Q2 2024 Fluor Corp Earnings Call
Speaker Change: [music].
Operator: Good morning, and welcome to Fluor's second quarter 2024 earnings conference call. Today's call is being recorded. At this time, all participants are in a listen-only mode.
Good morning, and welcome to Fluor's second quarter 'twenty 'twenty four earnings conference call. Today's call is being recorded at this time all participants are in listen only mode. A question and answer session will follow management's presentation. A replay of today's conference call will be.
Operator: A question-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 and will be accessible on Fluor's website at investor.fluor.com for 30 days.
Available at approximately 10 30, a M. Eastern time today accessible on Fluor's website at Investor Doc for Dot Com.
Jason Langtamar: Website replay will be available for 30 days a telephone replay will also be available for seven days through the registration link also accessible on fluor's website at Investor <unk>, Florida Dot Com at this time for opening remarks, I would like to turn the call over to Jason Lang Tamar.
Operator: A telephone replay will also be available for 7 days through the registration link, also accessible on Fluor's website at investor.fluor.com. At this time, for opening remarks, I would like to turn the call over to Jason Landkamer, Head of Investor Relations. Please go ahead, Mr. Landkamer.
Jason Langtamar: Investor Relations. Please go ahead Mr Kinner.
Jason Landkamer: Thank you, Ellie, and good morning. Welcome to Fluor's 2024 Second Quarter Earnings Call. David Constable, Fluor's Chairman and Chief Executive Officer, and Joe Brennan, Fluor's Chief Financial Officer, are with us today. Fluor 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.
Speaker Change: Thank you Elliot and good morning, welcome to Fluor's 2024 second quarter earnings call, David Constable, Fluor's, Chairman and Chief Executive Officer, and Joe Brennan <unk>, Chief Financial Officer are with us today.
Speaker Change: 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.
Jason Landkamer: Before getting started, I would like to refer you to our Safe Harbor note regarding forward-looking statements, which is summarized on slide 2. In today's presentation, we'll be making forward-looking statements that reflect our current analysis of existing trends and information. However, there is an inherent risk that actual results and experience could differ materially.
Speaker Change: Before getting started I would like to refer you to our safe Harbor note regarding forward looking statements, which is summarized on slide two.
Speaker Change: During today's presentation, we'll be making forward looking statements, which is which reflect our current analysis of existing trends and information.
Speaker Change: There is an inherent risk that actual results and experience could differ materially.
Jason Landkamer: You can find a discussion of our risk factors which could potentially contribute to such differences in our 2023 Form 10-K and in our Form 10-Q, which was filed this morning. During the call, we will 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.fluor.com. I'll now turn the call over to David Constable, Floor's Chairman and Chief Executive Officer. David.
Speaker Change: Can find a discussion of our risk factors, which could potentially contribute to such differences in our 2023 Form 10-K and in our Form 10-Q, which was filed this morning.
Speaker Change: During the call we will 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, Florida Dot com.
David Calhoun: I will turn the call over to David comfortable Force, Chairman and Chief Executive Officer, David.
David Constable: Thank you, Jason. Good morning, everyone. Thank you for joining us today. Please turn to slide three. To get started today, I wanted to briefly highlight the Fluor Fellows Program. Fluor Fellows are a distinguished group of world-class subject matter experts whose knowledge and experience contribute significantly to Fluor's success both internally and externally. Our fellow's technical expertise sets Fluor apart from its competitors and frequently becomes the decisive factor for clients when selecting Fluor for future work.
David Constable: Well, thank you, Jason and good morning, everyone.
Speaker Change: Thank you for joining us today.
Speaker Change: Please turn to slide three.
To get started today I wanted to briefly highlight the Fluor Fellows program.
Speaker Change: Fellows are a distinguished group of World class subject matter experts, whose knowledge and experience contributed significantly there for success, both internally and externally are.
Speaker Change: Our fellows technical expertise says floor apart from its competitors and frequently become the decisive factor for clients when selecting floor for future work.
David Constable: The FLIR Fellows Program involves a robust nomination process. Candidates are nominated by department managers, executive management, and existing fellows and senior fellows. Fellows are selected based on their expertise, recognition from both peers and clients, and the value they bring to the company on a global basis.
Speaker Change: The floor Fellows program involves a robust nomination process candidates are nominated by Department managers Executive management, and existing Fellows and senior Fellows.
Speaker Change: Colors are selected based on their expertise recognition from both peers and clients and the value they bring to the company on a global basis.
David Constable: These leaders have roles beyond projects, helping drive innovation and performance across the organization. I'm pleased to say that with the 2024 class, we now have 91 fellows and senior fellows driving world-class technical excellence. Now, let's turn to our operating review, beginning on slide four. Revenue for the second quarter was $4.2 billion. Consolidated new awards for the second quarter were $3.1 billion, led by key awards in our Urban Solutions segment. Awards for the quarter do not reflect our substantial minority ownership in a joint venture that recently won the $30 billion Pantex M&O contract. More on that in a moment.
Speaker Change: Leaders have role beyond projects, helping drive innovation and performance across the organization.
Speaker Change: I'm pleased to say that with the 2024 class. We now have 91 fellows and senior Fellows driving World class Technical excellence.
Speaker Change: Now, let's turn to our operating review beginning on slide four.
Speaker Change: Revenue for the second quarter was $4 $2 billion.
Speaker Change: Consolidated New awards for the second quarter were $3 1 billion led by key awards in our urban solutions segment.
Speaker Change: Orders for the quarter do not reflect our substantial minority ownership in a joint venture that recently won the $30 billion pantex amino contract.
More on that in a moment.
David Constable: New awards were 82% reimbursable, and our total backlog is now $32.3 billion, of which 81% is reimbursable. Strong demand for our services continues to drive new award margins above the 4-6% segment margin range that underpins our strategy. Specific to the margin profile, new award margins continue to outpace margin on existing backlog by an average of over 150 basis points for the past six quarters. Our margin story is driven by strength and service margins, which have been in the 20% range this year for our traditional EPCM business. This strong demand for our services is driving our investment in resources and people.
The awards were 82% Reimbursable and our total backlog is now at $32 3 billion of which 81% is reimbursable.
Speaker Change: Strong demand for our services continues to drive New award margins above the 4% to 6% segment margin range that underpins our strategy.
Specific to the margin profile New award margins continue to outpace margin on existing backlog by an average of over 150 basis points for the past six quarters.
Speaker Change: Our margin story is driven by strength in service margins.
Speaker Change: It had been in the 20% range this year for our traditional <unk> businesses.
Speaker Change: This strong demand for our services is driving our investment in resources and people are.
David Constable: Our shift to an asset-light company provides us the opportunity to move resources quickly as we pursue a wide range of requests, which includes everything from pre-feed and studies to large EPCM programs. This flexibility also supports our diverse pipeline of opportunities in advanced technologies and life sciences, mining and metals, production of fuels, and more broadly, energy transition. Moving to our business segments, please turn to slide six. Urban Solutions, our most diverse segment, reported a $105 million profit in the second quarter.
Speaker Change: Our shift to an asset light company provides us the opportunity to move resources as quickly as we pursue a wide range of requests.
Speaker Change: Which includes everything from pre feed and studies.
A large <unk> programs.
Speaker Change: This flexibility also supports our diverse pipeline of opportunities in advanced technologies, and life Sciences mining and metals production of fuels and more broadly energy transition.
Speaker Change: Moving to our business segments, Please turn to slide six.
Speaker Change: Urban solutions, our most diverse segment reported $105 million profit in the second quarter.
David Constable: Results in this segment reflect increased execution activities on multiple advanced technology and life sciences projects and the effects of a change order on a legacy infrastructure project. This change order covers many of the matters that gave rise to the charge we recognized in the second quarter of 2023. New awards for the quarter were $2.4 billion compared to $2.3 billion a year ago.
Speaker Change: Results in this segment reflect increased execution activities on multiple advanced technology and life Sciences projects and the effect of a change order on a legacy infrastructure project.
Speaker Change: This change order covers many of the matters that gave rise to the charge we recognized in the second quarter of 2023.
Speaker Change: New awards for the quarter were $2 $4 billion compared to $2 3 billion a year ago.
David Constable: Ending backlog continues to reflect the strength of our end markets and now stands at $19.6 billion. This represents an increase of nearly 70% over the past 12 months. Now, please turn to slide 7.
Speaker Change: Ending backlog continues to reflect the strength of our end markets and now stands at $19 $6 billion.
Speaker Change: This represents an increase of nearly 70% over the past 12 months.
Speaker Change: Now please turn to slide seven.
David Constable: During the quarter, Mining and Metals received a $1.1 billion incremental award for an aluminum rolling facility in Alabama. Clients in this space continue to have a steady, long-term vision for their CapEx plan. Over the next few quarters, we are preparing for new awards to support rare earth refining, iron ore port debottlenecking, and a lithium project in the United States. Moving to slide eight.
Speaker Change: During the quarter mining and metals received a $1 $1 billion incremental award for an aluminum rolling facility in Alabama.
Speaker Change: Clients in this space continue to have a steady long term vision for their capex plans.
