Q2 2022 Fluor Corp Earnings Call

[music].

Good morning, and welcome to Fluor's second quarter 2022 earnings Conference call today's call is being recorded.

At this time all participants are in a listen only mode.

<unk> and answer session will follow management's presentation.

A replay of today's conference call will be available at approximately 10 30, a M. Eastern time today accessible on Fluor's website at Investor <unk>, Florida Dot com.

The web replay will be available for 30 days.

A telephone replay will also be available for seven days through a registration link also accessible on fluor's website at Investor Dot, Florida Dot Com at this time for opening remarks, I would like to turn the call over to the least Jason Lee Lance Kaymer head of Investor Relations. Please go ahead, Mr land camera.

Thanks, and good morning, welcome to floors 2022 second quarter earnings call, David Comfortable Force, Chairman and Chief Executive Officer, and Joe Brent enforced Chief Financial Officer are with us today.

Four issued its second quarter earnings release earlier this morning, and a slide presentation is posted on our website that we will 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 reflect our current analysis of existing trends and information.

There is an inherent risk that actual results and experience could differ materially.

You can find a discussion of our risk factors, which could potentially contribute to such differences in our 2021 Form 10-K and in our Form 10-Q, which was 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 in the Investor Relations section of our website at Investor Dot floor Dot com.

I'll now turn the call over to David comfortable forced chairman and Chief Executive Officer David.

Thank you, Jason and good morning, everyone. Thank you for joining us today.

Now please turn to slide four.

Before we get started on operational results I'd like to draw your attention to fluor's 14th annual sustainability report.

That was recently published.

Our sustainability report provides insight into how we are accelerating.

Our ESG actions to build a better world.

Notable accomplishments highlighted in this latest report include first the.

The actions underway to reduce our carbon footprint led by a 15% reduction in scope two emissions from 'twenty to 'twenty to 2021.

This performance supports our drive towards delivering on our net zero 2023 commitment for scopes, one and two.

In addition, we also achieved a 12% reduction of scope three emissions in the same period.

Second our efforts in supporting employees and their families health and safety during the COVID-19 pandemic, which included the expansion of Fluor's employee assistance program globally.

And finally advancing D Eni efforts from implementing inclusion council.

Broadening employee resource groups, so that all of Florida employees globally feel included and can reach their full potential.

Additional information, including our <unk> and SaaS be disclosures can be found in the sustainability section of our website.

Q2, New awards for the quarter were above a one to one book to burn ratio at $3 $6 billion.

Importantly, 73% of New awards for the quarter were Reimbursable.

And nearly 40% were in support of energy transition related opportunities.

Floor continues to differentiate itself in this growing global market space.

We also continue to see strong demand for our technical and construction services in.

In the first quarter, our margins on New awards were 470 basis points above our plan.

And we were able to achieve equally impressive results with margins on second quarter, New awards that were 550 basis points higher.

Moving now to our business segments, Please turn to slide six.

Urban solutions reported segment profit of $8 million for the second quarter.

Results for the quarter reflects cost growth on three legacy infrastructure projects.

And the closing of the <unk> transaction.

Joe will discuss in a moment.

New awards for this segment approach to two to one book to burn ratio at $1 $9 billion compared to $617 million a year ago.

Now turning to slide seven.

The it infrastructure.

New Awards included a $547 million award for the <unk> 35 Capital Expressway, South project, just south of Boston.

This award is a continuation of Florida regional infrastructure focus.

And reinforces the strength of our project execution skills in road and bridge work.

For the second half of 2022.

The near term prospect pipeline includes the 27 project in the Netherlands.

In the quarter, we recognized charges on the Gordie Howe legacy infrastructure project.

Floor at our partners recently performed a detailed review of project progress in cost.

The team continues to see significant inflation pressure on materials and labor.

This resulted in a $32 million increase in our cost estimate.

We have engaged external partners to create a comprehensive claim package that we expect to submit in the fourth quarter.

Described is 36% complete with an anticipated completion date in early 2025.

We also recognized non material charges on two other legacy projects as a result of cost growth and rework.

Across the infrastructure landscape, there are clear signs of cost inflation.

At Florida, we see cost escalation and fuel and commodities such as rebar.

On large contracts, we reduced our fuel risk by entering into fuel hedges.

While we have not seen significant inflationary pressure on labor we are planning for this.

Included the currently identifiable amount in our forecast.

Our projects estimate future labor costs by using local labour information for craft wages.

Or labor agreements with agreed escalation rates.

During the proposal phase our teams negotiate firm fixed price commitments with the majority of our subcontractors and suppliers.

When we were successful in winning an award. We then strive to immediately execute those contracts to lock in prices with subcontractors and suppliers.

As discussed previously we will continue to be extremely selective on infrastructure pursuits with.

With a focus on fair and balanced contract terms and with clients, where we have a strong relationship.

Turning to slide eight.

