Q3 2024 Fluor Corp Earnings Call

Unknown Executive: Also, accessible on Fluor's website at investor.fluor.com.

A bolt on <unk> website at Investor <unk> Com at this time for opening remarks, I would like to turn the call over to Jason Lang Kmart.

Jason Landkamer: At this time, for opening remarks, I would like to turn the call over to Jason Landkamer.

Unknown Executive: Heather and Restaurant Relations. Please go ahead, sir.

Had their Investor Relations. Please go ahead Sir.

Jason Landkamer: Thank you, Operator, and welcome to Fluor's 2024 3rd Quarter Earnings Call. David Constable, Fluor's Chairman and Chief Executive Officer, Joe Brennan, Fluor's Chief Financial Officer, and Jim Breuer, our Chief Operating Officer, are here with us today. Fluor issued its third 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 operator, and welcome to Florida, 2024 third quarter earnings call, David comfortable Fluor's, Chairman and Chief Executive Officer, Joe Brennan, <unk>, Chief Financial Officer, and Jim Brewer, Our Chief operating officer are here with us today.

Speaker Change: Floor issued its third quarter earnings release earlier this morning, and a slide presentation is posted on our website, we will reference while making prepared remarks.

Jason Landkamer: Before getting started, I'd like to refer you to our Safe Harbor note regarding forward-looking statements, which is summarized on slide 2. During today's presentation, we'll be making forward-looking statements which 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 2023 Form 10-K and our Form 10-Q, which was made available earlier today.

Speaker Change: 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, 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 you can find a discussion of our risk factors, which could potentially contribute to such differences in our 2023 Form 10-K, and our Form 10-Q, which was made available earlier today.

Jason Landkamer: During this 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.

Speaker Change: During this 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.

Jason Landkamer: I'll now turn the call over to David Constable, Fluor's Chairman and Chief Executive Officer.

Speaker Change: I'll now turn the call over to David Constable Force, Chairman and Chief Executive Officer, David.

David Constable: David. Thank you, Jason, and good morning everyone. Thank you for joining us today. Please turn to slide three.

Speaker Change: Thank you, Jason and good morning, everyone and thank you for joining us today.

Speaker Change: Please turn to slide three.

David Constable: To begin today, I would like to acknowledge the impact of the recent devastation in the southeast over the past few weeks. Hurricane Helene, shortly followed by Hurricane Milton, caused significant damage, including historic flooding. widespread power outages and multiple deaths across the southeast. Our Greenville, South Carolina office did sustain moderate damage, but thanks to our HSE and facilities management team, the office remained open and functional. However, almost all of our employees in the area were personally affected in some way. In the face of this tragedy, we are helping communities. For example, the North Carolina Department of Transportation requested assistance from the I-26 Fluor United Asheville team, and we promptly responded.

Speaker Change: To begin today I would like to acknowledge the impact of the recent devastation in the southeast over the past few weeks.

Speaker Change: Hurricane Helene shortly followed by Hurricane Milton caused significant damage, including historic flooding.

Speaker Change: Widespread power outages and multiple deaths across the south east.

Speaker Change: Our Greenville, South Carolina office didn't sustain moderate damage, but thanks to our HSE and facilities management team.

Speaker Change: The office remained open and functional.

Speaker Change: However, almost all of our employees in the area were personally affected in some way.

Speaker Change: In the face of this tragedy, we were helping communities.

Speaker Change: For example, in North Carolina Department of Transportation requested assistance from the 26, Florida, United Asheville team and we promptly responded.

David Constable: The crews worked to clear roadways and provide temporary repairs, enabling utility teams to reach impacted areas and restore access for affected residents. All states impacted by Hurricane Helene and Milton are in Fluor's FEMA public assistance contract. Mission Solutions has more than 200 people deployed in the southeast. and expect at least 300 more to be deployed in the near future.

Speaker Change: Crews worked to clear roadways, and provide temporary repairs, enabling utility teams to reach the impacted areas and restore access for affected residents.

Speaker Change: All states impacted by Hurricane Helene and Milton our in Fluor's FEMA public assistance contract.

In mission solutions has more than 200 people deployed in the South East.

And expect at least 300 more to be deployed in the near future.

David Constable: Our thoughts go out to all families and residents impacted by these hurricanes and we are honored to be supporting numerous communities in their recovery efforts.

Speaker Change: Our thoughts go out to all families in residents impacted by these hurricanes and we were honored to be supporting numerous communities and their recovery efforts.

David Constable: Now let's turn to our operating review beginning on slide four. Revenue for the third quarter was $4.1 billion. Consolidated new awards for the third quarter were $2.7 billion and included awards for a downstream project in Mexico and a mining and metals project in Australia. Based on our new awards for the quarter, our total backlog is now $31.3 billion, of which 80% is reimbursable. Margins on new awards in the quarter continue to underpin our expected segment margin range. This is driven in part by the strength in our services margin. which have been in the 20% range for our traditional EPCM businesses this year.

Speaker Change: Now, let's turn to our operating review beginning on slide four.

Speaker Change: Revenue for the third quarter was $4 $1 billion.

Speaker Change: Consolidated New awards for the third quarter were $2 7 billion and included awards for a downstream project in Mexico, and our mining and metals project in Australia.

Speaker Change: Based on our New awards for the quarter. Our total backlog is now $31 3 billion.

Speaker Change: Of which 80% is reimbursable.

Speaker Change: Margins on New awards in the quarter continued to underpin our expected segment margin range.

Speaker Change: This was driven in part by the strength in our services margins.

Speaker Change: Which have been in the 20% range for our traditional <unk> businesses. This year.