Speaker Change: Over the next few quarters, we are preparing for new awards to support rare Earth refining.
Speaker Change: Iron ore port Debottlenecking and lithium projects in the United States.
Speaker Change: Moving to slide eight.
David Constable: Advanced Technologies and Life Sciences continues to ramp up to meet sustained client demands. New awards for the quarter included phase one of Northvolt's large-scale lithium-ion battery manufacturing facility in Germany for $361 million. Northvolt, headquartered in Sweden, manufactures batteries for consumer and industrial products, electric vehicles, and solutions for energy storage systems.
Speaker Change: Advanced technologies and life Sciences continues to ramp up to meet sustained client demand.
Speaker Change: New awards for the quarter included phase one of the north both large scale lithium ion battery manufacturing facility in Germany for $361 million.
Speaker Change: North volt headquartered in Sweden manufactures batteries for consumer and industrial products electric vehicles and solutions for energy storage systems.
David Constable: During the quarter, our ATLS business line formed an alliance with Topso and ABB Limited to streamline the construction of state-of-the-art electrolyzers for the effective production of green hydrogen. We look forward to providing EPC support for this key energy transition effort. We continue to see strong investments in the semiconductor space, where the outlook is supported by the CHIPS Act funded here in the United States. From smaller tool install opportunities all the way up to large fabrication facilities, there's over $5 billion in potential prospects over the next 12 months.
Speaker Change: During the quarter, our HLA business line for it in our lives with top so and ABB limited to streamline construction of state of the art Electrolyze yours for effective production of Green hydrogen.
Speaker Change: We look forward to providing EPC support for this key energy transition effort.
Speaker Change: We continue to see strong investments in the semiconductor space, where the outlook is supported by the chips Act funded here in the United States.
Speaker Change: From smaller tool install opportunities all the way up to large fabrication facilities, there's over $5 billion in potential prospects over the next 12 months.
David Constable: Over the next few quarters, the ATLS business line is pursuing opportunities in data centers and additional phases on large life sciences projects. In the data center market, we're building our relationships with large tech companies that are taking a disciplined approach to capital expenditures. In infrastructure, productivity remains strong across the portfolio. During the quarter, we completed the deck connection on the Gordie Howe project. This bridge is the longest cable-stayed bridge in North America and the longest composite steel and concrete-decked cable-stayed bridge in the world.
Speaker Change: Over the next few quarters. The Hff's business line is pursuing opportunities in data centers and additional phases on large life sciences projects.
Speaker Change: In the data center market, we are building our relationships with large tech companies that are taking a disciplined approach to capital expenditures.
Speaker Change: In infrastructure productivity remains strong across the portfolio.
Speaker Change: During the quarter, we completed a debt connection on the Gordie Howe project.
Speaker Change: This bridge is the longest cable stayed bridge in North America, and the longest composite steel and concrete deck cable stayed bridge in the world.
David Constable: The team is currently focused on completion and handover of both ports of entry. On the LAX automated people mover project in Los Angeles, our joint venture has reached a settlement with the client that covers already completed extra work dating back to August 2018 and a longer than anticipated construction timeline. We will continue to work with the client while we seek final approval of the change order with the City of Los Angeles.
Speaker Change: The team is currently focused on completion and handover of both ports of entry.
Speaker Change: On the <unk> automated people mover project in Los Angeles, Our joint venture has reached a settlement with a client that covers already completed extra work dating back to August 2018, and a longer than anticipated construction timeline.
Speaker Change: We will continue to work with the client while we seek final approval of the change order with the city of Los Angeles.
David Constable: While we recognize a $39 million improvement to our previous disclosed position for our portion of the settlement, this project remains in a lost position. Finally, Plant and Facility Services secured a $533 million renewal from a large consumer products manufacturing client where we are providing ongoing construction management services. Moving on to slide nine.
Speaker Change: While we recognized a 39 million improvement to our previous disclosed physician for our portion of the settlement.
Speaker Change: This project remains in a loss position.
Speaker Change: Finally plant and facility services secured a $533 million renewal from a large consumer products manufacturing client, where we are providing ongoing construction management services.
Speaker Change: Moving on to slide nine.
David Constable: Mission Solutions reported a segment profit of $41 million for the second quarter, compared to $40 million a year ago. New awards for the quarter were $63 million and included various task orders for FEMA. Ending BALCO for the quarter was $3.8 billion. During the quarter, our Paducah contract was extended for two years through June 2027. We have also received a notice of intent to extend our Portsmouth and DUF-6 contracts for up to one year through September 2025.
Speaker Change: [noise] mission solutions reported segment profit of $41 million for the second quarter compared to $40 million a year ago.
Speaker Change: New awards for the quarter were 63 million and included various task orders for FEMA ending.
Speaker Change: Ending backlog for the quarter was $3 8 billion.
Speaker Change: During the quarter, our Paducah contract was extended for two years through June 2027.
Speaker Change: We have also received a notice of intent to extend our port Smith and <unk> fixed contracts for up to one year through September 2025.
David Constable: I'm pleased to report that the F.E. Warren Nuclear Weapons Storage and Maintenance Facility is substantially complete. The project represents the last legacy project in the Mission Solutions portfolio. In early July, notices to proceed were issued to two joint ventures in which Fluor has minority ownership interests.
Speaker Change: I am pleased to report that the <unk> nuclear weapons storage and maintenance facility is substantially complete.
Speaker Change: The project represents the last legacy project in the mission solutions portfolio.
Speaker Change: In early July notices to proceed were issued to two joint ventures in which Fluor has minority ownership interest as.
David Constable: As previously mentioned, the NNSA awarded the Pantex M&O contract in Amarillo, Texas. Based on all three of the five-year contract options being exercised, the contract will span 20 years at an estimated funding level of approximately $30 billion. The protest period on this project has passed, and transition from the incumbent is underway. Also, we were notified in July that the protest for the incumbent on the Air Force test operations and sustainment contract was denied, and transition on this project is underway. Because we are a substantial minority partner in both joint ventures, our portion of earnings will be recognized as equity method income and not revenue.
Speaker Change: As previously mentioned the NSA award awarded the Pantex MMO contract in Amarillo, Texas based on all three of the five year contract options being exercised the contract will spend 20 years at an estimated funding level of approximately $30 billion.
Speaker Change: The protest period on this project is past and transition from the incumbent is underway.
Speaker Change: Also we were notified in July that the protest for the incumbent on the Air Force Test operations and Sustainment contract was denied and transitioned on this project is underway.
Speaker Change: Because we are a substantial minority partner in both joint ventures are a portion of earnings will be recognized as equity method income and not revenue.
David Constable: With the additional contributions from these two projects accounted for under the equity method of accounting, this segment is currently managing over $5 billion of additional project scope annually that is not reflected in our revenue. Other prospects for mission solutions include the Hanford Tanks Project, which we have won, but are awaiting the conclusion of the protest process. In addition, we are positioned to do additional work in the intelligence services space.
Speaker Change: With the additional contributions from these two projects accounted for under the equity method of accounting.
Speaker Change: This segment is currently managing over $5 billion.
Speaker Change: Of additional project scope annually there is not reflected in our revenue.
Speaker Change: Other prospects for mission solutions include the Hanford tanks project, which we have won but are awaiting conclusion of the protest process.
Speaker Change: In addition, we are positioned to win additional work in the intelligence services space.
David Constable: Before we move to energy solutions, I want to highlight a new 50-50 partnership with Worley to pursue opportunities that support the Australia-UK-USA Trilateral Security Partnership, formerly known as AUKUS. The partnership brings deep maritime, defense, and nuclear competencies required to build and maintain a nuclear navy capability while also enabling the uplift of Australia's sovereign defense industrial base. Please turn to slide 10.
Speaker Change: Before I move to energy solutions I want to highlight a new 50 50 partnership with Whorley to pursue opportunities that support the Australia UK USA Trilateral security partnership formerly known as <unk> the.
Speaker Change: The partnership brings deep maritime defense and nuclear competencies required to build and maintain a nuclear navy capability, while also enabling the uplift of Australia sovereign defense industrial base.
Speaker Change: Please turn to slide 10.
David Constable: In energy solutions, segment profit was $75 million for the second quarter, compared to $89 million a year ago. Results for the quarter reflect several large projects in the late stages of execution. During the quarter, we recognized a modest charge on a construction-only subcontract with our joint venture entity in Mexico.
Speaker Change: In energy solutions segment profit was $75 million for the second quarter compared to $89 million a year ago.
Speaker Change: Results for the quarter reflects several large projects in the late stages of execution.
Speaker Change: During the quarter, we recognized a modest charge on a construction only subcontract with our joint venture entity in Mexico.
David Constable: With this recognition, we are close to reaching an agreement with our client on the cost to complete this project. New awards for the quarter totaled $582 million and included incremental work for a petrochemical facility in Canada and an engineering study for Aramco. The Energy Solutions team had a number of accomplishments in the second quarter. First, we moved our LEED Energy Solutions Office from our long-time location in Sugar Land, Texas, to a fit-for-purpose location in Houston's Energy Corridor.