In mining and metals, we successfully started to convert the prospect pipeline is shared with you last quarter during.

During Q2 floor was awarded a contract to perform engineering procurement and construction management.

Hi, Luca resources any Abbott project.

Fully integrated rare Earths refinery in Western Australia.

When complete this refinery will produce light and heavy rare earth oxides that are essential to global electrification.

And renewable energy infrastructure.

We're also booked an award for the construction and construction management of a copper project in Indonesia for a valued long term client.

This new work is.

An extension of an award we booked last year.

Over the next three quarters are mining and metals clients are positioning to move forward on approximately $5 billion of limited and full notice to proceed awards to support demand for copper gold lithium and metals.

Our <unk> project in Peru is nearing completion and began initial operations in July .

The facility is expected to have an average production of 300000 tons of copper per year.

Floor was responsible for <unk> engineering procurement and construction management services.

Now please turn to slide nine.

Our efforts in advanced technologies and life Sciences continue to support our strategic priority of driving growth across the portfolio.

In semiconductors, we are supporting the demand for onshoring manufacturing across multiple clients.

Currently, Florida, working with Intel on projects in Arizona and Malaysia.

And we anticipate that these programs will convert to a full release of work over the next few quarters.

On the life Sciences front, we anticipate receiving work in the third quarter for an expansion of an existing biologics manufacturing facility.

Currently underway for Fuji film in Europe .

We also see new biotech investments in Europe , and the U S.

Moving on to slide 11.

Mission solutions reported segment profit of $28 million for the second quarter consistent with our expectations.

During the quarter, we were informed by the NSA of their intention to cancel the pantex Y 12 contract.

There was initially awarded to US late last year.

According to the NSA The award was cancelled due to an accelerating workload at both facilities.

The Internet has determined it requires two separate contracts.

<unk> Y 12, and pantex in order to deliver on critical National security missions.

They will hold two new competitions, starting with the release of the Pantex request for proposal by the end of this year.

While we are disappointed with the outcome. Our team is fully engaged in preparing for the rebid process on both projects.

Even without Pantex Y 12 mission solutions as a positive trajectory.

We're well on track for upcoming renewals Recompete and new work.

This includes our recent notification from the department of energy.

Their intent to extend our Savannah River site contract for.

For four additional years.

With a one year option period.

We therefore believe the mission solutions is well positioned.

To have another successful year.

Moving to energy solutions, Please turn to slide 13.

Segment profit of $65 million reflect foreign currency impacts cost growth in estimated recoveries on a legacy upstream project.

Results also include an embedded derivative gain of $17 million.

New awards for the quarter included a large lithium chemicals project in China.

Here floor was awarded the engineering procurement and fabrication management for this energy transition project.

We also received a partial award for a refinery upgrade project in Mexico with our joint venture partner <unk>.

Energy solutions third major award in the quarter was for the full notice to proceed on the new fortress energy fast LNG two project.

As a follow up award to the LNG, one project from new fortress last quarter.

We have proven that our midscale modular design and execution plans facilitates repeatable models.

Can be used to replicate and fast track similar LNG plants in the future.

We are well positioned to support the increased worldwide demand for LNG.

In our traditional oil gas and chemicals markets, we continue to see our clients, taking a pragmatic approach with their capex plans.

However, I can tell you that Q3 is already off to a good start with a key client reaching FID.

On our large reimbursable petrochemical facility in China.

We expect to be sharing further information on this project in the coming weeks.

Turning to slide 14.

At the LNG, Canada project, our joint venture scope is well over 60% complete.

The project is transitioning to a different phase of construction with module is arriving at the project site.

And the related increased focus on above ground work.

Now the 215 total modules.

98 of shifts and 93 were on site at the end of the quarter.

On this slide you can see a refrigerant compressor module in Italy being prepared for transport.

We continue to work collaboratively with the client to resolve COVID-19 related impacts across the primary job site at fabrication yards.

Moving to slide 16, and new scale.

We continue to see tremendous support and interest in new scale since its SME listing in early may.

After investing in Israel for over 10 years, and as new skills largest investor. It is encouraging to see that the market agrees that there is significant value in new scale and their carbon free clean energy solution.

Based on recent prices are 57% investment is approaching $2 billion in value.

Yeah.

During the quarter, the United States announced it is providing Romania with a new scale small modular reactor simulator.

This asset more stimulated will support Romanians next generation of nuclear experts technologists and operators.

The collaboration highlights the growing global support for new scale as the Premier clean energy solution.

In addition, the U S government also announced that it is committed $40 million towards the front end engineering and design study as Romania moves towards the deployment of a new scale Voyager six <unk> power plant.

Finally last Friday, the NRC voted unanimously to approve the design certification of the new scale S. Emaar.

This follows the standard design approval and issuance of the final safety evaluation report in August 2020.

New scale design will now become only the seventh reactor design certification that the NRC has issued for use in the U S.