David Constable: Moving to our business segments, please turn to slide six. Urban Solutions, our most diversified group, reported segment profit of $68 million. New awards were $828 million in the third quarter, and ending backlog was $19 billion. A 72% increase in the past 12 months. Results in this segment reflect a ramp-up of execution activities on multiple advanced technology and life sciences projects.

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

Speaker Change: Urban solutions, our most diversified group reported segment profit of $68 million.

Speaker Change: New awards were $828 million in the third quarter.

Speaker Change: And ending backlog was 19 billion at.

Speaker Change: 72% increase in the past 12 months.

Speaker Change: Results in this segment reflect the ramp up of execution activities on multiple advanced technology and life Sciences projects.

David Constable: Now please turn to slide seven. During the quarter, Mining and Metals received a $289 million incremental award for a rare earth minerals refinery in Australia. Representing almost half of Urban Solutions' backlog, the Mining and Metals business line continues to be well positioned for large EPC projects in the near term, including a port debottlenecking project in Australia. and lithium work in the United States. The longer term focus for clients in this space remains positive. For example, BHP notified us last week that we were awarded the Manera Escondida Concentrator Program in Chile.

Speaker Change: Now please turn to slide seven.

Speaker Change: During the quarter mining and metals received a $289 million incremental award for a rare Earth minerals refinery in Australia.

Speaker Change: Representing almost half of urban solutions backlog, the mining and metals business line continues to be well positioned for large EPC projects in the near term.

Speaker Change: Including our Port Debottlenecking project in Australia and.

Speaker Change: And lithium work in the United States.

Speaker Change: The longer term focus for clients in this space remains positive.

Speaker Change: For example.

Speaker Change: H P notified us last week that we were awarded the Minera Escondida concentrated program in Chile.

David Constable: We will start the selection phase study for this mega project in the fourth quarter.

We will start the selection phase study for this Mega project in the fourth quarter.

David Constable: Moving to slide eight. In advanced technologies and life sciences, our focus for 2024 remains centered on talent allocation. and development to support unprecedented market demand. New awards for the quarter included an incremental award for the current phase of our existing Eli Lilly project in Indiana. and the Design Award for the next phase of this mega project. Backlog for ATLS has increased nearly 90% over the past year. In the data center market, we continue to engage with large tech companies and expect growth in the first half of 2025 to reflect their expanding CapEx plan. We also believe that the size and supply chain requirements for these mega facilities represent a sweet spot for Fluor.

Speaker Change: Moving to slide eight.

In advanced technologies and life Sciences, our focus for 2024 remains centered on talent allocation.

Speaker Change: And development to support unprecedented market demand.

New awards for the quarter included an incremental award for the current phase of our existing Eli Lily project in Indiana.

And the design award for the next phase of this Mega project.

Speaker Change: Backlog for <unk> has increased nearly 19% over the past year.

Speaker Change: In the data center market, we continue to engage with large tech companies and expect growth in the first half of 2025 to reflect their expanding capex plans.

Speaker Change: We also believe that the size and supply chain requirements for these mega facilities represent a sweet spot for fluor.

David Constable: In preparation for this work, we are not standing still. The company is working on several competitive advantages for data center execution. Currently, we are developing innovative cooling process concepts, and we've completed work with a client to develop off-site modularization design and production processes that will expedite the build-out of data centers. in the semiconductor space. We continue to be engaged with Intel on select projects.

Speaker Change: In preparation for this work we are not standing still.

Speaker Change: The company is working on several competitive advantages for datacenter execution.

Speaker Change: Currently we are developing innovative cooling process concepts and we've completed work with the client to develop Offsite modernisation design and production processes that will exit the.

Speaker Change: The build out of data centers.

Speaker Change: In the semiconductor space, we continue to be engaged with Intel on select projects. However, a large manufacturing facility, where we were providing early work support has been cancelled.

David Constable: However, a large manufacturing facility where we were providing early work support has been cancelled. Despite the cancellation, the market remains robust and we are redeploying that team to other ATLS projects. Our relationship with Intel continues to be strong. Over in Life Sciences, work continued to progress on the Eli Lilly facility in Indiana. Recent activities include the installation of siding and glazing on the Pharmaceutical Facilities Central Utilities Building.

Speaker Change: Despite the cancellation the market remains robust and we are redeploying that team to other HOS projects.

Speaker Change: Our relationship with Intel continues to be strong.

Speaker Change: Over in life Sciences work continued to progress on the Eli Lilly facility in Indiana.

Speaker Change: Recent activities include the installation of siding and glazing on the pharmaceutical facilities Central utilities building.

David Constable: Looking ahead, we see the opportunity for significant additional work for this client, as well as other life sciences projects in Europe and in the U.S.

Speaker Change: Looking ahead, we see the opportunity for significant additional work for this client.

Speaker Change: As well as other life sciences projects in Europe and in the U S.

David Constable: Please turn to slide nine. In infrastructure, we made considerable progress on both legacy and non-legacy projects in the quarter. On the Gordie Howe International Bridge Project, the team is headed towards its next major milestone, which is completion of the bridge overlay. At the LAX Automated People Mover Project in Los Angeles, our joint venture has obtained final approval for the settlement we recognized last quarter. And in October, our JV Consortium that built the Mario M. Como Bridge filed a $1 billion breach of contract lawsuit against the New York State Thruway Authority for costs incurred before the bridge was successfully completed six years ago.

Speaker Change: Please turn to slide nine.

Speaker Change: In infrastructure, we made considerable progress on both legacy and non legacy projects in the quarter.

Speaker Change: On the Gordie Howe International Bridge project. The team is headed towards its next major milestone, which is completion of the bridge overlay.