Speaker Change: With this recognition we are close to reaching an agreement with our client on the cost to complete this project.
Speaker Change: New awards for the quarter totaled $582 million and included incremental work for a petrochemical facility in Canada, and an engineering study for Aramco.
Speaker Change: The energy solutions team had a number of accomplishments in the second quarter.
David Constable: This location optimizes our real estate footprint and increases exposure to a tremendous concentration of industry talent for our expected growth. Next, we opened a second office in India to support our global execution platform and to position us for significant in-country market growth. Finally, Energy Solutions' only legacy contract, the Penguins FPSO project, was turned over to the client and towed to its final destination in the North Sea. Shifting to LNG Canada, our team celebrated a major milestone with the final weld on train one. The weld took 48 hours of continuous work from teams of welders working in shifts.
Speaker Change: First we moved our lead energy solutions office from our longtime location in sugar land, Texas.
Speaker Change: Two a fit for purpose location in Houston's energy corridor.
Speaker Change: Dislocation optimizes, our real estate footprint and increased exposure to a tremendous concentration of industry talent for our expected growth.
Speaker Change: Next we opened a second office in India to support our global execution platform and to position us for significant in country market growth.
Speaker Change: Finally <unk>.
Speaker Change: Energy solutions only legacy contract that Penguins F. BSO project was turned over to the client and told to its final destination in the North Sea.
Speaker Change: Shifting to LNG, Canada, our team celebrated a major milestone with a final weld on train one the.
Speaker Change: Well it took 48 hours of continuous work from teams of welders working in shifts more than 380 pipe welders have worked on the project since construction began in 2018.
David Constable: More than 380 pipe welders have worked on the project since construction began in 2018. To date, we have turned over one-third of the systems to the client and will be ready to import refrigerants in mid-August. This week, we announced a key contract award for the next phase of engineering and design for Rho Power's small modular reactor facility using NuScale Power's industry-leading technology. As a reminder, Fluor has a development agreement with New Scale where we have a preferential right to work related to SMR opportunities.
Speaker Change: To date, we have turned over one third of the systems to the client and will be ready to import refrigerants in mid August.
Speaker Change: This week, we announced a key contract awards for the next phase of engineering and design for ROE powers small modular reactor facility using new scale powers industry, leading technology.
Speaker Change: As a reminder, fluor has a development agreement with new scale, where we have a preventive preferential rights for work related to <unk> opportunities.
David Constable: For the remainder of 2024, prospects are led by traditional refining and battery manufacturing. After a six-year cycle of delivering on large-scale programs, including LNG Canada and TCO, we are now seeing this mature EPC backlog replaced by higher-margin pre-feed and feed opportunities that set the stage for new large-scale projects. With respect to the nuclear industry, I recently had a call with Energy Secretary Granholm about the importance of nuclear energy, and SMR specifically, and how Fluor can play a key role in supporting a transition to low-carbon power in the United States.
Speaker Change: For the remainder of 2024 prospects are led by a traditional refining and battery manufacturing.
Speaker Change: After a six year cycle delivering on large scale programs, including LNG, Canada and Tcl. We're now seeing this mature EPC backlog replaced by higher margin pre feed and feed opportunities that set the stage for new large scale projects.
Speaker Change: With respect to the nuclear industry I originally had a call with energy Secretary ground home about the importance of nuclear and <unk>, specifically and how floor can play a key role in supporting a transition to low carbon power in the United States.
David Constable: I'm optimistic that the recently passed ADVANCE Act will increase the aperture for nuclear opportunities that the company is well positioned for. Finally, for fiscal year 2025, the House Energy and Water Appropriations Committee recently added $8 billion to the $900 million in fiscal year 2024 to fund the completion of the Advanced Reactor Demonstration Program, as well as an SMR demonstration project. While not a law, this is a critical step to making advanced nuclear power a reality by the end of the decade. With that, I will turn the call over to Joe for the financial update. Joe?
Speaker Change: I am optimistic that the recently passed advanced Act will increase the aperture for nuclear opportunities that the company is well positioned for.
Finally for fiscal year 2025, the house energy and water Appropriations Committee recently added $8 billion to the $900 million in fiscal year 'twenty for to fund the completion of the advanced reactor demonstration program as well as in SM, our demonstration project.
Speaker Change: While not law. This is a critical step to making advanced nuclear power a reality by the end of the decade.
Speaker Change: With that let me turn the call over to Joe for the financial update Joe.
Joseph Brennan: Thanks, David, and good morning, everyone. Today, I will review our results for the second quarter and go over financial outlook assumptions that support our guidance. Please turn to slide 12. As David mentioned, for the second quarter of 2024, revenue was $4.2 billion. Our consolidated segment profit for the quarter was $194 million. Adjusted EBIT off for the second quarter was $165 million compared to $181 million a year ago.
Joe Brennan: David and good morning, everyone. Today I will review our results for the second quarter and go over financial outlook assumptions that support our guidance. Please turn to slide 12, as David mentioned for the second quarter of 2024 revenue was $4 2 billion. Our consolidated segment profit for the quarter was $194 million.
Joe Brennan: Adjusted EBITDA for the second quarter was $165 million compared to $181 million a year ago. Our adjusted EPS was <unk> 85, compared to <unk> 76 in Q2 of 2023.
Joseph Brennan: Our adjusted EPS was $0.85 compared to $0.76 in Q2 of 2023. EPS results benefited from a lower tax rate as revenue and tax advantage locations increased. When you adjust for the change order and infrastructure, the incremental cost growth on a project in Mexico, and the timing of revenue contributions from large projects and energy solutions, Q2 results support our full-year guidance. Our adjusted results for the quarter exclude $20 million for the positive income effects of FX on embedded derivatives in Mexico and nearly $50 million of other FX gains. G&A expenses for the quarter were $50 million, down from $60 million a year ago. Net interest income for the quarter was $38 million, compared to $37 million a year ago.
EPS results benefited from a lower tax rate as revenue and tax advantaged locations increased.
Joe Brennan: When you adjust for the change order and infrastructure the incremental cost growth on a project in Mexico, and the timing of revenue contributions from large projects and energy solutions Q2 results support our full year guidance, our adjusted results for the quarter excludes $20 million for the positive income effects of.
Joe Brennan: FX on embedded derivatives in Mexico.
Joe Brennan: And nearly $50 million of other FX gains.
Joe Brennan: G&A expenses for the quarter were $50 million down from $60 million a year ago.
Speaker Change: Net interest income for the quarter was $38 million compared to $37 million a year ago net interest contributions reflect a higher for longer interest rate environment, and our low cost fixed rate debt. We anticipate interest income to remain near this level for the next two quarters, New awards of $3 1 billion.
Joseph Brennan: Net interest contributions reflect a higher-for-longer interest rate environment and our low-cost fixed-rate debt. We anticipate interest income to remain near this level for the next two quarters. New awards of $3.1 billion in the quarter resulted in an ending backlog balance of $32.3 billion, which now stands at 81% reimbursable. Based on our prospect pipeline, we anticipate a book-to-burn ratio equal to one for the third straight year. The book to burn would be much higher if you included the unconsolidated revenue that Mission Solutions manages.
Speaker Change: In the quarter resulted in our ending backlog balance of $32 3 billion, which now stands at 81% Reimbursable based on our prospect pipeline, we anticipate a book to burn ratio equal to one for the third straight year.
Speaker Change: The book to burn would be much higher if you included the unconsolidated revenue that mission solutions manages moving on to slide 13.
Joseph Brennan: Moving on to slide 13, our cash and marketable securities balance for the quarter was $2.6 billion. This excludes amounts held by NuScale. Operating cash flow for the second quarter was $282 million, compared to $62 million outflow a year ago.
Speaker Change: Our cash and marketable securities balance for the quarter was $2 6 billion.
This excludes amounts held by new scale operating cash flow for the second quarter was $282 million compared to 62 million outflow a year ago. This reflects distributions from our joint ventures customer payments on several large projects and a refund from the IRS amounting to 77 million.
Joseph Brennan: This reflects distributions from our joint ventures, customer payments on several large projects, and a refund from the IRS amounting to $77 million. Additional IRS refunds of approximately $90 million are anticipated to be recovered later this year. During the quarter, we distributed $21 million in cash to fund legacy projects.
Speaker Change: <unk>.
Speaker Change: Additional IRS refunds of approximately $90 million are anticipated to be recovered later this year.
Speaker Change: During the quarter, we distributed $21 million in cash to fund legacy projects. We currently estimate that our funding requirements on the three remaining legacy projects is $50 million for the balance of 2024.
Joseph Brennan: We currently estimate that our funding requirements on the three remaining legacy projects are $50 million for the balance of 2024. The sale of Storch UK operations is progressing and dependent upon regulatory approval timing, which is likely to happen towards the end of 2024. Regarding NuScale, I want to note that NuScale's ongoing capital efforts may reduce Fluor's ownership below the threshold for consolidation. While this would result in us no longer consolidating NuScale, we would expect to recognize our investment under the equity method.