And the only ASMR design.

Before I turn over the call I wanted to expand a bit on my initial comment about nearly 40% of our new awards this quarter directly related to energy transition.

More specifically we are currently executing energy transition front end projects, the total $38 billion and potential future work across our segments.

And we are pursuing another $28 billion of front end prospects in this space.

With that let me now turn the call over to Joe for the financial update Joe.

Thanks, David and good morning, everyone. Today I will review our results for the first quarter provide an update on our divestitures and capital structure plans and go over the key financial outlook assumptions that support our 2022 guidance.

Please turn to slide 18.

For the second quarter of 2022 revenue of $3 3 billion reflects projects that have neared completion and the pace of limited versus full notice to proceed on projects segment profit increased to $108 million from $95 million a year ago and our.

Our earnings release, we added adjusted EBITDA results to help investors and analysts better understand our results from operations independent of tax expenses.

Adjusted EBITDA for the quarter was $65 million slightly below our expectations for the quarter. When the project charges. David mentioned are included and when you consider the negative effect of FX on a number of projects as an example in energy solutions the impact of FX on our projects this quarter was approx.

<unk> $29 million.

Our diluted adjusted EPS for the quarter was 13.

Results for the quarter reflect a higher effective tax rate due to our current mix of global earnings project charges and the negative effect of FX I, just mentioned corporate G&A expenses for the quarter were $45 million down from $71 million last quarter.

This was driven by a $38 million reduction in incentive compensation, which was partially offset by a $5 million reserve for legacy <unk>.

Legal legacy claims net interest expense in the quarter was $1 million compared to $9 million last quarter. We expect our net interest expense to remain at low levels due to the positive impact of rising rates on global cash balances.

New awards for the quarter of $3 $6 billion exceeded a one to one book to burn ratio.

Ending backlog improved to $19 5 billion. When you include some of the recent client announcements as David mentioned, we fully anticipate being above a one to one book to burn ratio for the third quarter.

Our cash and marketable securities balance for the quarter was $2 2 billion with 26% of this amount domestically available. Please.

Please turn to slide 19.

Our operating cash flow for the quarter improved to $55 million as working capital level levels remained stable for the year, we expect our cash balance will be roughly flat.

St Strategy day in January of 2021, we have been keeping you updated on our cost optimization program project fit we are on track to capture nearly $100 million and ongoing cost savings in 2022. Two years ahead of our goal we expect to have annual savings well above this amount by 2024.

Please turn to slide 20.

Regarding our capital structure, we remain on track for using existing liquidity and the monetization of our noncore business units to retire our 2023 notes and make progress on our 2024 notes.

During the quarter $23 million of the 2023 notes were retired at the end of the quarter, we had a $1 $2 billion in outstanding debt, including $153 million maturing in March of 2023 today, our debt to capital ratio is now under 40%.

In June we were successful in monetizing our interest in <unk> infrastructure investment in Canada for the quarter, we received cash proceeds of $18 million.

As it relates to the monetization of store can amigo, we continue to make progress last quarter I mentioned that we had entered into an exclusivity agreement for the purchase of Stuart's European operations.

Our conversations with the preferred bidder have progressed, well and we hope to provide more details soon.

Divestiture of the remaining <unk> operations have accelerated and we expect to have an update on our operations in Mozambique by the end of the third quarter.

Finally, after the successful listing of new scale shares last may we have been asked about our ownership strategy for new scale, one of Florida's largest assets since.

Since the beginning of 2021, we have been clear that our intention long term is to own approximately 20% to 25% of new scale.

Currently we are under a <unk> related lockout period that started in early may as such we feel it is premature to provide additional detail on our plans at this time.

Any plans for our investment in new scale will be considered with all other sources of cash including cash from operations and proceeds from stork and Amigo and total these sources provide the financial flexibility, we need to invest in our people maintain our solid capital structure and unlock value for our shareholders.

Please move to slide 21, we are tightening our adjusted earnings per share guidance from $1 15.

Two $1 40 to $1 15 to $1 35 for the full year.

This change was mainly driven by higher tax expenses due to our current mix of global earnings.

As we start to ramp up U S. Based revenue in 2023, we believe the effective tax rate will decline as we begin to utilize the approximately $800 million.

Of currently available domestic tax benefits.

To provide better insight into our operational performance without the discourse distortion caused by higher tax expenses. We are now introducing adjusted EBITDA guidance for the full year, we expect adjusted EBITDA to be in the range of $380 million to $430 million note that this adjusted EBITDA guidance is in line.

With our original expectations that supported our initial 2022 adjusted EPS guidance.

Adjusted EBITDA expectations for the second half of 2022 will be driven by improved bookings and increased project gross margin and lower segment profit our overhead.

Our assumptions for 2022 include revenue similar to full year 2021, adjusted G&A expense of approximately $50 million per quarter and a second half effective tax rate of approximately 36%. This may vary somewhat depending on the countries in which revenue is generated.