Speaker Change: At the L. A X automated people mover project in Los Angeles, Our joint venture has obtained final approval for the settlement we recognized last quarter.

Speaker Change: And in October our JV consortium that build the Mario M. Cuomo Bridge filed a $1 billion breach of contract lawsuit against the New York State Thruway authority for cost incurred before the bridge was successfully completed six years ago.

David Constable: Despite there being a clearly outlined dispute resolution process in our contract, it is disappointing that the New York State Thruway Authority has chosen to delay its liability for this bridge.

Speaker Change: Yeah.

Speaker Change: Despite there being a clearly outlined dispute resolution process and our contract. It is disappointing that the New York State through we authority has chosen to delay its liability for this bridge.

David Constable: Moving on to slide 10. Mission Solutions reported a segment profit of $45 million for the third quarter, driven in part by increased execution activities on two DOE contracts. New awards for the quarter were $274 million, and ending backlog for the quarter was $3.1 billion. Last quarter, we received notices to proceed on two projects, the Pantex Management and Operations Contract and the Air Force Test Operations and Sustainment Contract. I'm pleased to report that we've had seamless handovers and are now fully executing both mega programs. As we announced last month, the Fluor Joint Venture received a notice to proceed on the Hanford Integrated Tank Disposition Contract.

Speaker Change: Moving on to slide 10.

Speaker Change: Mission solutions reported segment profit of $45 million for the third quarter drill.

Speaker Change: Driven in part by increased execution activities on two D OE contracts.

Speaker Change: New awards for the quarter were $274 million and ending backlog for the quarter was $3 1 billion.

Speaker Change: Last quarter, we received notices to proceed on two projects, the Pantex management and operations contract and the Air Force test operations and Sustainment contract.

Speaker Change: I am pleased to report that we have had seamless handovers and are now fully executing.

Speaker Change: <unk> Mega programs.

Speaker Change: As we announced last month.

Speaker Change: <unk> joint venture received a notice to proceed on the Hanford integrated tag disposition contract.

David Constable: The contract has an estimated ceiling of $45 billion over a 10-year period for environmental management operations in Washington State. As a minority partner, Fluor will recognize its share of earnings from this new program using the equity method of accounting starting in the fourth quarter of 2024. We're also pleased to announce that the National Nuclear Security Administration has selected a team that includes Fluor to conduct a year-long engineering study for a centrifuge pilot plant. Fluor will be the EPC service provider for the activity. This initiative, part of NNSA's Domestic Uranium Enrichment Centrifuge Experiment Program, seeks to maintain and advance uranium enrichment technology for U.S.

Speaker Change: The contract has an estimated ceiling of $45 billion over a 10 year period for environmental management operations in Washington State.

Speaker Change: As a minority partner Fluor will recognize its share of earnings from this new program using the equity method of accounting.

Starting in the fourth quarter of 2024.

Speaker Change: We're also pleased to announce that the national nuclear Security administration has selected a team that includes fluor to conduct a year long engineering study for our centrifuge pilot plan.

Speaker Change: So it will be the EPC service provider for the activity.

Speaker Change: This initiative part of NSA domestic uranium enrichment centrifuges experiment program seeks to maintain an advanced uranium enrichment technology for U S National security needs.

David Constable: national security needs. Continuing on this nuclear theme. The Department of Energy is rolling out plans for the domestic supply of high-assay, low-enriched uranium enrichment and deconversion facilities. Fluor has been selected as one of a few partners for both of these activities to help with developing a path forward.

Speaker Change: Continuing on this nuclear same.

Speaker Change: The department of energy is rolling out plans for the domestic supply of high assay low enriched uranium enrichment and deconversion facilities.

Speaker Change: Floor has been selected as one of a few partners for both of these activities to help with developing a path forward.

David Constable: Near-term prospects for mission solutions include an extension with the DOE for Portsmouth and Pikes and Ohio, and additional work in the intelligence services space.

Speaker Change: Near term prospects for mission solutions include an extension with the Doe for Portsmouth and Pikes in Ohio and.

Speaker Change: And additional work in the intelligence services space.

David Constable: Now please turn to slide 11. In Energy Solutions, segment profit was $50 million for the third quarter. Results reflected lower-than-expected contributions from a large project in the late stages of completion, and $18 million in cost growth on a construction-only subcontract executed by our joint venture partner in Mexico. More specifically on this project, the joint venture is close to an agreement that will address costs from now until project completion in 2025. New awards for the quarter totaled $1.5 billion and included a full notice to proceed on a downstream project in Mexico, as well as an award for a large refinery unit in Texas.

Speaker Change: Now please turn to slide 11.

Speaker Change: In energy solutions segment profit was $50 million for the third quarter.

Speaker Change: Results reflected lower than expected contributions from a large project in the late stages of completion.

Speaker Change: And 18 million in cost drills on our construction only subcontract executed by our joint venture partner in Mexico.

Speaker Change: More specifically on this project the joint venture is close to an agreement that will address costs from now until project completion in 2025.

Speaker Change: New awards for the quarter totaled $1 5 billion and included a full notice to proceed on a downstream project in Mexico as well as an award for a large refinery unit in Texas.

David Constable: In Q3, we started the next phase of engineering and design work for Ropower's small modular nuclear reactor project in Romania. Utilizing new scales, industry-leading technology. We continue to see strong interest in SMRs and traditional nuclear, both of which are viable carbon-free solutions for power generation. In addition to the SMR engineering work for Ropower, we are making great progress on securing a reimbursable front-end award for two conventional nuclear reactors in Romania.

Speaker Change: In Q3, we started the next phase of engineering and design work for ROE powers small modular nuclear reactor project in Romania.