Speaker Change: The sale of storage UK operations is progressing and dependent upon regulatory approval timing, which is likely to happen towards the end of 2024 regarding new scale I want to note that new skills ongoing capital efforts may reduce Florida ownership below the threshold for consolidation. While this would result in us no longer consolidating news.
Speaker Change: We would expect to recognize our investment under the equity method before.
Joseph Brennan: Before I close with details on our outlook, I want to provide an update on our view of capital structure. Year to date, we have made considerable progress in entitlement negotiations. Free Cash Flow Conversion and Investing in Our People. These elements all support our stated goal of initiating a plan to return capital to shareholders. Please turn to slide 14. We are affirming our 2024 Adjusted Per-share Guidance of $2.50 to $3.00 and tightening our Adjusted EBITDA Guidance Range from $600 to $700 million to a range of $625 million to $675 million. Our expectations for operating cash flow are now between $500 million and $600 million.
Speaker Change: Before I close with details on our outlook I want to provide an update on our view of capital structure year to date, we have made considerable progress in entitlement negotiations free cash flow conversion and investing in our people. These elements all support our stated goal of initiating a plan to return capital to shareholders.
Speaker Change: Please turn to slide 14.
Speaker Change: We are affirming our 2024 adjusted per share guidance of $2 50 to $3 and tightening our adjusted EBITDA guidance range from $600 million to $700 million.
Speaker Change: To a range of $625 million to $675 million, our expectations for operating cash flow are now between $500 million and $600 million.
Joseph Brennan: Our assumptions for 2024 include revenue growth of approximately 15 percent, G&A expense of approximately 215 million dollars, and an effective tax rate of between 30 to 35 percent. Our expectations for 2024 full-year segment margins are approximately 5% in energy solutions, approximately 4% in urban solutions, and approximately 6% in missions. Before we head to Q&A, I'll turn the call back over to David for an organizational change announcement. Thanks, Joe.
Speaker Change: Our assumptions for 2024 include revenue growth of approximately 15% G&A expense of approximately $215 million and an effective tax rate of between 30% to 35% our expectations for 2020 for full year segment margins are approximately.
Speaker Change: <unk>, 5% in energy solutions, approximately 4% and urban solutions, and approximately 6% and mission solutions before.
Speaker Change: Before we head to Q&A I'll turn the call back over to David for an organizational change announcement David.
Thanks, Joe.
David Constable: As we enter the second half of the year and successfully wrap up Chapter One of our Building a Better Future strategy, we're looking ahead and developing plans for the next chapter. Going forward, our objectives will be to maximize opportunities in growth markets. Remain laser-focused on execution, generate consistent operating cash flow, and continue to develop our pipeline of talent. In support of our objectives, we are making changes to our floor management team. To prepare for the future, we require a more holistic view of our markets, strengths, and needs in project execution and talent allocation across our business. Please turn to slide 16.
David: As we enter the second half of the year and successfully wrap up chapter one of our building a better future strategy. We're.
David: We're looking ahead and developing plans for the next chapter.
Going forward, our objectives will be to maximize opportunities in growth markets.
David: We remain laser focused on execution.
David: <unk> consistent operating cash flow and continued to develop our pipeline of talent.
David Constable: To this end, effective August 5th, Jim Brewer, who is currently the Group President of Energy Solutions, will assume the role of Fluor's Chief Operating Officer reporting to me, with our three business segment group presidents for energy, mission, and urban solutions reporting to Jim. Succeeding Jim as Group President of Energy Solutions is Mike Alexander, currently the Chemicals Business Line President within the segment. Next, to strengthen and optimize our supply chain capabilities, effective October 1st, Raj Desai will join the Fluor management team as Fluor's Chief Procurement Officer.
David: In support of our objectives, we are making changes to our floor management team.
David: To prepare for the future we require a more holistic view of our markets strengths and needs and project execution and talent allocation across our businesses.
David: Please turn to slide 16.
David Constable: Currently, Raj is responsible for our Supply Chain and Commercial Strategies Group. In addition to these duties, Roger will also assume responsibility for our information and technology organization, furthering Fluor's expertise in leveraging technology in project execution. Robert Taylor, our current Chief Information Officer, has advised of his intention to retire at the end of 2025, March 2025, after nearly 34 years with Fluor. And lastly, after a career with Fluor that spans almost 40 years, John Reynolds, our Chief Legal Officer and Corporate Secretary, confirmed his decision to retire from the company effective mid-May 2025. Effective August 5th, Kevin Hammons will join the Fluor Management Team as Chief Legal Officer.
Speaker Change: To this end effective August 5th Jim Brewer, who is currently the group President of energy solutions will assume the role of Fluor's Chief operating officer reporting to me.
David Constable: Over the coming months, John will transition his responsibilities to Kevin, who for the past several years served as Senior Vice President and Managing Counsel of the Americas. Until his retirement in May 2025, John will remain in service to the company as Corporate Secretary to the Board of Directors. I'd like to take this opportunity to warmly thank Robert and John for their service and dedication to Fluor Corporation and congratulate Mike, Raj, and Kevin on their upcoming appointments to the FMT and Jim on his new role as Chief Operating Officer.
Speaker Change: With our three business segment grew presence for energy mission and urban solutions reporting to Jim.
Speaker Change: Succeeding Jim as group President Energy solutions as Mike Alexander currently the chemicals business line President within the segment.
Speaker Change: Next to strengthen and optimize our supply chain capabilities effective October one Raj decide will join the <unk> management team has flourished chief procurement officer.
Speaker Change: Currently <unk> is responsible for our supply chain and commercial strategies groups.
Speaker Change: In addition to these duties Roger will also assume responsibility for our information and technology organization, furthering fluor's expertise and leveraging technology and project execution.
Speaker Change: Robert Taylor, our current Chief Information Officer has advised me of his intention to retire at the end of 2025 March 2025, after nearly 34 years with Fluor.
And lastly, after a career with Florida that spans almost 40 years, John Reynolds, our Chief legal officer, and corporate Secretary confirmed his decision to retire from the company effective mid May 2025.
Speaker Change: Effective August 5th Kevin Hammons will join the <unk> management team as Chief legal officer.
Speaker Change: Over the coming months, John will transition his responsibilities to Kevin for the past several years served as senior Vice President and managing Council of the Americas.
Speaker Change: Until his retirement in May 2025, John will remain in service of the company as corporate Secretary to the board of directors.
Speaker Change: I'd like to take this opportunity to warmly, thank Robert and John for their service and dedication to Fluor Corporation, and congratulate Mike Raj and Kevin on their upcoming appointments to the FMT and Jim on his new role as Chief operating officer.
Speaker Change: For your reference the abridged profiles for Jim Mike Raj and Kevin are attached as an appendix to the earnings call presentation.
David Constable: For your reference, the abridged profiles for Jim, Mike, Raj, and Kevin are attached as an appendix to the earnings call presentation. And with that, operator, we're now ready for our first question. Thank you very much. We are now opening the floor to questions and answers. If you'd like to ask a question, please press star 1.
Speaker Change: And with that operator, we're now ready for our first question.
Speaker Change: Thank you very much we are now opening the floor for a question and answer session. If you'd like to ask a question. Please press star one our first question comes from James <unk> from Keybanc capital markets. Your line is now open.
Operator: Our first question comes from Sangita Jain from KeyBank Capital Markets. Your line is now open. Hi, good morning, and thank you for taking my question. So if I can start with the capital allocation comments that you guys just made and the plan to return cash to shareholders, can you tell us a little bit more about what that exactly means and what the timing of that would be? Yeah, thanks.
Yes.
James <unk>: Hi, good morning, and thank you for taking my questions.
James <unk>: I can start with the capital allocation comments that you guys just made and the plan to return cash to shareholders can you tell us a little bit more about that on what that exactly means and what the timing of that would be.
Joseph Brennan: Thanks, Sangita, for the question. I think, as we laid out at the beginning of the year, by the end of the year, we would be kind of in a position to firm up what that plan would look like and the timing of it. I think one of the elements – I think we've satisfied a lot of what we're doing internally, and as we're embarking on the 2024 strategic plan, I think that's the last piece of this to kind of close off the circle and allow us to kind of roll out what our communication related to the shareholder allocation plan will be. So we're kind of in that process.
Speaker Change: Yes. Thanks, Thanks firsthand Nida further question.
As we laid out at the beginning of the year by the end of the year that we would be kind of in a position to firm up what that plan would look like and the timing of it I think one of the elements. We I think we've satisfied a lot of what we're doing internally and as we're embarking on.
Speaker Change: The 2024 strategic plan I think that's the last piece of this to kind of close off the circle and allow us to.
Speaker Change: Kind of rollout with our communication related to two.
Speaker Change: To the shareholder allocation plan will be so we're kind of in that process wed like to vet off one more thing, but its coming by the end of the year and then we'll be a little bit more granular about what that looks like I don't think were prepared to talk about the granularity of it but I would say a lot of the things that are occurring in the quarter are giving us more and more confidence and as we close out the strategic plan I think we'll be in a good position to have that.
