see rates come down for that robust pipeline to convert, or do you feel like a great stay here, you guys saw visibility on really some of those bookings that you’re expecting to play out through the year?
David Constable: Yes. The projects that we work on other than maybe some energy transition developers that would need some financing, which they’ve been somewhat successful at. But our key client base, if you will, that we deal with use their balance sheet. So, and our clients look through the short-term challenges of economic and geopolitical challenges. And they play the long game, right? So, as I look at the client CapEx across just a sampling of Fluor’s, say, 10 clients that I took a look at here a couple of weeks ago, their CapEx for 2024 is holding strong, up. Some of them are up. But just those tenants are going to spend about $110 billion in CapEx. I think they expect to spend $125 billion in annually, $125 billion in the out years.
So with quite a bit of that $20 billion in energy transition, where, again, we are well-positioned and are, as I said, working on over 200 projects in energy transition. So I think we’re in a very good space. You take BHP this morning that came out and said, well, the Nickels not doing well for them. So they’re pivoting to copper and iron ore and potash, which is right in our wheelhouse. So, and they didn’t change their CapEx guidance. So I just think that interest rates are less of a concern for Fluor and our prospects. And then you’ve got, of course, the Mission Solutions clients that are spending in our space in DOD, DOE and say, TxDOT, one of our key infrastructure customers, they’ve spent $279 billion last year and $292 billion in 2024.
So there’s so much to say grace over. We just need to be careful that we don’t bring too much work in. We have to make sure we’ve got the resources, the A teams to execute these projects and be very selective, and get paid for the value that we bring and the best opportunities.
Operator: This ends our question-and-answer session. I will now turn the call back over to CEO, David Constable for some closing remarks.
David Constable: All right. Thank you, operator. Many thanks to all of you for participating on the call today. Based on our performance, it’s evident that we are well-positioned to leverage the progress we’ve made over the past three years, and we expect that this will drive significant value for Fluor shareholders for years to come. So again, we appreciate your interest in Fluor Corporation, and thank you again for your time.
Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.