Our expectations for segment margins in the second half of the year or approximately 5% in energy solutions, approximately four 5% and urban solutions and approximately three 5% in mission solutions. Operator, we are now ready for our first question.

Thank you and if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Please limit yourself to one question and one follow up question again, Please press star one if you'd like to ask a question.

Alright, and our first question will come from Michael Dudas with vertical research. Please go ahead.

Good morning, gentlemen.

Good morning, Mike Good morning, Mike.

David maybe expand a little bit you mentioned about.

Some of the projects that <unk> had limited notice to proceed is moving a little bit better towards full notice.

Can you talk about maybe the cadence of that through the second half when looking into 2023.

And maybe the confidence level of the clients that you have in your kind of near term pipeline any shaken at all or are they still go into had given some of the uncertainties that we're all reading about in the press.

Yeah, Mike.

We're really encouraged by.

The New awards in Q2 than what we've already seen in Q3.

It's not slowing down at all.

And.

As I mentioned.

Those limited notices and full notice to proceed or.

Very solid we expect both.

<unk> and mining in the second half and into 'twenty three so.

Capex plans not just in mining but across.

Across the energy solutions, and urban solutions and of course government.

Which is obviously in the press right now.

<unk> seen very solid we've got capex the.

The capex spend across our top three our top 10 customers commercial customers.

Be about $175 billion in 'twenty two and.

And up to $190 billion in 'twenty three.

Annually and beyond and about 20 to 25 billion of that is spent going to be spent in energy transition annually, which as you know we are differentiating ourselves in picking up a lot of energy transition work.

Uh huh.

Bye.

Differentiating with our subject matter experts.

Historically out of energy solutions, but now cutting across all of our 10 business lines. So yes.

Yes.

In a recessionary environment.

The environment.

At least a technical recession.

We feel feel good about our new awards, we historically performed well.

In a recessionary environment and we're seeing that now thanks, Mike.

Yes.

Even in my follow up would be.

Maybe you can elaborate a little more certainty again very topical given <unk> passed.

Signs of law against last week.

The progress on some of the construction construction management projects for these for Intel and other customers and where we could see more visibility on some of those projects and the size of those projects over the next say six to 18 months.

Yes, the chips Act.

Alright, it's just needs to get signed off by the President's So thats going forward.

With.

What is it $54 $54 billion in grants and loan guarantees and.

25% investment tax credits for the semiconductor manufacturing.

The industry.

And especially as tooling equipment as well in the semiconductor manufacturing process. So.

Yeah, we will be participating there as I mentioned, not only with Intel, but other key manufacturers here in the U S and.

In Asia, but also in Europe , and we're seeing.

The business line is telling me that we're seeing other governments outside the U S. Following following our lead if you will.

With incentives.

When you think about Germany, and Italy countries.

Countries like that where we're at we'll see semiconductor manufacturing picking up so we were.

We're bullish on it and we.

We expect to see.

Incremental awards in that space.

When I say incremental I'm talking hundreds of millions of dollars and then you can think about.

A couple of billion dollars in the first quarter of next year. So it's.

It's coming along nicely and we will continue to.

Two.

To move on that on that work going forward.

Excellent David Thank you.

Thanks, Michael.

Alright, and next question will come from Steven Fisher with UBS. Please go ahead.

Thanks, Good morning.

You mentioned that the Q2, New awards have margins that are 550 basis points above plan can you just put that a little bit into the context of which plans you're referring to.

And when would we start to see those margins meaningfully coming through the the result and are there any offsets to that.

Anywhere else in terms of inflation that might be a drag on that.

Hey, good morning, Steven I'll start and then and then have Joe talk a little bit more about how that burns.

If we could do that so.

That's a that 550 basis points is off of our operating.

As compared to our operating plan that was set.

At the end of 'twenty, one and approved early 'twenty two.

So that's that's how you should think about that is what we were expecting which which obviously informed our guidance that we put out. So that's that's where we compare against and Thats. The plan I talked to when we talk about 550 basis points.

And I'll also say before before I turn it over to Joe that that those margins where we.

We said extremely strong.

Uh huh.

And primarily reimbursable rate.

Contracts fair and balanced Reimbursable contracts.

And just one fixed price contract, there, but very low risk.

So in the government space So <unk>.

Services, if you will services or fixed price so.

Joe on burn for that Yeah, no. Thanks, David It's Stephen good morning.

The way that.

We're looking at it as a lot of these projects have been in some form of execution.

Through feed or into <unk>, so that when they do enter the backlog pipeline on a full release basis, we would be entering at a fairly advance.

Percentage of progress so we would see a much quicker burn on some of those activities and the other projects that are entering the pipeline or other feed nature, which would be generating higher margins from inception. So.

It is it is a much better position I think for us relative to the timing of when we will start to see some of that.

That margin drop to the bottom line.

Alright.

Next question.

