Q1 2021 Fluor Corp Earnings Call
Please standby we're about to begin.
Good morning, and welcome to the fourth first quarter 2021 earnings conference call.
Today's call is being recorded.
At this time all participants are in a listen only mode.
A question and answer session will follow management's presentation.
A replay of today's conference call will be available approximately at 10 30, a M. Eastern time today accessible on Fluor's website at Investor day for Dot Com.
The web replay will be available for 30 days a telephone replay will also be available for seven days and a registration link also accessible on fluor's website at Investor Day, Florida Dot com.
At this time for opening remarks, I would like to turn the call over to Jason Lang Kaymer director of Investor Relations. Please go ahead.
Yeah.
Thank you operator, welcome to <unk> 2021, first quarter conference call with US today are David Constable Force, Chief Executive Officer, and Joe Brent and Flores Chief Financial Officer, We released our earnings announcement earlier. This morning, and we are stripping out slide presentation on our website, which we'll reference while making prepared remarks.
Before getting started I'd like to refer you to our safe Harbor note regarding forward looking statements, which is summarized on slide two.
During today's presentation, we'll be making forward looking statements and which reflect our current analysis of existing trends and information.
There is an inherent risk that actual results and experience could differ materially.
And you can find a discussion of our risk factors, which could potentially contribute to such differences and our form 10-Q filed earlier today.
During this call we may discuss certain non-GAAP financial measures reconciliations of these amounts to the comparable GAAP measures are reflected in our earnings release and posted and the Investor Relations section of our website at Investor Doc floor Dot com.
I'll now turn the call over to David Constable Force, Chief Executive Officer, David.
Thank you, Jason and good morning, everyone.
And for joining us today.
And you could please turn to slide three.
Before we get started on the operational results.
What are the strategic priorities outlined during our strategy day was to foster a high performance culture with purpose.
And I'm pleased to announce that we have appointed to Lonnie Aziz.
And the six year Fluor employee.
With 20 years of EPC experience to lead our diversity equity and inclusion efforts.
Florida is a vast and diverse company and with <unk> leadership she.
She will help us retain and attract and cultivate a work force that represents the world and which we live and operate.
On a separate subject. Please note that earlier this week.
Favorable motion was granted as it relates to and outstanding Securities Class action lawsuit.
This motion.
Dismissed with prejudice all allegations.
That was relating to a single statement.
In 2015.
About one gas fired power project.
Well no assurance can be given as to the ultimate outcome of this remaining obligation. We do not believe it is probable that a loss will be incurred.
Please turn to slide four.
It's been great to see the vaccine rollout around the globe and I'm, particularly encouraged with the speed of distribution here in the United States.
Although there are still many regional challenges to deal with the end of the pandemic seems to be insight.
Which will be a relief to all of us.
Currently well over 90% of our project sites and about 80% of our offices are operating and limited operations or better.
One exception is our office in new Delhi, whereas surge and COVID-19 cases has caused local officials to issue a locked down and curfew order effective until may 10th.
The safety and well being of all employees is our top priority to help support our deli colleagues and families that are in medical need we are lifted several oxygen concentrators from Houston.
Our <unk> hundred and new Delhi employees are all now working safely and.
And productively from home.
Okay.
And the first quarter, our book to Bill ratio was 1.25 with New awards led by the Dos Bocas refinery program and our energy solutions group.
While we continue to see softness and the markets. When it comes to capital spending we anticipate that awards will start to pick up as we get into the back half of 2020 one.
And our teams are busy on a Friday and work and project pursuits. They will help to build a healthy backlog over the next few years.
No and again that we are now reporting in line with our three new business segments and our.
<unk> solutions urban solutions and mission solutions.
Additionally store is now a part of discontinued operations.
Joe will give an update on our divestitures of stork, and Amigo and just a few minutes.
Moving to slide five with regard to new scale.
On April 5th we announced a $40 million equity contribution from J G C. We.
And we know J D C well, having executed projects with him for more than 10 years.
They are an ideal partner that can support new skills industry, leading carbon free energy solution.
In addition.
This morning, we announced a new scale is retained Guggenheim partners to explore financing options to fund the commercialization of new scale small modular reactor technology.