Joseph Brennan: We'd like to vet off one more thing, but it's coming by the end of the year, and then we'll be a little bit more granular about what that looks like. I don't think we're prepared to talk about the granularity of it, but I would say a lot of the things that are occurring in the quarter are giving us more and more confidence. And one more on the last project outlay that seems to be lower than the $150 million that you gave last quarter. Is it fair to assume that that's a reflection of the positive adjustment at LA PeopleMover?
Speaker Change: Gotcha.
Speaker Change: Great and one more on the loss project outlay that seems to be now lower than the 115 million that you gave last quarter is it fair to assume that that is at an inflection on the positive adjustment that make people mover.
Joseph Brennan: It is, in terms of the settlement value and the fact that we don't have that cash outlay, Sangita, that's a fair logic tie there. That's a piece of it, for sure. Okay, understood. Thank you so much.
Speaker Change: It is in terms of the settlement value and the fact that we don't have that cash outlay sangeeta that is.
Speaker Change: Fair.
Speaker Change: Logic Tither, that's a piece of it for sure.
Sangeeta: Okay understood. Thank you so much.
Operator: Our next question comes from Jamie Cook from TruVist Securities. Your line is now open. Hi, Joe. I guess my first question is, Joe, on the cash flow guide increase. It was nice to see what was not embedded in your guidance. I'm just wondering, I know you said the cash reflects distributions from joint ventures and you had the IRS refund and et cetera.
Sangeeta: Our next question comes from Jamie Cook from <unk> Securities. Your line is now open.
Joseph Brennan: I'm just wondering how much cash outperformed your initial expectations. And then it's nice to see you're starting to get cash from the joint ventures. What's embedded in the guide, or where would there be upside?
Jamie Cook: Hi, congratulations on a fairly clean quarter here.
Jamie Cook: That's my first question, Joe just on the cash flow guide increase it was nice to see.
Jamie Cook: What was not embedded in your guidance I'm just wondering I know you said the cash reflects distributions from joint ventures, and you had the IRS refund and et cetera.
Jamie Cook: I'm just wondering how much cash outperformed your initial expectations and then it's nice to see you're starting to get cash from the joint venture is what's embedded in the guide or where would there be upside I'm. Just wondering if we should get more positive that these distributions are coming.
Joseph Brennan: I'm just wondering if we should be more positive that these distributions are coming and the sort of magnitude of that. And then, David, on the bookings for the rest of the year, I think before you've talked about a book to bill of over one. I know bookings are lumpy. Just your confidence level there and, in particular, what you're seeing on the data center side. Thank you. Thanks, Jamie. I'll start with the cash.
Jamie Cook: And sort of the magnitude of that and then.
Jamie Cook: I guess, David on the on the bookings for the rest of the year I think before you've talked about a book to bill of over one I know bookings are lumpy.
Speaker Change: Just your confidence level, there and in particular, what you're seeing.
David: On the datacenter side. Thank you.
David: Thanks, Jamie I'll start I'll start with the cash.
David Constable: You know, we had an outlay at the beginning of the year from a planning perspective of $360 million to fund legacy projects, and today, through the reestablishment of entitlements and excellence in execution, we've dropped that number from a $360 million outlay potentially to now $126 million. And even within that $126 million, in the balance of 2024, I see ways to kind of improve that outlay. So I think that's going to help us drive to the upper end of the guide that we've laid out relative to OCF.
Speaker Change: We had an outlay at the beginning of the year from a planning perspective of $360 million to fund legacy projects and today. We currently have managed through the reestablishing of entitlements in and excellence in execution, we've dropped that number from a $360 million.
Speaker Change: <unk> potentially to now $126 million.
Speaker Change: And even within the $126 million and the balance of 2020 for IC.
Speaker Change: Ways to kind of improve that outlays, so I think thats going to help us.
Speaker Change: <unk> to the upper end of the guide that we've laid out relative to ocs.
Speaker Change: I'm getting more and more confidence that thats kind of the direction that we're heading but that I see more opportunity to get to the upper end of that guide, but I think some time needs to play out here.
David Constable: And I'm getting more and more confident that that's kind of the direction that we're heading. But I see more opportunity to get to the upper end of that guide, but I think some time needs to play out. Good morning, Jamie. On the book, I booked a bill, and you know, the one about confidence had a really good first half, right?
Speaker Change: Okay.
Jamie Cook: Good morning, Jamie.
Speaker Change: <unk>.
Jamie Cook: On the bookings book to Bill in the.
Jamie Cook: The one the one oh confidence.
Jamie Cook: We had a really good first half right we booked 10.
Joseph Brennan: We've booked 10, $10 billion in the first half of the year, so basically right on track with our, That's $50 billion over the past two and a half years, and booking $20 billion in each of the... 22 and 23, so about the same run rate. New award bookings remain strong, right? Higher margin profile versus the existing backlog, as we mentioned in the prepared remarks. In Q2, in fact, new awards were 250 basis points above the backlog margin, so that's great to see.
Jamie Cook: 10 billion in the first half of year, So basically right on track with R.
Speaker Change: That's 50 billion over the past two and half years and booking $20 billion in each of the 22% and 23. So while at the same run rate New award bookings remains strong white higher margin profile versus the existing backlog as we mentioned in the prepared remarks Q.
Q: Q2 in fact New awards.
Speaker Change: 50 basis points above the backlog margins, so thats great to see.
Joseph Brennan: As far as, you know, what it's shaping up like for new awards in the second half, the ATLS and mining markets remain very promising, but also, you know, if you look at the Q3 major prospects, they'll be in mining, traditional refining, chemicals, semiconductors, DOE maintenance, and energy transition projects across the portfolio. And then in Q4, DOE environmental management bookings, more mining, LNG, data centers, some large data center work, and then some more chemicals prospects. So, confidence level, yeah, I'd say we'll be right around one, I think, thereabouts.
Speaker Change: As far as whats, it's shaping up like for New awards in the second half.
Speaker Change: Tls and mining markets remain very promising.
Speaker Change: But also if you look at the Q3 major prospects.
Speaker Change: There'll be in mining traditional.
Speaker Change: Finding chemicals.
Speaker Change: Semiconductors.
Speaker Change: Do maintenance and energy transition projects across the portfolio and then in Q4.
Speaker Change: Environmental management bookings.
More mining.
Speaker Change: LNG.
Speaker Change: Data centers.
Speaker Change: Some large data center work and then some more chemicals prospects. So.
Speaker Change: Confidence level, yes, I'd say, we'll be right around one I think thereabouts I think that's what we've been messaging for the past several quarters.
Speaker Change: And obviously we've got.
Speaker Change: Our revenue growth of about 15% guidance. This year, just so you can track it that way as well too to get to what that book to burn would be so that's where we're at.
Speaker Change: Okay.
Speaker Change: Thank you.
David Constable: I think that's what we've been messaging for the past several quarters. And obviously, we've got revenue growth of about 15% this year, just so you can track it that way as well to get to what that book to burn would be. So, that's where we're at. Thank you. Our next question comes from Andy Kaplowitz from City Group. Your line is now open. Good morning, everyone.
Speaker Change: Our next question comes from Andy Kaplowitz from Citigroup. Your line is now.
Andy Kaplowitz: Good morning, everyone.
Andy Kaplowitz: Good morning, good morning.
Operator: Good morning, David. Maybe you'll follow up on Jamie's questions about data centers. You mentioned that you're building relationships with tech customers, and they're taking a disciplined approach to projects. So, maybe, what does that mean?
David: David maybe a follow up on Jimmy's questions around data centers. You mentioned that you are building relationships with tech customers and they are taking a disciplined approach to projects submitted what does that mean.
David Constable: Do you start seeing more bookings this year? Is it more of a 25% ramp up in bookings there? And maybe talk about Fluor's competitive positioning.
Speaker Change: Do you start seeing more bookings this year is it more of a 25 ramp up in bookings there mainly talking about fluids competitive positioning do you think the majority of the projects will actually be classroom visible.
David Constable: Do you think the majority of the projects will actually be cost reimbursable? Yeah, so like I said to Jamie, the data center work right now for the larger programs is starting in Q4, which is what we're seeing right now, and then into 25, like you mentioned. So that's where we are with data centers. There is just a really big demand. Right now, I think, as everyone on the call knows, the need for data centers has rapidly increased based on cloud-based technology and artificial intelligence, right? For example, in the U.S. market alone, you know, power consumption.
David: Okay.
Speaker Change: Yeah, So like I said to Jamie the the data center work right now for the larger programs are starting in Q4.
Speaker Change: Is what we're seeing right now and then into 'twenty five like you mentioned so thats.
Speaker Change: That's where we're at with data centers, it's just a really big demand.
Speaker Change: Right now I think as everyone on the call knows the the need for data centers has rapidly.
Speaker Change: Increased based on cloud.
Speaker Change: Cloud based technology and artificial intelligence right. So.
Speaker Change: In the U S market alone the power consumption to reflect the number of servers of data centers that they can.