Speaker Change: Utilizing new scale industry, leading technology.

Speaker Change: We continue to see strong interest in <unk> and traditional nuclear both of which are viable carbon free solutions for power generation.

Speaker Change: In addition to the <unk> engineering work for ROE power, we are making great progress on securing a reimbursable front end award for two conventional nuclear reactors in Romania, so more to come on that front.

David Constable: So more to come on that front. With regard to LNG Canada, this project is now over 95% complete and systems handover to the client is progressing. During the quarter, the team achieved the fuel gas in milestone, and in October we started offloading refrigerants at the port and executed start-up operations for the refrigerant compressors. This project is on track to support LNG Canada's plan to ship first cargoes in 2025. The project continues to meet management expectations.

Speaker Change: With regard to LNG, Canada. This project is now over 95% complete and systems handover to the client is progressing.

Speaker Change: During the quarter the team achieved a field gas in milestone and in October we started offloading refrigerants at the port and execute a startup operations for the refrigerant compressors.

Speaker Change: This project is on track to support LNG Canada's plan to ship first cargos in 2025.

Speaker Change: The project continues to meet management expectations.

Speaker Change: Okay.

David Constable: Over the next few quarters, energy solutions prospects include support for battery chemicals and the chemical recycling industries, with traditional upstream petrochemicals and LNG power projects following thereafter.

Speaker Change: Over the next few quarters energy solutions prospects include support for battery chemicals, and the chemical recycling industries with traditional upstream petrochemicals and LNG power projects. Following thereafter.

David Constable: Please turn to slide 12.

Please turn to slide 12.

David Constable: Before I turn the call over to Jim, I wanted to share some of my observations as we close out 2024 and head into 2025 and beyond. Last quarter we discussed the tremendous progress we made under building a better future strategy and it was time to develop plans for our next chapter. I see a few themes that will be underpinning our next strategic planning cycle. First, as several EPC projects wind down in Energy Solutions, the expected conversion of feed packages to EPC awards has not yet come to fruition. This is due in part to delays in energy transition and to our risk management discipline that has served us well.

Speaker Change: Before I turn the call over to Jim I wanted to share some of my observations as we close out 2024 and head into 2025 and beyond.

Speaker Change: Last quarter, we discussed the tremendous progress we made under our building a better future strategy and it was time to develop plans for our next chapter.

Speaker Change: I see a few themes that will be underpinning our next strategic planning cycle.

Speaker Change: First as several EPC projects wind down and energy solutions. The expected conversion of feed packages to EPC awards has not yet come to fruition.

Speaker Change: This is due in part to delays in energy transition and to our risk management discipline that has served us well.

David Constable: For perspective, over the past three years, we have noted over $20 billion of projects in energy solutions due to unfavorable risk or contractual conditions. In the near term, the combination of traditional energy, energy transition, and low-carbon power projects will drive feed packages. Fluor continues to play a significant role in the chemical space, including large liquids to chemical programs in the Middle East. In urban solutions, we have an even greater potential than originally envisioned. While we have mobilized significant resources into this space, opportunity demands that we deploy additional capacity to capitalize on these time-to-market focused projects.

Speaker Change: In the near term, the combination of traditional energy, energy transition, and low-carbon power projects will drive feed packages. FLIR continues to play a significant role in the chemical space, including large liquids-to-chemical programs in the Middle East.

Speaker Change: In urban solutions, we have an even greater potential than originally envisioned.

Well, we have mobilized significant resources into this space.

Speaker Change: Opportunity demands that we deploy additional capacity to capitalize on these time-to-market focused projects.

David Constable: And lastly, in Mission Solutions, we continue to have great success in the environmental remediation market. The next phase of growth will be driven by work in the national security market and nuclear fuel arenas. Our ability to be a trusted partner will also be predicated on having high quality technical experts ready to support the U.S. government.

Speaker Change: And lastly, in Mission Solutions, we continue to have great success in the environmental remediation market. The next phase of growth will be driven by work in the national security market and nuclear fuel arenas.

Speaker Change: Our ability to be a trusted partner will also be predicated on having high quality technical experts ready to support the U.S. government.

David Constable: And just a note. here this week. We are pleased the election process delivered a clear winner. This creates an environment of certainty that our clients need in order to make major capital investment decisions. a key part of our strategic priorities. was to drive growth across the portfolio. Our revenues from non-traditional oil and gas projects stand at 75% at the end of Q3 2024, surpassing our strategic target of 70%. We see strong, staggered growth for revenue and EBITDA in the next strategic planning period through 2028. This growth will be supported by robust cast generation and improved long-term TSR delivery.

Speaker Change: And just a note here this week, we are pleased the election process delivered a clear winner. This creates an environment of certainty that our clients need in order to make major capital investment decisions.

Thank you very much.

A key part of our strategic priorities.

was to drive growth across the portfolio.

Speaker Change: Our revenues from non-traditional oil and gas projects stand at 75% at the end of Q3 2024, surpassing our strategic target of 70%.

Speaker Change: We see strong CAGR growth for Revenue and EBITDA in the next strategic planning period through 2028. This growth will be supported by robust cash generation and improved long-term TSR delivery.

David Constable: As a reminder, TSR performance under the current planning period.

Speaker Change: As a reminder, TSR performance under the current planning period is 191%.

David Constable: is 191 percent.

David Constable: With that, let me turn the call over to Jim Breuer to provide some details on how we are already positioning for the next chapter in FLIR's strategy.

Speaker Change: With that, let me turn the call over to Jim Brewer to provide some details on how we are already positioning for the next chapter in FLIR's strategy.