This is consistent with the strategy announced in January to reduce floors equity ownership of new scale.
Regarding our cost savings initiatives efforts are now well underway to streamline the organization.
And we'll be updating you on our progress as the year proceeds.
Key to this program will be ensuring the deployment of world class execution teams onto new prospects over the coming quarters couple.
Coupled with the proper level of fit for purpose back office support.
I'd like to take the next few minutes to inform you on what is happening across our end markets and what we expect to see over the next few quarters.
And please turn to slide six.
And energy solutions. This quarter are eager fluor joint venture was awarded three contracts totaling $2 $8 billion for the Pemex does focus refinery in Mexico.
We have a long and successful history with Pemex contracts.
And we are pleased to be adding a $1 4 billion share of this refinery program to backlog.
During the quarter Ken.
Chemicals project was canceled and as a result, we removed approximately $1 billion from backlog, while slightly increasing the energy solutions total backlog to $11 1 billion.
When we unveiled our strategy and January there was a lot of interest and fluor's energy transition opportunities supporting a reduced carbon future.
Over the past few months.
We have been and extensive conversations with clients about our energy transition capabilities.
We are executing several carbon capture feed and feasibility studies using our proprietary economy F G plus technology.
Additionally, we are doing early work and the areas of refinery efficiency gas.
As a vacation to produce carbon negative energy green hydrogen and renewable diesel renewable jet fuel and energy storage and.
And each of these areas, we have identified projects and are continuing to pursue new opportunities as well.
I'd also like to provide a quick update on LNG, Canada on slide seven of the presentation.
I encourage all of you to check out the project website and social media channels to see our progress on the project on site. We have completed all site preparation work the Cedar Valley Lodge cap is filling up pilings are in place and overseas modules are being constructed and the fab yards.
We've been re mobilizing craft workers on site and are currently at required staffing levels.
In 2020, one and the focus on site is completing the installation of underground cable and pipe as well as concrete foundations.
The project team to go vertical and be positioned for the receipt of large equipment and the first modules, which are scheduled to arrive later this year.
COVID-19, and changes in law or impacted both engineering and material deliveries as well as the site's ability to mobilize workers due to public health orders.
However, several opportunities are being jointly explored with the client to mitigate the COVID-19 and change in law impacts.
We will keep you updated on the outcome of these discussions.
Moving to urban solutions on slide eight.
This segment is comprised of the infrastructure mining and metals and advanced technologies and life Sciences and markets and infrastructure. We completed the handover for the 183 South Highway project outside of Austin, just a few miles from the oil kill Parkway project, we booked in 2020.
There's obviously a lot of interest and excitement with the proposed federal infrastructure plan.
We think a long term infrastructure Bill would obviously be a good thing for the U S economy.
In addition to providing needed funding for surface transportation improvements.
It would enable state and local governments to better plan for future growth and capacity needs.
It's too soon to tell what impact that bill could have on fluor.
But we typically experienced a two to three quarter lag between any new federal infrastructure spending and the release of construction and services Rfps within the states.
Within our infrastructure focused area of regional projects and selected states, we're tracking some key opportunities and Texas and North Carolina This year.
Please turn to slide nine.
Next we remain confident and our mining and metals opportunities and prospects. We are currently completing feed work that represents $20 billion of potential projects and.
And we see a robust pipeline of feed and feasibility studies ahead of US These projects will support and increasingly urbanized and electrified world that is driving the need for investment and minerals like copper and lithium.
We have several large prospects and 2021 and.
And expect awards throughout the year.
For our last group and urban solutions, we have a lot of positive momentum and advanced technologies and life Sciences as.
As we briefly mentioned in February and the first quarter, we won a significant E. P C and biotech project in Europe.
This award from Fuji film is for a world scale biologics drug substance manufacturing facility that will be used to produce a variety of treatments, including vaccines.
We have seen over the last 18 months vaccine development is an integral part of our global economy and facilities like this one will be essential going forward and protecting the population.
Finally, there's been a lot of news recently about the inability of semiconductor chip manufacturers to increase production to meet demand.
While it will take several months for the supply chain to overcome this shortage. This is another area, where we can leverage our advanced manufacturing capabilities current.
Lee we are tracking several semiconductor prospects in the United States.