David Constable: To reflect the number of servers of data centers that they can house, it's going to reach, we think, or we've looked at the data, and we think it'll reach about 35,000 megawatts by 2030, and there are, what, about 17,000 in place right now. So huge growth in data centers, and the U.S. is going to account for it accounts for 40% of the global market, so lots of data center work to say grace over here. And, from what we've seen, it is primarily reimbursable, right?
Speaker Change: <unk> houses is going to reach we think or we.
Speaker Change: Looked at the data and we think it will reach about 35000 megawatts by 2030 and there is what about 17000 in place right now so a huge growth in data centers in the U S is going to account for.
Speaker Change: For 48 accounts for 40% of the global market. So lots of lots of data center work to say grace over here and from what we've seen it is primarily reimbursable right. So that's also encouraging or reimbursable with with incentives on cost and schedule.
David Constable: So that's also encouraging. Or reimbursable with incentives on cost and schedule, right in our wheelhouse in our contract, our risk profile, and fair and balanced contract term strategic priority to go after these data centers. And they are large, right?
Speaker Change: <unk>.
Speaker Change: Right in our wheelhouse too.
Speaker Change: And our contract our risk profile and fair and balanced contract term strategic priority to go. After this this these data centers and they are large right. So there's only a few contractors in the country, who can really take on these these really large projects and fluids, obviously, one of those and we'll be right in the mix for for the data Center.
David Constable: So there are only a few contractors in the country who can really take on these really large projects, and Fluor is obviously one of those and will be right in the mix for the data center buildout that's coming. So we're very bullish on data centers but also semiconductor facilities right now in the global markets and also life sciences in ATLS. So ATLS is shaping up very nicely here going forward. David, and maybe you can give us more color regarding what you're seeing specifically within energy solutions?
Speaker Change: <unk> that's.
Speaker Change: That's coming so very we're very bullish on data centers, but also semiconductor facilities right.
Speaker Change: Right now more in the global markets and and also life Sciences and <unk>. So.
Speaker Change: <unk> is shaping up very nicely here going forward.
Speaker Change: It's helpful. David and maybe can you give us more color regarding what you're seeing specifically within our energy solutions backlog is up year over year, but revenues down and you have low LNG, Canada as you said winding down so what kind of visibility.
David Constable: Backlog is up year over year, but revenue is down, and you have Canada, as you said, winding down. So what kind of visibility toward revenue growth methods do you have over the coming quarters and in 2025? Could there be a lull before, as you said, you do a bunch of feeds, but then you get in TPC, I guess, later in 2025 or 2026? How does it evolve?
Speaker Change: Towards revenue growth and that is do you have over the coming quarters and in 2005.
Could there be a lull before as you said you know you do a bunch of feeds but then you get an TPC I guess later in 'twenty five or 'twenty, how does it evolve.
David Constable: Yeah, we've had a good run in energy solutions. Backlog is up, as I mentioned, right, up to $8.5 billion, up quite a bit over Q2 of 2023, so that's good news. But also, we have been finishing off some major projects, coming to the end at LNGC, and TCO is ramping down somewhat. But as we look at all the feedwork and prospects in feedwork, there's about $420 billion of potential projects out there that we can go after.
Speaker Change: Yes.
Speaker Change: We've had a good run in energy solutions backlog is up as I mentioned right up to $8 1 billion up.
Speaker Change: Quite a bit over over Q2 of 'twenty three so that's good news, but also we have been.
Speaker Change: Finishing off some major projects coming to the end of the LNG <unk> and Tcl as is.
Speaker Change: Ramping down somewhat but as we look at all of feed work and and and prospects in feed work.
Speaker Change: There's about 400.
$420 billion.
Speaker Change: <unk> potential.
Speaker Change: Projects out there that we can that we can go after and a good portion of that is in energy solutions right just and if you just look at the prospects of front end work.
David Constable: And a good portion of that is in energy solutions, right? Just in the – if you just look at the prospects of front-end work, it's split pretty evenly between – of the $207 billion that we're tracking right now, it's split very evenly between energy solutions and urban solutions, about $104 billion for energy solutions. And that's across chemicals and refining in Mexico, specifically nuclear power. And then a very big chunk is in downstream production and fuels, which cover off a lot of the energy transition.
Speaker Change: Split pretty evenly between of the 207 1 billion.
Speaker Change: We're tracking right now is split very evenly between energy solutions in urban solutions.
Speaker Change: About 104 billion from energy solutions, and Thats across chemicals and refining.
Speaker Change: The refining in Mexico, specifically nuclear power and then a very big chunk is in downstream production and fuels, which covers awful lot of the energy transition. So I think with everything thats either in house, which is another 200.
David Constable: So I think with everything that's either in-house, which is another $200 billion of studies that we think will proceed, a lot of good things are coming. If you look at full projects, EPCM, EPC, EPCM, there's about $60 billion of prospects in the next 18 months for the company, and $25 billion of that is energy solutions.
Speaker Change: $200 billion of studies that we've got that we think we will proceed.
Speaker Change: A lot of good things are coming if you look at full projects PCM EPC PCM, there's about $60 billion of.
Speaker Change: Of prospects in the next 18 months for the company and $25 billion of that is energy solution. So yeah.
David Constable: So yeah, I wouldn't call it a lull, but we're going into that front-end work, where our strategy is to get in early and stay late. So we're busy on some more front-end work in energy solutions that'll see them growing nicely in the coming quarters. Appreciate all the color.
Speaker Change: Yes.
Operator: Thanks. Our next question comes from Steven Fisher from UBS. Your line is now open.
I wouldn't call it a lull, but it's going into that front end work.
Speaker Change: Our strategy is to get in early and stay late so we're busy on some more front end work in energy solutions that'll that'll see them growing nicely in the coming quarters.
Speaker Change: I appreciate all the color.
Thanks.
Speaker Change: Our next question comes from Steven Fisher from UBS. Your line is now open.
Steven Fisher: Great, thanks. Good morning and congratulations. I just wanted to clarify whether the urban solutions change order you had in the quarter was already kind of probability weighed in the guidance. And if it was, was there something else that offset that since the midpoint of EBITDA was kept the same? And then I'll just ask my second question now. David, you cited an average of 150 basis points of higher margins going into backlog over the last six quarters.
Steven Fisher: Great. Thanks, good morning, and congratulations.
Steven Fisher: Wanted to clarify whether the urban solutions change order you had in the quarter was already kind of probability weight in the guidance.
Speaker Change: And if it was was there something else that offset that the mid point.
Speaker Change: EBITDA was kept the same.
Speaker Change: And then I'll just ask my second question now David you cited that the average of 150 basis points of higher margins going into backlog over the last six quarters, how should we think about the trajectory of margins going into backlog from here.
Steven Fisher: Actually, we think about the trajectory of margins going into backlog from here kind of relative to that 150 basis points. Is that kind of flattening now, or do you think there's still room for higher margins?
Speaker Change: Relative to that 150 basis points is that kind of flattening now or do you think there's still room for putting higher margins in thank you.
Joseph Brennan: Steven, I'll take kind of the view on guidance for the quarter. You know, I guess the way I would frame it for you is that the results for the quarter kind of reflect the underlying quality of the existing backlog that we booked over the last couple of years. That $50 billion up through the end of 2023, an additional $10 billion plus what's coming in on Pantex.
Speaker Change: Stephen I'll take kind of the view on guidance for the quarter.
Speaker Change: I guess the way I would frame it for you as the results for the for the quarter kind of reflect the underlying quality of the existing backlog that we booked over the last couple of years.
Speaker Change: The $50 billion up through the end of 'twenty, three and additional $10 billion plus whats coming in on pantex.
Joseph Brennan: We understand there were some puts and takes in the quarter, but we still have confidence in our core results, and I think those results suggest the run rate of $165 million that we showed in the quarter. As we move forward, Steven, I think what we'll see is less and less volatility. As a result, we're continuing to close out our existing legacy projects. We've made significant progress there, and our de-risk project portfolio of 80% reimbursable will begin to mature as it pulls through the pipeline. But, as we laid out in prepared remarks, we did have some delayed revenue recognition on some of our major programs and energy solutions, which are coming in in the back half of the year.
Speaker Change: We understand there were some puts and takes in the quarter, but we still have confidence on our core results and I think those results suggest the run rate of $165 million that we've shown in the corner.
Speaker Change: As we move forward Stephen I think what we'll see is less and less and less volatility as.
Stephen: As the results were.
Stephen: Were continuing to close out our existing legacy projects. We've made significant progress there and are de risked project portfolio of 80% Reimbursable will begin to mature as it pulls through the pipeline, but as we laid out in prepared remarks, we did have some delayed revenue recognitions over some of our major programs.
Stephen: And energy solutions, which are coming in in the back half of the year.
Joseph Brennan: And so that gives us confidence in being able to support the guidance and certainly, Yeah, good morning, Steven. Yeah, on margins and going to backlog, that's been a good run that we've seen. And it continues to pull our backlog margins up, so our backlog continues to get healthier. As we've said, we're over 80% reimbursable now, which has surpassed our strategic priority target of reimbursable work and backlogs. So, I'd say looking at it, I'd say it will continue. I think we'll continue to book new wards above our planned margins.