Jim Breuer: Jim? Thank you, David, and good morning, everyone. Please turn to slide 13. As David indicated, our portfolio of businesses is diversified, and these markets fluctuate in their own business cycles. at Fluor. We want to maintain our position in key markets while we take maximum advantage of our current growth opportunities. To support these projects, we're taking a more holistic view of our markets to align our resources and project delivery model, resulting in a workforce and an execution platform that are flexible and that can shift from one business to another to fully leverage our global capacity. As a first step in this direction, we recently launched a new model to manage our distributed execution centers in the Philippines, Poland, and India.

Jim?

Jim Brewer: Thank you, David, and good morning, everyone. Please turn to slide 13.

Speaker Change: As David indicated, our portfolio of businesses is diversified, and these markets fluctuate in their own business cycles. At Fluor, we want to maintain our position in key markets while we take maximum advantage of our current growth opportunities.

Speaker Change: To support these projects, we're taking a more holistic view of our markets to align our resources and project delivery model, resulting in a workforce and an execution platform that are flexible and that can shift from one business to another to fully leverage our global capacity.

Speaker Change: As a first step in this direction, we recently launched a new model to manage our distributed execution centers in the Philippines, Poland, and India.

Jim Breuer: These are highly competent execution centers that perform project work globally, but historically have specialized in only a few industries.

Speaker Change: These are highly competent execution centers that perform project work globally, but historically have specialized in only a few industries.

Jim Breuer: Going forward, these offices will no longer report to a single business segment, but instead will be fully leveraged by all of so that their excellent resource pool and experience can be accessed by all of our projects. This new model, which encompasses approximately 35% of our home office execution capability. was better matched to demand for trained resources with the supply in these operation centers. With foster diversity in employee skills across industries. and support increased stability and growth for our backlog. Our new execution model directly supports David's observations of industry trends and increases the flexibility and speed needed by our clients in today's market.

Speaker Change: Going forward, these offices will no longer report to a single business segment, but instead will be fully leveraged by all the floor, so that their excellent resource pool and experience can be accessed by all of our projects.

Speaker Change: This new model, which encompasses approximately 35% of our home office execution capabilities.

Speaker Change: will better match the demand for trained resources with the supply in these operation centers, with foster diversity in employee skills across industries, and support increased stability and growth for our backlog.

Speaker Change: Our new execution model directly supports David's observations of industry trends and increases the flexibility and speed needed by our clients in today's market.

Jim Breuer: Many of our current projects and pursuits demand a time-to-market response. is activating our full set of execution capabilities to address...

Speaker Change: Many of our current projects and pursuits demand a time-to-market response, and FLUOR is activating our full set of execution capabilities to address this need.

Jim Breuer: I look forward to sharing additional information about our evolving execution platform in the new year and getting better acquainted with the investment.

Speaker Change: I look forward to sharing additional information about our evolving execution platform in the new year and getting better acquainted with the investment community.

Joseph Brennan: With that, let me turn the call over to Joe for the financial update.

Joe Brennan: With that, let me turn the call over to Joe for the financial update.

Joseph Brennan: Yeah, thanks, Jim, and good morning, everyone. Today I will review our results for the third quarter and go over financial outlook assumptions that support our guidance. Please turn to slide 15. Consolidated segment profit for the quarter was $117 million. This was impacted by lower-than-planned results in energy solutions and the timing of settlements in infrastructure. Adjusted EBIT off for the third quarter was $124 million, compared to $216 million a year ago. Our adjusted EPS was $0.51 compared to $1.02 in Q3 of 2023. The EPS result was encumbered by a higher effective tax rate as revenue in Mexico and Canada increased which could not be offset in locations with operating losses.

Joe Brennan: Yeah, thanks Jim and good morning everyone. Today I will review our results for the third quarter and go over financial outlook assumptions that support our guidance.

Joe Brennan: Please turn to slide 15. Our consolidated segment profit for the quarter was 117 million dollars. This was impacted by lower-than-planned results in energy solutions and the timing of settlements and infrastructure.

Joe Brennan: Adjusted EBITDA for the third quarter was $124 million compared to $216 million a year ago. Our adjusted EPS was $0.51 compared to $1.02 in Q3 of 2023.

Joe Brennan: The EPS result was encumbered by a higher effective tax rate as revenue in Mexico and Canada increased, which could not be offset in locations with operating losses.

Joseph Brennan: Our adjusted results for the quarter exclude $20 million for the positive effects of FX on the embedded derivative. G&A expenses for the quarter were $37 million, down from $56 million a year ago, as the quarter reflects a reduction in anticipated incentive compensation. Net interest income from the quarter was $37 million compared to $42 million a year ago. Net interest contributions continue to benefit from an elevated interest rate environment combined with our low-cost fixed rate debt. Based on our prospect pipeline, we anticipate a book-to-burn ratio approaching one for the third straight year. We currently stand at a book-to-burn ratio of 1.1 for the first three quarters of 2024.

Joe Brennan: G&A expenses for the quarter were $37 million, down from $56 million a year ago, as the quarter reflects a reduction in anticipated incentive compensation.

Joe Brennan: Net interest income from the quarter was $37 million compared to $42 million a year ago. Net interest contributions continue to benefit from an elevated interest rate environment combined with our low-cost fixed-rate debt.

Joe Brennan: Based on our prospect pipeline, we anticipate a book-to-burn ratio approaching one for the third straight year.

Joe Brennan: We currently stand at a book-to-burn ratio of 1.1 for the first three quarters of 2024. As a reminder, the book-to-burn would be much higher if you include the unconsolidated revenue that Mission Solutions manages.

Joseph Brennan: As a reminder, the book-to-burn would be much higher if you include the unconsolidated revenue that Mission Solutions manages.