Moving to mission solutions on slide 10.
This quarter, our Fluor led joint venture, what and extension for the Portsmouth decontamination and decommissioning contract from the department of energy and Ohio.
It's reimbursable 12 months contract with $2 six months options is valued at $690 million.
The D O a as a key long term client and.
And we look forward to continuing our support at Fort Smith.
And finally, a few weeks ago, the federal government announced that it was with withdrawal all troops from Afghanistan by September 11th.
Although uncertainty about the pace of withdrawal remains fluor expects to book an additional three month extension to Logcap four in the second quarter that will allow us to further support the U S Army and Afghanistan, and Chile are demobilized.
Before I turn the call over to Joe that would be remiss, if I didn't take the opportunity to acknowledge yesterday's retirement of Peter Fluor from the company's board.
Peter is the last of a long line of family members to serve the company since our founding and 1912 <unk>.
Joining the board and 1984.
He continued to fluor family legacy and a commitment to excellence integrity and ethics.
Always putting the safety and well being of employees first.
And recognizing that teamwork is a key component of our success.
On behalf of the entire company I would like to thank Peter for his outstanding service and wish him.
And his entire family.
Shelf and happiness going forward.
And with that.
I'll now turn the call over to Joe for the financial update Joe.
Thanks, David and good morning, everyone and please turn to slide 11.
For the first quarter of 2021, we are reporting adjusted earnings per share of seven and.
As a reminder, we are adjusting out new scale expenses foreign exchange fluctuations and impairments and certain legal related costs.
Our adjusted results also exclude and embedded foreign currency derivative for and energy solutions project in Mexico.
This derivative is based on exchange rates between the U S dollar and the Mexican peso and will fluctuate over the life of the contract or at least until the job has been fully procured.
Our overall segment profit for the quarter was $60 million or 2% and.
And that includes the $29 million embedded derivative and energy solutions and quarterly new scale expenses of $15 million. This compares favorably to $55 million and the first quarter of 2020.
We're moving new scale expenses and the effect of the embedded derivative would improve our total segment profit margin to three six per cent.
Margins and energy solutions, and urban solutions reflect reduced execution activity on certain projects and the lack of new awards to replace projects we are completing.
We anticipate project activities will accelerate as we move through 2021.
And mission solutions margins were strong due to the increased execution activity on projects as well as an increase and performance scores on several projects.
As David mentioned, we received a $40 million investment and new skill from J D. C. This quarter and are anticipating other significant investments and the near future.
Note here that even though partners are meeting new skills cash needs. We will continue to expense 100% of this investment on our income statement on a consolidated basis.
Our G&A expense and the quarter was $66 million. This is higher than our expected run rate due to the increase and our stock price driven and.
Driving up the value of our executive compensation expense.
David said, our cost savings initiative is well underway.
We have identified cost savings above the $100 million target previously discussed.
And I look forward to providing an update on the progress as we get into the execution phase later, this year and trends and transition into a fit for purpose organization.
On slide 12.
Our ending cash for the quarter was $2 billion, 25% of this domestically available.
As a reminder, the rest of our cash is tied up and either be ies and projects or and foreign accounts and is not easily accessible.
Our operating cash flow for the quarter was an outflow of $231 million and was negatively impacted by increased funding of COVID-19 cost on our projects higher cash payments of corporate G&A, including the timing and extent of employee bonuses and increased tax payments.
And while it is typical to have a lower operating cash flow and the first quarter, we expect full year operating cash flow to be positive.
We used approximately $50 million and cash for challenged legacy projects and the first quarter.
As I stated in February we expect to spend an additional $65 million over the balance of 2021 to fund these projects.
As we announced earlier this week, we have divested our and Mikko North America business for $73 million. This follows our successful transaction of our amico, Jamaica business last year.
We are now focusing on our South American assets and we'll update you on that plan later in 2021.
Historic divestiture process is well underway and we have received interest from a number of promising buyers and we're working through our diligence and are targeting a sale.
Near the end of this year or early in 2020 two.
Please move to slide 13.
We are maintaining our adjusted earnings per share guidance of between 50 and 80 for the full year.
Hitting this target is dependent on projects being awarded in a timely fashion and revenue picking up over the next two quarters.
