Chad Dillard: Got it. Thank you.
Operator: Your next question comes from the line of Michael Dudas with Vertical Research. Micheal, your line is open.
Michael Dudas: Hi, good morning, Claudia.
Claudia Jaramillo: Good morning.
Bob Pragada: Good morning, Mike.
Michael Dudas: Bob, maybe you could share maybe a touch of the pipeline of backlog. As you’re entering 2024 in P&PS, you touched on water in your prepared remarks. What are some of the other areas that you see some interesting opportunities for new project backlog growth? And how much of — you mentioned about the change in mix of the type of service that you’re going to be providing to your client base. How quickly or how noticeable will that be maybe on the project management consultancy side as we run through the revenue model over the next maybe two to three years?
Bob Pragada: So two parts. One, Mike, you’re asking about kind of what are some of the other end market secular trends that we’re seeing? And then the second part of the question is around how do we see kind of revenue models as our consultancy business continues to grow — consultancy type business. Is that fair?
Michael Dudas: Yes, to drive that, the better mix that you’re talking about over your…
Bob Pragada: Sure, sure. The other verticals, I mentioned of our top 30 wins, nine are in water. If you take water and advanced facilities, it’s — half of the top 31s were in both of those sectors, six big advanced facilities markets, too. So we continue to see strong activity within the advanced facilities world, probably driven more so now as we bottomed out from an end market standpoint as far as sales goes within the semiconductor industry. Keep in mind, our clients continue to spend through there. But now with the GLP-1 drugs going on in life sciences and all the strength that we see with our clients we’ve had for years, advanced facilities is going to continue to be strong. And then the others, I’d highlight is energy transition.
I highlighted a specific job, but the whole grid modernization of everything that we’re seeing, and we’re kind of in that consultancy component of that, and that’s a strong piece, which is a segue to the second part. I would say that, that continued profile of our portfolio within now, call it, independent Jacobs, is we’re kind of in the early innings of that. And so it’s going to be a balance. But I’d say over the course of the next two or three, four years, it’s going to drive that margin expansion even beyond what Claudia talked about post ’25 with a cash conversion component to that that’s very high.
Michael Dudas: Perfect, I appreciate that. Thank you.
Operator: Your next question comes from the line of Andy Kaplowitz with Citigroup. Andy, your line is open.
Andy Kaplowitz: Hey, good morning, everyone, again.
Bob Pragada: Good morning, Andy.
Andy Kaplowitz: So just sorting through Q4 results, I know there’s a lot of noise because of the announced deal, but EPS and upcoming in below the low end of your previous guidance, could you give us more color into what exactly happened in the quarter that was below your expectations? And you mentioned the $40 million of temporary costs that you’re carrying and how that’s impacting your results. Should we simply be adding that $40 million back to your $1.53 billion to $1.6 billion EBITDA for ’24 to get what guidance would have been if you weren’t doing the RMT?
Claudia Jaramillo: Yes. So Andy, so let’s start with the first one, which is the big one and explains roughly half of the gap is the tax piece. And I had — I included some of them in my remarks. So if I take, it’s $0.06, so it’s more the — when you have a one-off allowance, and this is something that happens with your deferred tax. And — so then the next one is going to be basically overhead costs or unallocated is one, we call it corporate unallocated. That’s the other big piece. And then the share count, and I mentioned why we could do stock repurchases in the fourth quarter given — based on the transaction. So that’s at a high level what that means. Then I added some of the commentary that is on the temporary cost that we’re carrying as we prepare CMS and the Cyber & Intelligence unit to operate independently. So that’s the other piece of the puzzle, if you want.
Andy Kaplowitz: Claudia, is it right to say that you could — again, if you weren’t doing the RMT, you would add that $40 million debt to EBITDA? Or is that not right to think like that?
Claudia Jaramillo: Absolutely. And that’s what Bob mentioned that towards the end, that’s really our earnings power should exclude that — those temporary costs. We’re very client-centric. It’s our clients’ mission, and we want to make sure we have quite a bit of value tied to this transaction and the upside that we included in this additional value that we’re going to get in the transaction and the new entity. We won the two entities to be very successful. It’s temporary. And is to make sure we’re preparing to have a very leader that we want and that we continue to be.
Andy Kaplowitz: Great, and then Bob…
Bob Pragada: So Andy just to clarify. So the EBITDA guidance that I gave at the end we’re carrying it in that guidance.
Andy Kaplowitz: Yes, that’s clear. And then, Bob, just P&PS, net revenue up 11% year I think you said you have good confidence in mid- to high single-digit organic revenue growth. Could you elaborate on the confidence do you see P&PS backlog growing at that rate in FY ’24? And then how are you thinking about the balance between higher interest rates impacting projects and geopolitical risks with all the fiscal stimulus, that you mentioned and so on.
Bob Pragada: Yes. I think on the backlog piece of the question, Andy, my answer is yes, I think that mid- to high single-digit growth will continue. Remember, we’ve got a really nice diversity within P&PS. So if we think about some of the political risk or what’s happening with interest rates, which might be affecting some of our private sector clients, there’s not a full immunity, but our private sector clients continue to spend just because of the — whether they be technology-based or global supply chain based, I say technology-based science-based drivers or supply chain drivers that has continued, and that’s really been driving the performance. As far as IIJA or a larger infrastructure around energy transition outside the U.S., we have not seen that effect. In fact, our pipeline continues to grow at mid to high-single-digit percentages, and this is on a base that’s very high.