Joseph Brennan: Moving on to slide 16. Our cash and marketable security balances for the quarter was $2.9 billion. This excludes amounts held by NuScale. Operating cash inflows for the third quarter was $330 million compared to $3 million a year ago. This reflects distributions from our joint ventures, customer payments on several large projects, and a refund from the IRS amounting to $92 million. During the quarter, our legacy projects continued to operate in a cash-efficient manner with only $2 million of required funding. This compares favorably to the $45 million in funding a year ago. We currently estimate that our funding requirements for the remaining legacy projects in the fourth quarter will be approximately $30 million.

Moving on to slide 16.

Joe Brennan: Our cash and marketable security balances for the quarter was 2.9 billion dollars.

Joe Brennan: This excludes amounts held by NuScale. Operating cash inflows for the third quarter was $330 million compared to $3 million a year ago.

Joe Brennan: This reflects distributions from our joint ventures, customer payments on several large projects, and a refund from the IRS amounting to $92 million.

Joe Brennan: During the quarter, our legacy projects continued to operate in a cash-efficient manner with only $2 million of required funding. This compares favorably to the $45 million in funding a year ago.

Joe Brennan: We currently estimate that our funding requirements for the remaining legacy projects in the fourth quarter will be approximately thirty million dollars. Our backlog of legacy work has declined to eight hundred and fifty nine million dollars across the five projects.

Joseph Brennan: Our backlog of legacy work has declined to $859 million across the five projects. We expect to complete the sale of Storch UK operations as early as the first quarter of 2025, pending regulatory approval for the proposed transaction. Upon conclusion of this transaction, we will have divested all legacy portions of the business, with the exception of our overseas Fabyard. Regarding NuScale, and its ongoing capital efforts resulted in Fluor's ownership being deconsolidated early in October of 2024. As a result, we anticipate recognizing a gain of $1.6 billion in the fourth quarter of 2024, based on a stock price of $13.15 for our 126 million shares.

Joe Brennan: We expect to complete the sale of Stork's UK operations as early as the first quarter of 2025, pending regulatory approval for the proposed transaction. Upon conclusion of this transaction, we will have divested all legacy portions of the business, with the exception of our overseas fab yard.

Joe Brennan: Regarding NuScale and its ongoing capital efforts resulted in floors ownership being deconsolidated early in October of 2024.

Joe Brennan: As a result, we anticipate recognizing a gain of $1.6 billion in the fourth quarter of 2024 based on a stock price of $13.15 for our 126 million shares.

Joseph Brennan: We will recognize the fair value of our investment in NuScale prospectively on a mark-to-mark basis based upon the prevailing price of their stock on our balance sheet dates, so you can easily determine how NuScale will impact our financial results. The incredible excitement surrounding the use of SMRs as a carbon-free solution for data centers is turbocharging Newscale's commercial model. The timing could not be better for our investment. We are pleased with the progress made to date with this strategic investor and will be taking actions in the first half of 2025 to capture a portion of this value for Fluor.

Joe Brennan: We will recognize the fair value of our investment in NuScale prospectively on a mark-to-mark basis based upon the prevailing price of their stock on our balance sheet dates, so you can easily determine how NuScale will impact our financial results.

Joe Brennan: The incredible excitement surrounding the use of SMRs as a carbon-free solution for data centers is turbocharging Newscale's commercial model. The timing could not be better for our investment.

Joe Brennan: We are pleased with the progress made to date with the Strategic Investor and will be taking actions in the first half of 2025 to capture a portion of this value for FLOR. Any actions undertaken will be done with the intent to support both FLOR and SMR shareholders.

Joseph Brennan: Any actions undertaken will be done with the intent to support both Fluor and SMR shareholders.

Joseph Brennan: Before I close with the details on our outlook, I want to provide an update on our view of the capital structure. Based on our improved capital position and liquidity, we will soon be initiating a plan to return capital to our shareholders. To support this effort, Floor Board of Directors has increased our existing share repurchase program to 30.5 million shares authorized for repurchase.

Joe Brennan: Before I close with the details on our outlook, I want to provide an update on our view of the capital structure, based on our improved capital position and liquidity.

Joe Brennan: We will soon be initiating a plan to return capital to our shareholders. To support this effort, Floor Board of Directors has increased our existing share repurchase program to 30.5 million shares authorized for repurchase.

Joseph Brennan: Please turn to slide 17. We are tightening our previous 2024 adjusted earnings per share guidance of $2.50 to $3.00 to a range of $2.55 to $2.75. and lowering our adjusted EBITDA guidance from $625 to $675 million dollars to a range of $525 to $575 million. Our guidance for adjusted EPS excludes the benefit of any potential share repercussions. We intend to provide guidance for 2025 on our views on longer term value creation during our year-end call in February. Supported by a strong Q3 operating cash flow, we are increasing our cash flow guidance for the full year to approximately $700 million.

Please turn to slide 17.

Joe Brennan: We are tightening our previous 2024 adjusted earnings per share guidance of $2.50 to $3.00 to a range of $2.55 to $2.75.

Joe Brennan: and lowering our adjusted EBITDA guidance from $625 to $675 million dollars to a range of $525 to $575 million. Our guidance for adjusted EPS excludes the benefit of any potential share repurchases.

Joe Brennan: We intend to provide guidance for 2025 on our views on longer-term value creation during our year-end call in February.

Joe Brennan: Supported by a strong Q3 operating cash flow, we are increasing our cash flow guidance for the full year to approximately $700 million. This full year outlook compares to operating cash flows of $212 million in 2023.