We are also maintaining our previous segment level guidance and expect 2021 full year segment margins to be approximately two two and a half to three 5% and energy solutions, which excludes any fluctuation from the embedded foreign currency derivative, 2% to 3% and urban solutions and 2.5% to 3% and.
And mission solutions.
Before we open up the line for questions I know a number of you have asked for a historical view of our financials under the new segments.
We have posted unaudited financials for 2019, and 2020 that aligns with our new reporting structure on the Investor Relations section of our website.
Operator, we are now ready for our first question.
Of course, thank you and if you would like to ask a question. Please signal by pressing star one on your telephone keypad.
And if youre using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
We ask that you limit yourself to one question and one follow up question again. It is star one if you would like to ask a question.
Okay.
And we'll go ahead and take our first question from Andy Kaplowitz from Citigroup. Please go ahead.
Yeah.
Hey, good morning, guys.
Good morning, and good morning, and any.
David So book to Bill at 1.25, and Q1, and Florida actually grew backlog, even despite that $1 billion cancellation, you talked about I know you talked last quarter and now pushing that one times book to Bill only at the end of 2021 and so it seems like you've seen and acceleration of awards or is your expectations, but maybe you could comment on that and then.
Do you think you know could sustain backlog growth for the rest of the year.
Thanks, Andy and I appreciate the question and good morning.
It was a it was a good quarter, obviously for new awards across all three.
Our business segments.
Obviously with the.
Great Award and in Mexico, with Pemex for three three different packages totaling as I said $2 $8 billion, one for just over $1 4 billion our share.
And then some good day.
Good activity and in mission solutions, and the Big Fuji biotech plant, which are like I says world scale over and Denmark, and there'll be more and where that came from is well down the road. So yeah, great a great to get started.
And the first quarter with those.
Those awards I think you have to look at the the book to Bill and in light of of the lower revenue I think.
Because of the the COVID-19.
The impact and the impact on New awards in 2020, and the hangover in 2021 on revenue and the volume as we couldn't push through and on certain very large projects due to COVID-19.
And that pulled down that revenue lower than our planned number. So I think that's the best way to look at it that Q1.
Saw that that that good a book to bill, but you can expect the revenues to be coming back up as we entered the second third and fourth quarters, and and and it probably will probably get back to you know hopefully get back to that one one point or a book to bill at the end of the year like we said beef and the last call. So that's all used.
Look at it.
Thanks, and David made.
Maybe I can ask you about the cadence than a V. P S for the year.
Based on a revenue comment you had suggested before you done that it would ramp up maybe a bit backend loaded, but you know given the slow revenue start is it more backend loaded even now and are we looking at maybe more of a moderate revenue decline versus the sort of slight revenue decline you guide us to for 'twenty one versus 'twenty.
Well I guess I'm going to ask Joe to comment on how that's going to flow through the year, Andy Yeah, Andy I the way I look at it where were some of our major projects that are sitting in and.
And backlog today, I think had some additional impact in Q1 related.
Related to COVID-19 that that we had hoped during the planning process.
And would have.
Would have generated additional revenues, but we do believe as we get into Q2 that our backlog is really going to take us specifically LNG see as they ramp up their fabrication activities. Our Tcl project is getting back on site.
I think also being able to add $3 $7 billion of New awards at the beginning of the year, we'll be able to get significant burn them on.
And those projects so I would suspect that we'll see a recovery within those revenues.
As we progress into Q2 and Q3.
And Joe just to clarify the ongoing negotiations you have you know related to COVID-19, even you know Alan did you see and elsewhere.
And you you expect them to resolve at least favorably or not you know big cost creep for you guys any any color you could give there.
Hum.
The work that we've done with our clients I would not expect a significant cost creep I think they.
And we've kept it out of you know I'm more of a.
Kind of a litigation type discussion and we're working with our clients to get to the right resolution around change in law enforcement and mitigation strategies. So I would I would expect that you know any type of gas that we have relative to positions between the two parties.
We will be will be relatively minimal.
And.
Thanks, guys.
Thanks and now.
Hi.
And we'll go ahead and move on to our next question from Stephen Fisher from UBS. Please go ahead.
Thanks, and good morning.
