George Oliver: Yes. I’ll talk a little bit about operations. When you look at our Building Solutions across the globe, certainly, there was significant disruption where from a cycle time standpoint, some of our projects got extended a month or two, as we look at where we are today, we’re back to almost where we were. And what we’re believing now is our operational, the operating system that we’ve deployed, we can create now cycle time as a competitive advantage and being able to respond with the improvements that we’ve made within our supply chain and within our factories and ultimately within the field and how we execute on projects. So I’m very confident now that, that’s going to be a critical strength of ours. Your question relative to resources, we have been very attractive in being able to recruit labor, pretty much across the globe and have not been constrained by labor across both our project-based business as well as our service business.
And then in our critical factories, we’ve been able to recruit, retain and develop, the talent is ultimately going to be critical to delivering on our capabilities. So that feels very good. As it relates to commercial buildings, even though there is a thought that maybe buildings is going to be a pullback, the work that we’re doing within buildings is differentiating. And so as we go into a building now, especially with the focus on energy savings and decarbonization. There’s no company that’s consuming as much data as we are within the building. And so because of that, we can actually do upgrades and deploy new technologies and utilize our data platform, consume all of the data within the building, and in many cases, get a payback on what we do within the building.
And so that is our focus. And now with building standards being implemented in many jurisdictions not only here in North America but across the globe, we believe that, that really presents a big opportunity for us in that space, especially with the focus on energy and decarbonization.
Operator: Thank you. And our next question today comes from Deane Dray with RBC Capital Markets. Please go ahead.
Deane Dray: Thank you. Good morning everyone. Just wanted to follow-up on the potential timing of the insurance recovery, the business interruption insurance, would that be a fiscal 2024 event? And is that embedded in your guidance?
Olivier Leonetti: The timing would be a 2024 event. Some elements of our cost will actually be reimbursed, we believe, in Q1. That’s the goal. So we depend when the costs are incurred and when we are able to prepare our claims. So, some of it will come in Q1, certainly in this year.
Deane Dray: Okay. Well, that’s — if you get that in the first quarter, that’s pretty fast. So that’s impressive.
Olivier Leonetti: Some of…
Deane Dray: And then, …
Olivier Leonetti: Yes.
Deane Dray: …just a second question on China. Just — it was called out several times as being a source of weakness, especially in Building Solutions. Any color there just in terms of at the margin, what might be changing?
George Oliver: Yes. So as they went through different phases of COVID, we saw a pickup last year and capitalize on that opportunity. We believe that we’ve built a leading position in the higher end of the commercial market there and have a very large installed base that we’re capitalizing on to be able to build our Service business. We are concerned that the macro environment has continued to deteriorate, leading to concerns of the overall slowdown now accelerating. I think when we look at these macro trends, not only working against us, but our competitors. And as we have now studied the markets and looking at verticals or looking at the overall region, we are planning prudently for continued pressure in China. So we hope we’re a bit wrong and maybe it comes back a little bit stronger than we suspect right now, but that’s really what’s embedded in our guide.
Deane Dray: Okay. Thank you.
Operator: And our next question today comes from Andrew Obin with Bank of America. Please go ahead.
Andrew Obin: Yes guys. Good morning.
George Oliver: Morning, Andrew.
Andrew Obin: Hi. Can I just think it seems that JCI is facing as we look more growth, more investment, more inflation, so more CapEx, more working capital. So how do we think about this 100% cash conversion target going forward, that we are in a more, growthy and more inflationary environment, right? How do you balance growth and growth opportunities and investment versus cash conversion?
Olivier Leonetti: So if you look at what we said in our prepared remarks, we believe that the fundamentals to allow our company to be a 100% free Cash Flow Company overtime are there. Today, to your point, we are investing in some parts of the business to support the strong growth in high-end HVAC. We believe that the level of CapEx at this level will be what we need to support the growth we see in the coming few years. The big levers of improvement in free cash flow are going to be around working capital. I mentioned inventory just a day of inventory is worth about $50 million of cash. And if you look at where we are at the end of FY 2023 at about 54 days of inventory, we used to be at 45 days of inventory, you can do the math.