Yes. Our next question will come from Jamie Cook with Credit Suisse. Please go ahead.

Hi, good morning.

Our guidance questions and I have a different question on the guidance now.

Revenues are now seemed flat versus before 10% and were down double digit in the first half of the year. So implies revenue should accelerate in the back half of the year sort of what's driving that.

You know cash flow is well I think before you said.

Flat to slightly positive and potentially $2 4 billion of cash it's lower than that so yeah refunding the problem projects. If he if he could just give color you.

On that and then.

You know, Dave you talked about the prospects out there in energy transition.

Can you talk about sort of the competitive environment do you have a lot of competition on those projects and how you sort of think about win rates. Thank you.

Okay.

Yes, Jamie I'll take your good morning, I'll take your first question on cash we are flat, what we've embedded into flat to slightly down.

We have embedded in there the servicing of our 23 obligations. This year organically. So I think thats, having some some drag on on that.

On that number as we view it.

And I think as we see revenue and we're looking at revenue in the outward quarters I think it's in kind of in parallel to what I was.

Discussing with Steve in the previous question. We are entering these projects into backlog in states of of completion, where we should begin to see a.

A much higher burn rate as we're entering into the procurement phases of projects as we've worked our way through feed and <unk> into full releases. So I think youll start to see that tick up.

In Q3, and Q4 and as David.

Hinted at as we look at some of the awards not only that are that are flowing through the Q2 numbers, but we are.

Think we're poised to have a fairly substantive Q3, New award quarter as well.

To help underpin some of that growth that we should see in the back half of 'twenty two.

So Jamie on.

On energy transition and.

Competitiveness and win rates.

As I said in there.

Prepared remarks.

Yes, I really we really feel we're differentiated in the energy transition space.

We currently have 85 energy transition product projects in house.

And we're pursuing a 136 prospects in the next.

18 months.

And.

Of those totals.

Can think about.

The total installed cost of those.

Those programs like I said about $38 billion of current feed work.

Anti listen we're chasing another 2008.

28 billion.

<unk> mentioned that.

Our key cut just a key top tier customers are spending 20 to 25 billion.

Annually in energy transition and it really cuts across so many areas that that floor historically.

The our subject matter experts in.

Our traditional oil and gas chemical space and power.

Uh huh.

Businesses are really excel in and can add so much value. When you are looking at providing technical solutions and coming up with the.

The best Mousetrap on these these types of projects, whether it's theirs.

Many many places where clients are looking to.

Two.

Move into energy transition it can be energy storage.

We have work we have work in blue and Green hydrogen.

Our renewable fuels biofuels renewed.

Renewable jet fuel, obviously, our carbon capture we have differentiated ourselves there with our.

Proprietary pre and post combustion technologies.

The battery value chain, we're participating including the the award in China I mentioned here just.

Q2 <unk>.

Green ammonia decarbonization and electrification of facilities chemical recycling and of course, we're going to be.

Participating on the front end of these new small module reactor programs with new scale.

In Idaho in Romania to get started.

I think.

We don't want to win on price, we don't have to win on price.

We differentiate ourselves and want to get paid for value and I think.

If we choose to go after a project we have a very high probability of.

Of winning and in not having to like I say when on a price later on on the value we deliver.

Okay. Thank you.

Thanks.

Yeah.

Alright, and next we will move on to Andy Wittmann with Baird. Please go ahead.

Great. Good morning, Thanks for taking my questions guys.

I have two questions. The first one I wanted to ask about was just kind of the award slate.

Specifically, just any context, you could give us on the size of the pending Savannah River <unk> extension would be helpful. As well as maybe any comments you have on the Netherlands wind I know you do have some experience. There I was just curious as to the risk terms that you are considering as you're putting that one in and then maybe just.

Okay.

Companies thought on awards I think previously you talked about a bogey of kind of around $20 billion of awards and I just wondered with the status that you have for the first half of the year. If that's still a realistic goal for you all.

Okay.

Okay.

Thanks, Dan and good morning.

On the.

Savannah River site the Doe.

<unk> notified Congress here recently.

But they'd be extending the.

The program with.

With our.

Our joint venture there for four years.

With an additional one year option is what theyre looking at so we're very pleased to continue on that site I don't think we have been.

We are advised of any.

Yeah.

Amounts is a.

A multibillion dollar program obviously.

We can see.

Going into backlog.

Later this year most likely in Q3 I believe actually it's just.

Couple of weeks away. So if you can just hold on that we'll be able to.

To let everyone know what that what that does to our backlog in a couple of weeks.

Now you mentioned, Netherlands, as well I think you are talking about Netherlands, a 27%.

Correct, Yes, yes.

So, yes that is a road and bridge projects as well and.

With our client there.

We're very familiar with and have successfully executed projects in the past. So that's obviously one of our pursuit criteria.

And commercially.

We're also very comfortable with the scope.

So we're looking at and how to price that in fact it.