Just two or and and Stephen Good morning, just to follow up on Andy's question. There can you just give us a and update on the timing of those negotiations when do you think we could have that that initial agreement resolved.
Steve you're specifically talking about LNG C. I'd take it yes, sorry, LNG, Canada Yep.
So you know we're working.
And very closely.
With our with the clients.
On on that and obviously.
All of our notifications and place for the impacts are on the project to date.
And as we said before we have a weekly meeting a very complex topic obviously.
Based on you know you've got three engineering offices, and you've got a massive site and Kennedy you've got a couple of fabrication yards and.
And then.
You know a number of suppliers and vendors supplying the projects that all have to be it all has to be rolled rolled into the the discussions and and the.
The path forward that we're that we're working on with the client and I can't tell you that it's a very good discussion very positive.
You know good working relationship with them on on the negotiations to.
Put the the the COVID-19 impact.
And that took place in 'twenty, and 'twenty and into 2020. One early 'twenty. One here is our is what we're working on right now and.
And I guess, what I can tell you is the discussions are going very well and I would expect at.
At least the first the first.
Negotiation to be closed off impact to be closed off here and.
And the relatively near term.
Okay, that's great and just to clarify I think there was some discussion of some of the just general supply chain challenges will what we're seeing and the overall market today will that be incorporated in our in this type of resolution or will that just be kind of put off to some <unk>.
<unk>.
Later time point.
Yeah, I think on supply chain, where and very good shape on the project you know where our engineering almost basically complete I would say and and procurement is.
You know committed 93 per cent of the equipment.
Equipment and materials and.
And subcontractors are also I think over 80% committed so we know all that pricing.
For commodities, and Bulks and equipment and materials and subcontractors. So theres not really not a lot of not a lot left on that front from a escalation perspective, and the and some of the higher prices, you're seeing and commodities and and materials are currently so very comfortable on that front.
I think I can also comment you.
You know on that.
The Pemex refinery work, where and we're in a very good place there as well with respect to escalation.
Got you know we've been working for decades.
In Mexico with our with our joint venture partner on Pemex on very large pemex contracts, primarily in the energy space and those are all following our stringent pursuit criteria open book process with the customer and our engineering and equipment costs were clearly understood.
Good and firm prior to to converting those contracts and for bulk materials. We we negotiated with the customer that are our price excludes any escalation and that the actual escalation costs will be recovered through price adjustments, so really good contracts.
Down there as well as Union and Union agreements Ah that's of any revision to a labor agreement entitles us to a price adjustment so it really protecting ourselves well and and following our strategic.
Strategic priority of a fair and balanced contract terms as we talked about at strategy day, Joe has got a comment well, yes, and no Stephen the only thing I was going to add in terms of impacts relative you know we placed the Pows were bought out but there you know obviously there is some fabrication going on around the world relative to <unk>.
Being able to supply shows back on LNG see you back on LNG C for providing the fabrication yards. Those are all in inclusive of our force measure and change in law claims. So they would be a result of COVID-19 impacts as well. So they have been built into the discussions that we've been having relative to.
Schedule delays and and additional costs associated with with the supplying and feeding the fab yards to get to to get the progress they need.
Great and then just from a business development perspective, I know you guys want to be very selective.
And to what extent are you increasingly kind of going on offense as the economy recovers and commodity prices are up here are you kind of increasingly pushing sales pursuits or are you still more focused on kind of riding the ship and working through what you have to get through.
No weird.
A great question and thanks to you and are really focused on on a key account management with our sales executives and.
Our wholesales operations, our technology teams that go go to market for us and so that's.
<unk>.
We got a real you know externally and we've got this external push on right now to get to a relationship based and we were relationship based and many of our business lines, but across the board. We wanted to really push our relationship based approach to our our clients and that's well underway and we are definitely on offense.
Our first strategic priority is to drive growth right across the profile of the business lines, including non traditional oil and gas. So I think that's the key area I've been spending a lot of time and I think most of my time recently has been with the with the client base and talking talking with them about.
You know all of the the expected Capex, if you will the taking the lid off post pandemic and.
And the pent up demand that's coming at us. So we really are working.
And all the growth markets, we've talked about and chemicals in and and.