Stephen: So that gives us the confidence in being able to support the guidance and certainly up to the midpoint at this point.
Stephen: Yes, good morning, Stephen.
Stephen: Yes, Alan margins, then going into backlog that's been a good run that we've seen and it continues to.
Speaker Change: To pull our our backlog margins up so our backlog continues to get healthier as we've said we're over 80% Reimbursable now which is met R. R.
Stephen: We surpassed our strategic priority target.
Stephen: Reimbursable work in backlog so.
Speaker Change: I'd say it's.
Stephen: Looking at it I would say it will continue I think we'll continue to book New awards above our plan.
Speaker Change: Margins a lot of it has to do with.
David Constable: A lot of it has to do with the services margins that we're booking right now. A lot of this front-end work that we're back into in energy solutions obviously brings with it much higher margins when it's services only. So, that's a big contributor to what we'll be seeing over the next several quarters. I think that will continue.
Stephen: Services margins that we're booking right now a lot of this front end work that we're back into an.
Stephen: In energy solutions.
Stephen: Obviously brings with it much higher margins when it services only so that's a big contributor to what we'll be seeing over the next several quarters. So I think I think that will continue.
Speaker Change: Wouldn't want to.
David Constable: It's better to get there and then tell you what it is after the fact, but I think we'll continue to see margins coming in at new awards that are above our planned expectations. Very helpful. Thanks a lot.
Stephen: Better to get there and then tell you what it is after the fact, but I think.
Speaker Change: I think we'll continue to see.
Speaker Change: Margins coming in of New awards at.
Stephen: That are above our planned expectations.
Speaker Change: Very helpful. Thanks, a lot.
Steven Fisher: Hey, Steven Thanks, Steve.
Operator: Our next question comes from Mike Dudas from Vertigo Research Partners. Your line is now open. Good morning, Jason, Joe, and David. Good morning.
Mike <unk>: Our next question comes from Mike <unk> from vertical Research partners. Your line is now open.
Steven Fisher: Sure.
Speaker Change: Good morning, Jason Joe David.
Mike Alexander: Hi, good morning, Mike.
Michael Dudas: First for Joe, Joe, you know, with the positive success of cash flow improvement this year versus a year ago, after we go through all the puts and takes and the legacy projects moving out, some of the better... business moving in backlog through the P&L. What do you expect from a normalized kind of conversion rate on, you know, when Fluor is kind of running on those cylinders without some of those, even though there will be some special movements, you know, interquarter, what that can be, and does that change from what your expectations would have been?
Joe Brennan: First for Joe Joe.
Speaker Change: With the positive success of cash flow improvement here this year versus a year ago.
Steven Fisher: After we go through all the puts and takes in the legacy projects moving out some of the better.
Speaker Change: Business moving in backlog through the P&L.
Speaker Change: What do you expect from a normalized kind of conversion rate on your wind fluor's kind of running on most cylinders without some of those even though there will be some special movements intra quarter of what that can be and has that changed from what your expectations would have been.
Michael Dudas: No, thanks for the question, Mike. We have stated that 60% to 70% conversion rate as we move forward. And I would expect, I've gone back and kind of looked at our historical floor, and at times we've been up in the 75% range in a similar asset light model. So I think the goal would be to drive to levels in the 70% to 75% range.
Steven Fisher: Thanks for the question Mike.
Speaker Change: We have stated that 60% to 70% conversion rate as we move forward and I would expect if I got it.
Speaker Change: I've gone back and kind of looked at our historical floor and at times, we've we've been up in the 75% range and in a similar asset light model. So I think the goal would be to drive two levels in the 70% to 75% range, but as we transition here I think that 60% to 70% conversion.
Joseph Brennan: But as we transition here, I think that 60% to 70% conversion view is probably an appropriate one as we, you know, kind of progress through the next. That's helpful, Joe. And for David, you mentioned in your prepared remarks the booking from NuScale on rural power, your discussion with the Department of Energy Secretary, how, you know, how real, what your thoughts are on what potential that could be for floor, whether it's through NuScale or other opportunities, other areas on the nuclear side, and maybe an update on monetization opportunities for your majority of your whole. Yeah, good morning, Mike.
Speaker Change: View is probably an appropriate one as we kind of progress through the next few quarters.
Speaker Change: Okay.
Joe Brennan: That's helpful. Joe for David You mentioned in your prepared remarks, the booking from the new scale and rural power your discussion with the department of Energy Secretary.
Steven Fisher: How.
Speaker Change: How real house, how you your thoughts on what potential that could be for for whether it's through <unk>.
Speaker Change: New scale or other opportunities with other years on the nuclear side and maybe an update on monetization opportunities for your majority of your holdings.
Mike: Yes, good morning, Mike.
Joseph Brennan: Yeah, great topic right now, based on, as we talked about, the data centers and everything that's going on for power demand requirements, not only in the U.S. but globally. We said last quarter that the demand, or the interest, I'll say, for SMR technology, carbon-free power, has never been greater.
Speaker Change: Yes, great great topic right now.
Speaker Change: Based on as we talked about the data centers and everything that's going on from power demand requirements not only in the U S but globally.
Speaker Change: I think we said last quarter the demand for the interest I'll say the interest in <unk>.
Speaker Change: ASMR technology carbon free power.
Speaker Change: Never been greater.
David Constable: We obviously are seeing, supporting NuScale, but also supporting their commercialization and their development partner in commercialization globally. So we've got pretty good insight into all the opportunities out there with tech companies and with utilities to crack this nut on power demand and the requirement for it to be clean energy. So pretty exciting times.
Speaker Change: We obviously youre seeing.
Speaker Change: Supporting new scale, but also <unk>.
Speaker Change: Supporting their their commercialization and their development partner and commercialization globally. So we've got a pretty good insight into all the opportunities out there.
Speaker Change: With tech companies.
Speaker Change: And with utilities.
Speaker Change: To crack this nut on power demand and the requirement for it to be clean energy. So.
Speaker Change: Putting exciting times, we're excited about ROE power, we're excited for new scale.
David Constable: We're excited about Row Power, we're excited for NuScale, about their technology being chosen over there, and support from the U.S. government as well, and we're looking forward to getting started on that front-end package for Row Power. And we believe there's going to be a lot more of it, both internationally and here in the U.S. as well, either with utilities taking on the assets in their facilities or over the fence, build-on-operate, different business models are available, and the tech companies are coming.
Speaker Change: Their top technology being chosen over their support from the U S government as well and we're looking forward to getting started on that front end package.
Speaker Change: <unk> ROE power and we believe theres going to be a lot more of it.
Speaker Change: Both internationally.
Speaker Change: I think the floodgates will start to open here in the U S as well as <unk>.
Speaker Change: Either.
Speaker Change: With utilities, taking on the assets.
Speaker Change: In their.
Speaker Change: These are over the fence build build own operate different business models are available.
Speaker Change: And the tech companies are coming I think.
David Constable: I think they'll lean more towards PPAs, Power Purchase Agreements, with the SMR developers out there. So yeah, times are good. Like I said, we have preferential rights with NuScale, and we know the technology best from an engineering design and constructability perspective. So it's shaping up to be something going forward that will be all over. Exciting times.
Speaker Change: Lean more towards PPA power purchase agreements with.
Speaker Change: With the SMA developers out there. So yes, if times are good like I said, we have a preferential rights with with new scale and we know the technology best from a from an engineering design and construct ability perspective so.
Speaker Change: It's shaping up to be something.
Speaker Change: Going forward that will be all over so exciting times.
David Constable: On the monetization, we're still working with our strategic investor. I think everything I've just said about how positive things are shaping is definitely going to get the investment, I think, over the goal line here. You know, we'll probably be talking more about it at the end of the year and letting you know where that stands with Fluor's shares and, you know, selling down the majority of our shares to a strategic investor that will take the commercialization forward. Thanks, Mike. Thank you. Our next question comes from Angie Wittmann from Baird. Your line is now open.
Speaker Change: On the monetization.
Speaker Change: We're still working with our strategic Investor.
Speaker Change: I think everything I've just said about.
Speaker Change: Positive things are shaping.
Speaker Change: That is definitely going to.
Speaker Change: Get the investment I think over the goal line here.
Speaker Change: We'll probably be talking more about it at the end of the year and letting you know where that stands with the with fluor shares and.
Speaker Change: Selling down the majority of our shares to a strategic investor that will they will take the commercialization forward.
Mike: Thanks, Mike.
Speaker Change: Thank you. Our next question comes from Andy Wittmann from Baird. Your line is now open.
Operator: Oh, great. Thanks for taking my question. I guess...
Andy Wittmann: Oh, great. Thanks for taking my question I guess.
Andrew Wittmann: I just wanted to ask about the SG&A guidance, which I guess is up this quarter versus what you were thinking last quarter. And so I was wondering if you could discuss what's in there, Joe. Is there something one-time?
Andy Wittmann: I just wanted to ask on the SG&A guidance I guess.
Andy Wittmann: <unk> up this quarter versus what you were thinking last quarter and so I was wondering if you could discuss whats in there Joe is there something one time.