Joseph Brennan: This full year outlook compares to operating cash flows of $212 million in 2023. Our assumptions for 2024 include revenue growth of approximately 10%, G&A expenses of $200 million, and an effective tax rate between 35% and 40%. Our expectations for 2024 full-year segment margins are approximately 4% in energy solutions, 4% in urban solutions, and 6% in mission solutions.

Our assumptions for 2024 include revenue growth of approximately 10%.

Joe Brennan: G&A expenses of $200 million and an effective tax rate between 35% and 40%. Our expectations for 2024 full-year segment margins are approximately 4% in energy solutions, 4% in urban solutions, and 6% in mission solutions.

Unknown Executive: With that, I will turn it over to the operator for our first question. We are now opening the floor for question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. Kindly limit your questions to one question and one follow-up.

Speaker Change: With that, I will turn it over to the operator for our first question.

Speaker Change: We are now opening the floor for question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad.

Speaker Change: kindly limit your questions to one question and one follow-up. Your first question comes from Jamie Cook from Truist Securities. Your line is now open.

Jamie Cook: Your first question comes from Jamie Cook from Truist Securities. Your line is now open.

Jamie Cook: Hi, good morning. Two questions. One, Joe, just on the guide, the fourth quarter guide still implies a pretty significant ramp in revenues, I think like up 30%, you know, so just trying to understand your comfort level there and what would be driving the acceleration in revenues, and then your implied margins in energy solutions, given your lower margin guide implies sort of like a 3% margin in energy solutions. So just trying to understand what's happening there.

Jamie Cook: Hi, good morning. Two questions. One, Joe, just on the guide, the fourth quarter guide still implies a pretty significant ramp in revenues. I think like up 30%.

Jamie Cook: you know, so just trying to understand your comfort level there and what would be driving the acceleration in revenues and then you're implied.

Jamie Cook: Margins in energy solutions given your lower margin guide implies sort of like a 3% margin in energy solutions

Jamie Cook: So just trying to understand what's happening there. And then on the positive, obviously, the free cash flow guide was better. Is that just less funding of problem projects or is there something structural?

Jamie Cook: And then on the positive, obviously, the free cash flow guide was better. Is that just less funding a problem projects or something structural? And, you know, handicap the opportunity for you guys to start buying back the stock given the increased authorization?

Speaker Change: and, you know, handicap the opportunity for you guys to start buying back the stock given the increased authorization. Thank you.

Jamie Cook: Thank you.

Joseph Brennan: Yeah, I'll start with the challenge projects and what we've been able to do in 2024. Jamie, we had started the year with an outlook of about $260 million worth of funding requirements for our legacy challenge projects. We've been able to manage that through a lot of financial discipline, clawing back entitlements to a number of $80 million for the full year. So we've shown a lot of progress in that regard. And the way I would break it up is what we look at in 2024 in the Q3, Q4 quarter, we got about a two-thirds impact from cancellations and about a one-third impact from the delays that are impacting our overall guide for 2024.

Speaker Change: Yeah, I'll start with the challenge projects and what we've been able to do in 2024, Jamie. We had started the year with an outlook of about $260 million worth of funding requirements for our legacy challenge projects. We've been able to manage that through a lot of financial discipline, clawing back entitlements to a number of $80 million for the full year.

Speaker Change: So we've shown a lot of progress in that regard. On the margin reduction for Q3 and Q4 and N24, it's really a reflection of the delay in the revenue recognition.

Speaker Change: on a large project that is slipping really into a portion of it in Q4, and it'll move out into Q25. And it's really based in kind of that POC calc, which is driving that larger project.

Speaker Change: But you factor in the cancellations and the delays on three other programs, and it's created a pocket here in the year. Those resources have been shifted over to other projects that are in differing stages of execution.

Speaker Change: So the contributions from that will be generated, but it's been pushed to the right. So we've been able to reallocate those resources, so we feel comfortable about where they're headed.

Speaker Change: And the way I would break it up is what we look at in 2024 in the Q3-Q4 quarter, we got about a two-thirds impact from cancellations.

Speaker Change: and about a one-third impact from the delays that are impacting our overall guide for 2024. But I do want to reiterate that we do not have a change or an expectation for our long-term segment margins of between 4 to 6 percent.

Joseph Brennan: But I do want to reiterate that we do not have a change or an expectation for our long-term segment margins of between four to six percent.

Speaker Change: and I'm going to be talking about the new new new new new new new new new new new new new

Jamie Cook: Great, and I'm sorry. Sorry, go ahead, Jamie. Oh, sorry, I thought I was getting cut off. Just just, you know, obviously, the the share, the increase your authorization is a positive there.

Great, and then, sorry.

Sorry, go ahead, Jamie.

Speaker Change: Oh, sorry, I thought I was getting cut off. Just, you know, obviously the share, the increased share authorization is a positive there, but how would you handicap you guys actually doing something and also an opportunity for reinstating the dividend? Thank you.

Joseph Brennan: But how would you handicap you guys actually doing something and also an opportunity for reinstating the dividend? Thank you. Yeah, listen, we're going to come out in the fourth quarter and talk about holistically what the shareholder return plan looks like, Jamie. This is one piece of it. And it's an element of it. And we have cleared all the hurdles internally. And we have generated that free operating cash flow. And we've got a very good view into how cash will be generated moving forward in a business model that's 80% reimbursable and 20% kind of risk base.

Speaker Change: Yeah, listen, we're going to come out in the fourth quarter and talk about holistically what the shareholder return plan looks like, Jamie.

Speaker Change: This is one piece of it, and it's an element of it, and we have cleared all the hurdles internally and we have generated that free operating cash flow, and we've got a very good view into how cash will be generated moving forward in a business model that's 80% reimbursable and 20%.