Our advanced technology life Sciences in mining, obviously and and infrastructure. So.
And that's.
That's definitely.
The plan is to is to push that first strategic priority of driving growth. We've got great prospects I've talked last time about all of our feed work.
Feed and study work in House, we've got we're currently working on over 150, a front end design.
Programs totaling over $110 billion in and total installed cost Thats in house right now all early work early phases of course, and they don't all go to <unk>, but it gives you a good indication of how much a friend and work as is out there.
And then we're chasing another are about 140 billion.
And in early are front and design and Ah study work.
And 21 and 2022, so definitely on offense Stephen.
Terrific. Thanks, so much.
[noise].
And we'll go ahead and take our next question from Jamie Cook from Credit Suisse. Please go ahead.
Hi, Good morning, I guess Q questions one and.
And just with you know commodity prices, where you are I understand your focus more and energy transition or green energy, but is there any green shoots that you're starting to see and your traditional oil and gas business and.
And it sounds like chemicals as positive and now I'm, just wondering Q, how what you're seeing in terms of you know terms and conditions as the economy starts to improve and you have less players committed T. D. E. P C market, where I have walked away from it and I'm wondering what that means for potential terms and conditions as we come out of this.
And then my second question on the divestitures, and I guess and particular stork with some of the cost cutting you've done and things start economy, starting to improve I'm. Just wondering if that does it if the earnings for that business is potentially underappreciated and sort of how we think about the the conversations with customers and terms.
Potential valuations that you could fetch first for some of these divestitures. Thanks.
Thanks, Jamie and good morning all.
And I'll have Joe answer that the divestiture of stork here and talk about and evaluations and well at least.
And give us some thoughts on Oh, and what we're seeing at Stork right now.
With commodity prices are and you know, what what's iron ore and $200 a ton or something right.
As just one example, copper also there.
And oil you.
All these things.
Our driving.
Our clients in the right direction from our perspective like I said, we're talking to.
A lot of chemical clients right now a lot of downstream clients.
And on traditional downstream.
Work in addition to the energy transition that they've got to spend there theyre starting to.
Throw billions of dollars that energy transition, obviously very early days, but we've got a lot of energy transition work in house.
And with them as well to to look at how they might.
Attack that that challenge that we've all got to move to a lower carbon future, so, but yeah, I'd say chemicals.
Downstream.
And the traditional as you just saw and Mexico theres more of that.
Internationally for us are a life sciences and manufacturing.
Definitely going to be picking up based on on the challenges with with supply.
Across that that sector and you've got infrastructure, obviously, we're where we're expecting to see a lot of.
A lot of growth so yeah green shoots definitely if I look at those feed package and I just was talking about chemicals features prominently LNG is featuring prominently and front end work for us and downstream and then in addition, the the H L S and the mining the mining front and work as is.
Is one of the standouts as well so oh, the terms and the terms and conditions David like are they potentially.
And potentially more favorable if there's less players sort of you guys have stayed committed to E. D. C. A lot of players and I'm just wondering if that ends up being a positive for you guys at some point, yes, and get to the T's and C's, they're obviously, it's it plays and our favorite or two to work towards fair and balanced terms with the right customers and a weird weird.
Firmly on that track I think the Pemex, the Pemex contracts that were signed and we're just a great example, where we improved our position there.
There is as well so I I would say.
To say that that we will be seeing those fair and balanced contract terms and if not then we'll go work on something else. That's just that's just the way, where we're going forward and and with all this this front and work Theres no lack of prospects for us, it's it's not if but when the full F.
And on this Capex is pulled is let let go for us. So we'll be very very selective on our terms and conditions, but I do to your point.
I do think we will be able to to.
Do better based on the smaller a smaller pool of contractors out there that can bring full service rate from these early solutions all the way to convert all the way into E. P. C. P. C. M. So that's how we're seeing it Joe.
Yeah, Jamie and in regards to how we're viewing stork I think we've always viewed stork and.
In terms of the pre COVID-19 valuations.
During the COVID-19 period, and I think we talked about it and maybe on one of the previous calls.
A lot of the refineries have put off operations maintenance turnaround.
Activities.
Due to capital constraints and as we start seeing those.
Those come back into the market and and the requirement to perform those activities.