Joseph Brennan: Is it an incentive comp because the year's turning out well? Maybe if you just talk about the change there. No, it's a one-time impact, partly due to some of the investment that flowed through into the build-out of our office in Houston, and it'll be non-recurring, Andy, as we move forward. Okay, so we still like the $190 as kind of the underlying rate for the company. That is, it's fair.
Joe Brennan: Center of competency years, turning out well, maybe if you just talked about the change there.
Joe Brennan: It's a onetime impact.
Joe Brennan: Partly due to some of the investment that flowed through into the build out of our office in Houston and it'll be nonrecurring Andy as we move forward.
Andy Kaplowitz: Got it okay. So we still like the 190.
Andy: That's kind of the underlying rate for the company that has that.
Andy Kaplowitz: That's fair.
Joseph Brennan: Yep. Okay. I just wanted to talk about the change order that you got in the infrastructure on PeopleMover. During the quarter, there was an announcement publicly about some resolutions and change orders. Then there was a second announcement from LAWA on this one that was actually more substantial in the headline. But I don't know if that was Fluor's scope, so I was hoping you could clarify that. Was there any scope, or was there any relief given, in the second wave of LAWA money? Was that recognized in the second quarter, or could that be recognized in the third quarter?
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: I just wanted to talk about.
Speaker Change: The change order that you got in infrastructure people mover.
Speaker Change: During the quarter. There was there was an announcement publicly about some resolutions and change orders and then there was a second announcement from low on this one that was actually more substantial than the headlines, but I don't know if that was fluor scope. So I was hoping you could clarify that so was there any scope.
Speaker Change: Or is there any.
Andy: Relief given in the second wave of lower money and was that recognized in the quarter in the second quarter or could that be recognized in the third quarter I just thought maybe you could comment on that one too Joe that Andy Yes.
Joseph Brennan: I just thought maybe you could comment on that one too, Joe. Yeah, Andy. The settlement that we've reached is a global settlement, and the position that we've taken reflects our position to complete the project. This settlement gets us to the finish line. And we don't expect any other changes, other than if we're able to execute the job in terms of how we utilize reserves and contingencies. But this is the settlement that sets the kind of mark for handing over the facility. I got it.
Joe Brennan: Settlement that we've reached a global settlement in the position that we've taken reflects our position to complete the project.
Andy: Okay entirely internally.
Speaker Change: Turning to the second quarter outlook. This settlement gets us to the finish line.
Speaker Change: And we don't expect any other changes other than if we were able to execute the job in terms of how we utilize reserves and contingencies, but this is the settlement that sets the.
Speaker Change: Kind of the mark for handing over the facility to clients.
Speaker Change: Got it okay. Those are my only technical questions for today. Thank you very much and have a good day.
Speaker Change: Yeah.
Andrew Wittmann: Okay, those are my only technical questions for today. Thank you very much, and have a good day. Our next question comes from Brent Thielman from DA Davidson. Your line is now open. Hey, thanks. Good morning. David or Joe, actually, I was just wondering if you could clarify why the upper end of the EBITDA guidance range came down. It seems like you've got some really good momentum going into the second half. Is it just the pace that you're seeing the new mid-business deploy, or anything else? It's a good question, Brent.
Speaker Change: Our next question comes from Brent Thielman.
Davidson: Davidson Your line is now open.
Brent Thielman: Hey, Thanks, good morning.
Brent Thielman: David or Joe actually just wondering if you could clarify.
Brent Thielman: While the upper end of the EBITDA guidance range came down it seems like you'd get some really good momentum.
Speaker Change: And into the second half is it just that the pace that you are seeing the new business deploy here.
Davidson: Anything else.
Operator: It is the pace of the deployment of some of these programs, and they're coming online. It's more of where we are in the cycle, the burn cycle, and the maturity of those projects. And as we see kind of where we are in that progress, it made sense to kind of bring us off the top end of the range and hold the midpoint, but all that backlog is going to continue to burn as we move out through 24 and into 25.
Brent: Integrated question Brent It is the pace of the deployment.
Brent: Of some of these programs and they are coming online.
Speaker Change: It's more of a of.
Brent: Where we are in the cycle, the burn cycle and the maturity of those projects.
Brent: And as we see kind of where we are in that progress. It made sense to kind of bring us off the top end of the range and hold the midpoint, but all of that backlog is going to continue to burn as we move out through 'twenty four and into 25. So this is more just a function of where we are in the maturity of the cycle realm.
Operator: So this is more just a function of where we are in the maturity of the cycle relative to the work that we've onboarded, the 60-plus billion dollars of work that we've onboarded in the last, you know, three years. Okay, I appreciate that, Joe. Um, and I guess my second question, I mean, it's sort of interesting. I mean, urban solutions now account for 60% of your backlog compared to less than 40% a few years ago. I'm just curious what the bigger picture is.
Speaker Change: <unk> to the work that we've on boarded a $60 1 billion of work that we've on boarded in the last.
Brent: Three years.
Brent: Okay I appreciate that Joe.
Speaker Change: And then I guess my second question I mean, it sort of interest I mean urban solutions now 60% of your backlog compared to.
Speaker Change: With less than 40% a few years ago.
Speaker Change: Curious bigger picture is this.
David Constable: Sort of a new look for Fluor going forward. I know you've got this potential pipeline of work and Energy Solutions that can come down the line. But I guess I'm just curious whether this is the new look for Fluor going forward or just a product of where the markets are. Yeah, thanks for the question. You know, it's really encouraging to see that our strategic priority, that we said back in early 21, based on megatrends we were seeing around the world, driving growth across the portfolio outside of traditional energy outside of traditional gas, has really come to fruition and really lined up exactly as we thought it would.
Brent: Sort of a new look for floor going forward I know you've got this potential pipeline of work.
Brent: And energy solutions that can come down the line, but.
Speaker Change: I guess I'm just curious whether.
Speaker Change: Yes. So this is sort of the.
Brent: When you look for floor going forward or just a product that where the markets are right now.
David Constable: And it's, and you've seen that in Urban Solutions' backlog of almost $20 billion. But we've also, at the same time, wanted to grow traditional on gas, and we're happy that it could come along and be a strong part of the mix. And I think it will be for the future, both in energy transition but also in traditional energy solutions. And nuclear sits in energy solutions as well. Just be aware that, as we just talked about with Mike, those projects will be sitting in energy solutions going forward.
Speaker Change: Yes, thanks for the question.
Brent: It's really encouraging to see that our strategic priority.
Brent: That we said back in early 'twenty, one based on Mega trends, we were seeing around the world.
Brent: Driving growth across the portfolio outside of traditional energy outside of traditional oil and gas is really come to fruition and really lined up exactly as we thought it would and it's and you're seeing that in.
Brent: In urban solutions backlog of almost $20 billion.
Speaker Change: We've also.
Brent: At that same time, we also wanted to.
Speaker Change: <unk> traditional oil and gas and we're happy to come along and be a strong part of the mix and I think it will be for the future both in energy transition, but also in traditional.
Speaker Change: No.
Speaker Change: And you and nuclear sits in energy solutions as well just be aware that that as we just talked about with Mike will.
Brent: We will be sitting that those projects will be sitting in energy solutions going forward. So going forward, we're hoping and thinking that all boats will be raised.
David Constable: So going forward, we're hoping and thinking that all boats will be raised across the three segments, and we'll enjoy watching Energy Solutions and Urban Solutions battle it out for who's got the most backlog. But right now, ATLS based on data centers, semiconductors, life sciences, mining, and metals is very, very strong, as we've talked about. I guess, you know, I'd say it's coming across all business lines.
Speaker Change: No.
Speaker Change: Across the three segments and.
Speaker Change: We'll we'll enjoy watching energy solutions in urban solutions battle it out for <unk>.
Speaker Change: Who's got the most backlog, but right now it's definitely <unk> based on.
Speaker Change: Data centers semiconductors.
Speaker Change: Our life Sciences mining and metals is very very strong as we've talked about so.
Speaker Change: I guess I'd say, it's coming across all of all our business lines.
Speaker Change: Appreciate it best of luck.
Speaker Change: Thank you.
David Constable: I appreciate it. Best of luck! Thank you. That concludes our question and answer session for today. I'd now like to hand the call over to Mr. David Constable for final remarks. Thank you, operator. Many thanks to all of you for participating in the call today. I'm very pleased with the company's performance to date and our outlook for 2024, and our focus on bidding discipline and product performance continues to serve us well. So I appreciate your interest in Fluor. Thanks again for joining us. Thank you for joining today's conference call. Have a wonderful day. You may now disconnect.
Speaker Change: Thank you that concludes our question and answer session for today I'd now like to hand back the call over to Mr. David Constable for final remarks.
David Constable: Thank you operator, and many thanks to all of you for participating on the call today.
David Constable: I'm very pleased with the company's performance to date and our trends for 2024, and our focus on bidding discipline and project performance continues to serve us well. So I appreciate your interest in fluor. Thanks again for joining thanks.
Speaker Change: Thank you for joining today's conference call have a wonderful day you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].