Right now.

The conversion process, where it's all open book.

And we will go well through the projects through detailed engineering and design.

Prior to converting if we convert it.

Yet to be seen so we'll definitely be very comfortable with the risk profile. If there is any type of conversion at the back end of that project. So.

Comfortable there and then just your last your last question was on.

The $20 million on the statement, yeah, exactly the $20 billion and your comfort level in achieving that.

<unk>.

Okay.

We're not tracking on the 20 billion sorry.

Sorry, I thought you guys had previously made a comment that your award outlook for this year could be in the $20 billion range.

Maybe I was mistaken, but that was my understanding.

Okay, We got to know Joe Yes, no.

When we were when we were addressing that we had pantex Y 12, as an awarded contract.

As Pantex Y 12 has now gone through the protest and will be rebid into 2023.

We will pursue those opportunities as we move into next year that would have underpinned the $20 billion.

But.

I think we still are going to see very solid New award bookings for the years.

Whether it rises to the level of $20 billion.

We're working our way through that but we do see solid prospects and opportunities I think as David laid out in Q3 and as we move into Q4 underpinning that 20 billion would have been the pantex Y 12 awarded 14 billion. Yeah. So Andy I'll, just Andy I'll, just say Thats, where what we see now is new awards.

Well below above our outlook in Q3 is going to be we think very strong so.

Yes, we'll keep pushing on that front, obviously and.

And get as close to that 'twenty as we can.

And Andy just I think a bit of additional clarification, what we had laid out I think when we said that we would be well above the one to one and book to burn with the Pantex Y 12, but that we would still be above the one to one without the pantex Y 12, and I think we would reconfirm.

Firm that statement today.

Whether or not well.

Or not we're able to.

Pursue pantex, which obviously has now been pushed out to 'twenty three but we feel very very comfortable with that one to one <unk>.

Book to burn by the end of the year based on what's in front of US. Okay. That's helpful. Context. Thank you guys that that makes a lot of sense, Joe I'd just add just a couple of items just to understand the quarter a little better if you would.

Comments on the two reworks in the urban solutions.

You mentioned that there is an energy solutions.

Solutions recovery.

And you also mentioned here in the presentation that there was an $18 million proceeds from the sale of the Canadian.

P three.

I would imagine that at least in the P. Three it's got a gain probably associated with that so any of those discrete items that you mentioned, if you could help us understand the magnitude of those so we couldn't have a better sense of kind of what's the line. This segment margins would be helpful.

Yeah, So I'll start with the <unk> three of the $18 million was the cash and I'll give you approximately about $10 million that's flowing through the P&L for the quarter.

I think on the charges we've identified.

The 30 plus million dollar impact.

We've had two <unk>.

Non material charges on legacy <unk> projects that I think are reasonably close to the 30 million dollar value that's flowing right. So.

Holiday those too and then.

The third part of your question was relative to the $29 million of FX impacts that.

<unk> are a headwind for us in the quarter as well.

Alright, guys. Thanks.

Okay.

Thanks, Andy.

And our next question will come from Sean Eastman with Keybanc capital markets. Please go ahead.

Hi, Dan Thanks for taking my questions.

Along the same lines as the last question. There just just understanding the EBITDA guidance, obviously, that's a new metric, but I think you guys said, it's effectively intact with what would it have been contemplated at the beginning of the year, despite the charges and despite the FX drag.

So did something get better under the hood to backfill that and.

Maybe the second part there would be since EBITDA as it is a cleaner number to be focused on right now could you give us the range tied to the 2024 EPS target. So we can make sure the models calibrated properly.

Yes, let's so.

Yes, we get we can talk a little bit where we're in the process of going through our strat plan.

This year, so we will have some cleaner numbers.

Relative to that EBITDA guidance.

We feel we feel comfortable.

I would suggest.

Preliminarily, we're somewhere between <unk> <unk>.

$700 million and EBITDA to $900 million as we look out into the 2024 range that would support that.

Okay got it helpful and then.

Then we got a lot of color on on specific prospects in the near term I mean, what one project that I wanted to ask you guys about is is reboot.

With with Exxon, having revived the FID.

Process. There, obviously, you guys had been associated with that one and the initial plan.

I just wondered does that still fit the bid.

Bid criteria.

Her floor to point O or not.

Actual or telephone right.

Yeah.

Good morning, Sean Yes, so <unk>.

Still on the.

On the books right.

Looking at it.

Seriously clients, obviously looking at it very seriously with.

In the LNG space These days.

Critically important and we are.

Still on the job with our partners our joint venture partners.

And looking at how that.

The project will shape up.

Based on the revised scope of work.

And how it may come out.

For rebid and.

When I talk about scope work, how the how the clients may work between area, one and area four down there.

So it has been.

Believe it's going to look different going forward. So we're still a I'll say in play but.

Depending on on what the commercials ultimately look like and what type of scope we could provide.