And that's how kind of if were looking at our quality of earnings analysis. So we're we're looking more towards the future was what what our historic is going to look like in terms of how we're discussing it with potential with potential buyers at the end of the day.
And in terms of what you know what valuations I would see I don't really necessarily have a range yet.
And as we're still in the process of finishing the QE and the same and we will have the data room open here in the next two to four weeks and so then we'll start getting some some some.
And some real feedback relative to.
And how the market is viewing what the storage potential valuation.
Okay. Thank you I'll get back and canceling.
Jamie.
Yeah.
And we'll move onto our next question from Michelle and Eastman from Keybanc capital markets. Please go ahead.
Hi, guys. Thanks for taking my questions.
On the 20 billion and and mining scope that.
You guys are and process on the beads.
Just curious historically.
How much of that is translated to E. P. C per floor, just trying to get a realistic idea of you know.
You know how much you know fluor could win and execute out of that that number and you know how that new.
Number translates into floor revenue that'd be helpful to get that detail.
Yeah. It's thanks, Shawn good morning, Thanks for the question.
And just when you just think about just straight prospects out there the straight prospect list and the total T I C and revenue.
We think about a a probably a 30% to 40% win rate thereabouts historically on prospects.
But these [laughter] this over $20 billion.
Work is actually in house.
Front and contracts in place. So obviously, it's a much much higher than that.
Our conversion rate because we're doing and we're so it's more.
A.
Matter of does the project get to full RFID based on the market the internal rates of return for the for the client that cost schedule Capex.
And so on so that's a you know assuming that all goes forward and we've got a very high likelihood of converting a lot of this work all this ask Joe if he's got any exact percentages I don't think we track that exactly but no no. We don't we don't necessarily track that but I would reiterate reiterate what David is saying relative.
Two we are.
Essentially and a sole source position and doing the feeds.
Working.
With the clients in order to get a.
You know the right return on investment and through value engineering, and and relationships. So it has a much higher percentage and the position that we're in in terms of our win rates typically and that's you know Shaun.
Way to think about that if you if you if you've already got the fluor and place on your project you can have a much lower project lifecycle cost if you convert into the feed into the E. P. C. P. C. M. Because you are starting your schedule and getting to market sooner. So that's a that's a real obviously.
Value for the for the clients and and that's that's our.
Going back to the strategy day to day. So we're trying to do we're trying to get front end solutions with all of our customers bring solutions to the table and then and then convert and continue on.
Okay terrific. That's helpful. And then maybe shifting over to the cash flow. I mean, you guys have talked about kind of maintaining this cash balance at around 2 billion.
There's a lot of moving parts and there I'd just like to try and flesh out sort of what the underlying free cash flow outlook is for this year, whether that's fully intact. I mean, just isolating that around sort of the debt paydown and funding for large projects and you know whatever is included in there for asset sales.
You could just kind of get that bridge would be helpful.
Yes that was a it was a low operating cash flow quarter and Joe's got the yeah, well, we can talk about the the first quarter. There were a number of nonrecurring events that occurred and the first quarter.
Executive comp payouts, we had the the Cfe Jai.
Payment to to finalize our investment and CFA Jai.
And we had a you know the provisions for the challenged projects, which will ultimately be a recurring impact we had typically our project working capital and.
Adjustments flow from Q4 into Q1 and silly.
We have a significant amount of AEP, but we do see based on the back of backlog and and the strong bookings and quarter one.
And that we will maintain and and slightly grow our cash flow what's not included.
It is the amigo divestitures, the 73 million and what's not included in that number are.
<unk> three mm divestitures.
Dominic between $40 to 50 million and then ultimately the.
And our ability to to divest store during the year, which will have a significant impact to that number as well as you know as well as the overhead reduction initiatives that we're putting in place which will have a real cash.
Positive impact, so, we're saying flat to slightly up but it does not include a number of those those moving pieces that I just outlined at this point.
Okay helpful. Thanks, Thanks for the time.
And as a reminder, if you'd like to ask a question. Please signal by pressing star one on your telephone keypad again and the star one if you would like to ask a question.
And we'll go ahead and take our next question from Michael Day adds from vertical research. Please go ahead.