With an appropriate risk profile.

Then we will we'll take it from there. So I guess, it's a work in progress is the best way to look at it Sean.

And more to come on that.

And yes, <unk> is firmly intact on.

Our project pursuit criteria Joe.

Shawn I just wanted to go back to your first question because I think it was more in line with with the charges and with some of the headwinds that we're seeing in FX, how are we able to maintain the positive.

EBITDA guidance adjusted EBITDA.

EBITDA guide for the year and I think it's the underlying performance of the business. That's why we've brought adjusted EBITDA into the forefront we are performing well across the balance of our portfolio as we work our way through some of these legacy challenges.

But I would suggest to you that what we have in backlog today that we're delivering to.

Got it okay. Thanks, guys I will turn it over.

Sean.

And next we'll move to Andy Kaplowitz with Citi. Please go ahead.

Okay.

Everyone.

Andy Good morning.

And then you mentioned you've locked in.

Suppliers and infrastructure has your material cost inflation, but can you talk about when you look at that $8 billion of urban solutions backlog, how much of that backlog is legacy type work such as Gordie Howe are the other two projects that you took the charge on this quarter and then how much of the backlog would you say is relatively protected by the inflation strategies.

You mentioned.

Okay.

Thanks, Andy and I may have Joe comment as well on the backlog question, but if you just think about.

How were approaching.

Mitigating risk in an infrastructure going forward, obviously, we're very very selective as we've said many times on the clients will work with and focused on regional road and bridge work.

For example.

The recent <unk> 35.

East South <unk>.

Boston Award.

On that project.

Client takes all quantity responsibility.

And then we apply our tried and true floor unit rates.

Which obviously, we know well in Texas, and we apply those rates.

To those non risk quantities.

That can obviously be escalated will build in escalation features to those rates. So the majority of the <unk> and the sub contracts were placed within weeks of that award.

To lock in price validity.

And we're required like I said inflation indexing is applied in the on the projects also.

If delays experienced in escalation relief will also be applied in the client.

Clients are.

Really good partner on this work.

Paying upfront for raw materials, and providing extra lay down yards for us to get get things to the project. So that we protect ourselves and the client against any type of.

Inflationary inflationary pressure, so and then our backlog Joe just if you want to comment on the legacy projects Yeah from from an <unk> perspective, we have a $1 billion worth of revenue yet to.

To run through the books.

Helpful guys, and then could you give us color in submission solution, you mentioned Savannah River expansion, but it's influencing revenue has taken on this year I would surmise because you put a cap last year is there anything that you could book to have that revenue ramp up again, and then just look at the margins in that business they've been.

Consistently above your expectation is there any read into there I know you gave guidance in the secondhand and good performance on the execution side there.

So I'll, let Joe talk about margins a little bit on emission solutions, specifically, we're seeing.

You know a good pickup.

In extensions right as we talked about at Savannah River, and very busy with bids across all.

All three business lines in nuclear in civil.

Defense and intelligence so.

Like I said, we expect mission solutions to have a good.

A good year.

Starting to the trajectory.

Coming back if you will as we worked off Logcap and a lot of prospects.

And very busy with bids in mission solutions.

Across the three business lines here later, this year and into 2023 Joe.

Yes.

On the margin.

Thank you.

Andy we're looking at in Q1, we had a Puerto Rico settlement.

Which was really a nonrecurring event, which certainly added.

Some horsepower to our margin performance within mission solutions.

Coming off of the closure of of Logcap.

Afghanistan as we move forward, we would we would expect to see that.

Guidance in the range of approximately four 5%.

As we as we view the new awards that are going into backlog here over the next two to three quarters.

Alright appreciate it guys.

Thanks Sandy.

Alright, and next we will move to Michael Feniger with Bank of America. Please go ahead.

Yes. Thanks.

For taking my questions just on urban solutions I'm curious, how the mix of the businesses there play out into next year with with infrastructure picking up yet you're seeing a binding taking up too.

Curious you can kind of help us understand the moving growth dynamics, there how that kind of impacts the mix on the profitability level.

Yeah.

So without getting into the specifics of how the awards are going to move forward.

I would suggest to you that youre going to see an influx in the <unk> backlog and youre going to see an influx in the mining side of the backlog as it as it relates as it compares to infra and I would also suggest that youll, probably see kind of a a bit of a normalization to a slight uptick.

And some of those returns as infra has probably been a bit of a drag as we push some of the info project or the legacy projects through our pipeline and our backlog and as we introduce new work related to our getting our guiding bidding principles and and and quality of earnings and Ferring.

Balance terms.

We would expect to see those margins stabilize to improve them over.

Over the course of of the increasing backlog within that segment.

Yeah that's.

The guidance of four 5% I.

I think has some upside to it as the legacy projects wind down.

Great and just on nuclear can you just remind us.

How for once that participate in the nuclear opportunity. Obviously, there is the new scale ownership, we know that but I'm just curious what youre doing with them today, you can remind us how going forward.

Nuclear does become a bigger opportunity, where you guys feel comfortable participating in the future. Thank you.

Thanks, Michael.

So yes, like I said on the in the remarks.

Very exciting times at new scale.

And certainly we're.

We're comfortable with our ownership right now and.

Be looking at that going forward, but we do have first right of refusal.

On on those new scale projects.

Globally.

What we're working on right now is obviously the <unk>.

In Idaho for new apps.

The.

The six modules.

Up in Idaho.

Idaho Labs, and we're right now just finished the class III estimate so we're in I guess, the best way to look at that as we are in front end design moving from the class two to the soy class III class to estimate in 2023.

And then we will.

Moving to detailed engineering in early 'twenty four on that project. So.

Looking forward to progressing that that plant.

And also working on getting ready to work on the front end of the work in Romania and other.

Six.

Six module FMR facility in Romania that sits next to a potential for floor too to install.

Two conventional units.

Let's turn to vote.

Units three and four so.

We met with.

The minister of energy a couple of weeks back just a week ago.

<unk>.

The CEO of there.

S N N their nuclear.

Agency or nuclear customer in Romania.

<unk>.

With the support of the U S government.

And the new scale Tech technology, offering fluor will be there to support that project generally speaking.

We will take a view of where the locations of these <unk> around the world and if we can add value and.

And.

Effectively provide engineering procurement construction construction management services, then we will we'll take that on but we still have an eye on the risk profile and if necessary step back into more of a project management role.

Project management contracting role on behalf of the client.

Also to support new scales installations, so it'll be a case by case basis.

And that's how we'll look at it going forward, but very exciting times on that front.

As new scale plays in the energy transition World.

Thank you.

Thanks, Michael.

Okay, and then we will now move on to William Kim with Davidson. Please go ahead.

Hey, David and drove good morning, My name is William and uncovering from Brent Thielman.

Hey, Good morning, guys talk good morning can you guys talk a little bit more about the pipeline and cadence for potential New awards related to the LNG projects is that something you see coming in the second half or more so into 2023 I know you guys mentioned new fortress energy project.

Just wanted to get some more context on that.

Yes.

Thanks William.

We've already talked about remember that's just out there.

As a work in progress so we won't cover off that again, but we are really excited.

In our energy solutions.

Our business segment and LNG.

Is this line more specifically about.

How we've been able to develop that that market in the midscale modular.

LNG space and with.

With new fortress energy and just a great great customer.

And partner in that space and we're very aligned on.

On the need to fast track all of these LNG facilities to deploy them as quickly as possible and.

And evacuate natural gas.

Certainly from from North America and.

And Mexico.

To begin with and move that LNG over too.

Over to Europe . So.

As I said, we've got LNG, one underway in LNG to has been awarded and we're working on looking at the front ends of of subsequent.

LNG.

Facilities for.

For new fortress and.

There are a number.

A number of.

Facilities on the books that we will be looking at.

And like I said.

Repeatable.

Modularized fast cost effective.

Solutions that.

Yes.

That's a new fortresses.

Comfortable with and very pleased with without fluor's been able to manage that that program and we're looking at is a very long term play is the best way to put it I guess I'd say stay tuned for more more Midscale LNG awards in the near term.

Thank you and also what are some of the what's the tone of some of your mining clients as commodity prices have pulled back or those types of project opportunities being pushed to the right.

They are being delayed.

No.

It's really project specific.

Alright.

And I'd say for the most part when.

When you look at the mining client Capex.

Some of our customers they.

They have not come off their capex guidance.

This year or next year or beyond so.

I would say that.

The mining clients take a very long term view they have to because they're there.

Their major projects.

Our decade long decisions right that are not really impacted.

Bye.

Say by a temporary slowdown or a.

A recession and economic activity.

So.

I'd say that depending on the severity of a recession, obviously clients could decide to.

To slow down the schedule, but.

From a.

High level looking at all or all the mining houses.

Their capex plans are in place and include energy transition as well I might add that.

We can support support them with so.

Like I said $5 billion in near term New awards coming in mining and.

We continue to talk about mining.

When you think about the.

The early hitters.

On the new words picking up it's it's mining.

Chemicals coming out of the gates here very quickly.

And there are no further questions in the queue I will turn the call back over to.

To David for any final remarks.

Thanks, operator, many thanks to all of you for participating on our call today.

Uh huh.

We're really pleased with the pace and timing of New awards.

Yeah challenging <unk>.

Relation area environment.

And I believe that we remain on track to deliver our expectations for 2022 and on our key strategic priorities for 2024. So.

As always appreciate your interest and for corporations and thanks again for your time today.

Yeah.

And this concludes today's call. We thank you again for your participation you may now disconnect.

[music].

Okay.

Yes.

Yes.

Yeah.

[music].

Okay.

Okay.