Good morning, gentlemen.
Hey, Mike and Mike.
So maybe in the urban solutions area.
And the mining is going to be a big big positive going forward, maybe you can elaborate a little bit more you touched on and vaccine or other just mentioned and the other vaccine pressure others to come and you talked about semiconductor and maybe you can flush out some more on scope timing in the in your pipeline or the funnel opportunities.
And you know is there you expect acceleration because of what we've been seeing on the supply chain front, and say domestically and the United States or oil worldwide and is that something that can actually provide meaningful booking opportunities. Later this year or is that something that's more looking into 2022 on those and the projects.
And thanks, Mike Good morning.
And the H L. S businesses are doing extremely well their offices are full of.
Of our home office engineering talent doing lots of work around the world and actually bringing and personnel from other.
Business lines to support them, so, they're very very busy and they're busy and in a and data centers, they're busy and manufacturing and looking at quite a number of as I mentioned earlier semiconductor chip plants, primarily here in the United States and massive facilities and and then obviously.
<unk> Sciences, where they continue to make progress so.
They're they're new awards will be spread across the.
Across 2021 and.
And just continuing to grow.
I think we would disclose the exact.
Prospect list or the expected a.
New award values to you, but you know you can really look at it that way is that theyre going to.
To.
To be picking up as you go through through 'twenty, one and and into 'twenty. Two so there are there and very good good.
Good space right now and again, there, they're a faster book and burn as well they their projects come up fairly quickly and and and burn fairly quick quickly. That's you know they don't have a lot of of like mining and metals are energy a lot of long term projects, but they come up fast and and.
They burn and fast do you want to add anything Joel and I don't know.
And if that's appropriate.
Thank you and my follow up is regarding your announcement on new skill today can.
You characterized that as that.
Quicker than expected what you had thought of the timing and structure of this of the financing is and also to fund new scale, but also is there a monetization opportunity for you and the other partners. Maybe you can flesh that out and what do you think about the timing and and the structure that are certainly early indications that you're seeing with regard to.
And two you know accelerating net zero carbon power opportunity, which should be well received and the marketplace once people understand it.
Yeah and people are starting to understand it and we've got great partners that.
D O D O D certainly get it and and the utilities are coming along and it's a very exciting times and not just in the U S but internationally.
And Canada, obviously is a nuclear country is Japan, and and many others that are we're getting a lot of incoming interest coming and into new scale and seeing how and how that as I said industry, leading technology because of its a certification by the NRC the only S M. Our small module reactor.
To have that certification so.
Placed extremely well in the market and seeing just a lot of a lot of interest and you know we're pleased with the new.
The additional money.
Money is coming in a J D C. The 40 million that Joe talked about and we believe its the appropriate.
Time to explore how to unlock.
More value from new scale for Fluor shareholders and and so we've got the Guggenheim engagement now that are going to be exploring opportunities to monetize the investment and I.
And as we said in January at the strategy day overarching goal is to start to monetize fluor.
Fluor's investment and 2021 so we've got renewed interest.
And from existing investors that we've got and and new investors post the G C announcements so.
<unk> got generating significant interest to come in and and bring equity to to commercialize support the commercialization.
Partners supporting engineering procurement and fabrication and construction of the of the program and and again and you couple that with Guggenheim and.
Driving financing options are.
All options are focused on monetizing fluor's equity downward.
And and driving shareholder value starting in 2021 to your timing question and.
And and then take.
Take it from there, but its early days with with our with Guggenheim and and we're looking for good things to come and a highly valued.
The company and new scale based on their value proposition for carbon free Baseload energy.
Excellent. Thanks, David appreciate it.
Thanks, Mike.
Yeah.
And with that that does conclude our question and answer session for today.
And I would now like to turn the call back over to David comfortable for closing remarks. Thank.
Thank you operator and.
And many thanks to all of you for participating on the call today.
And today's results are beginning to show that fluor.
It's strategically shifting to align with our priorities outlined in January at our strategy day.
Please stay safe and hopefully will be meeting in person relatively soon and the.
Meantime, we appreciate your interest and Fluor Corporation and and Thanks again for your time today. Thank you.
And with that that does conclude today's call. Thank you for your participation you may now disconnect.
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