Joseph Brennan: And then you see what we've been able to do with the legacy projects. And I think we'll be able to clear up, you know, a position in a discussion with the board that we all had a significant amount of confidence relative to being able to to open the aperture on the return of that capital to our shareholders. And I would suggest to you, we're going to describe what that holistic plan looks like as we move into Q4. But we will begin to to start that as soon as practical. And I just want to clarify this, you know, anything that we're doing on the New Scale side, this is coming from really the last four years of recovering the business, rebuilding, it's separating the financial and the execution risk.

Speaker Change: kind of risk base, and then you see what we've been able to do with the legacy projects, and I think we'll be able to clear up.

Speaker Change: But we will begin to start that as soon as practical.

Speaker Change: And I just want to clarify this, you know, anything that we're doing on the New Scale side, this is coming from really the last four years.

Speaker Change: of recovering the business, rebuilding it, separating the financial and the execution risk. And we're in a position where we do have excess funds and it is time to open that tap and return it back to shareholders.

Joseph Brennan: And we're in a position where we do have excess funds, and it is time to open that tap and return it back to shareholders. And if you look at it, there is some symmetry to the 30 million shares, relative to what we had to do three or four years ago to dilute, in order to get the company back to where we are today.

Speaker Change: And if you look at it, there is some symmetry to the 30 million shares relative to what we had to do three or four years ago to dilute in order to get the company back to where we are today.

Jamie Cook: Thank you so much.

Thank you so much.

Andrew Kaplowitz: Your next question comes from Andy Kaplowitz from Citigroup. Your line is now open.

Speaker Change: Your next question comes from Andy Kapowitz from Citigroup. Your line is now open.

Andrew Kaplowitz: Good morning, everyone. Morning, Andy. David and Joe, I think you still have the 26 suggested you with that target out there of 800 to 950. Can you get there in the current environment?

Hey, good morning everyone.

Morning Andy

Speaker Change: David and Joe, I think you still have the 26 suggested you with that target out there of 800 to 950. Can you get there in the current environment? And then as we think about 25, I know you said you'll update us in February, but can you give us any initial thoughts? Do you still see an environment that supports backlog and revenue growth in 25? And then are there any puts and takes to think about in delivering margin versus what you're doing in 24?

Andrew Kaplowitz: And then as we think about 25, I know you said you'll update us in February, but can you give us any initial thoughts? Do you still see an environment that supports backlog and revenue growth in 25? And then there are there any puts and takes to think about in delivering margin versus what you did, what you're doing in 24?

David Constable: Yeah, good morning, Andy, I'll take that first one on 2026. And we're just going through our strategic planning, our next chapter of our strategic plan, as we speak, really present that to the board and, you know, finalizing it now for for discussions in in February with you all. So what I can see right now is to your question on, you remember, we set that EBITDA target, I guess it was late 2022, when we updated our, our original strategic plan of 2021. And that had had that 800 to 950 out there in EBITDA. To me, it looks like, you know, we're, we're probably four quarters behind that, that range right now.

Speaker Change: Yeah, good morning Andy. I'll take that first one on 2026.

Speaker Change: And we're just going through our strategic planning, our next chapter of our strategic plan as we speak, really, present that to the board.

you know finalizing it now for for discussions.

in February with you all.

Speaker Change: So what I can see right now is to your question on you remember we set that EBITDA target I guess it was late 2022 when we updated our

Our original strategic plan of 2021.

And that had that 800-950 out there.

To me, it looks like...

Speaker Change: You know, we're probably four quarters behind that range right now, so that's how we see it in the numbers. Again, we're just still finalizing them. That's what it looks like. I will say that the original plan, the 2021 Strategic Plan,

David Constable: So that's how we see it in our in the numbers. Again, we're just still finalizing them. That's, that's what it looks like. I will say that the the original plan, the 2021 strategic plan, the EPS that we're guiding right now, is tracking to that 2021 strategic plan target on a on a comparable basis. So definitely hitting that, that target. And, you know, over the planning period for that, that chapter one, if you will, of fixing and building the company, you know, floors market cap has increased what 720% and share prices up 675%. So and now the cash is starting to be generated.

Speaker Change: The EPS that we're guiding right now is tracking to that 2021 strategic plan target on a on a comparable basis, so definitely hitting that that target and

You know, over the planning period for that.

Speaker Change: That chapter one if you will of fixing and building the company, you know floors market cap has increased what 720 percent and share prices up

Speaker Change: So, now the cash is starting to be generated. Joe's talked about the shared buybacks, which the board fully supports. So that's where we're at right now, but again we'll get into...

David Constable: And Joe's talked about the share buybacks, which the board fully supports. So that's where we're at right now.

David Constable: But again, we'll get into In the prepared remarks, I really want to highlight that the CAGR growth that we're seeing for revenue need but over the planning period is very strong. And so we'll, again, we'll get back to that in February.

Speaker Change: In the prepared remarks, I really want to highlight that the CAGR growth that we're seeing for revenue need but over the planning period is very strong. And so, again, we'll get back to that in February.

David Constable: 2025. Let me add a few words there, Andy, it's a good question. As David said, we're going through our strategic plan and our operating plan for next year, and there are some highlights. A lot of excitement around the opportunities in our various segments, if you look at urban to be our primary engine of growth in the short term with a lot of EPCM work in data centers. Pharma, in mining, energy is reloading, a new wave of front-end work that should convert in the later years in the planning cycle. And, of course, Mission, looking at maintaining its leadership position in nuclear and environmental, but with geopolitical developments, the election.

2025

Let me add a few words there, Andy. Good question.

David Constable: and some other factors. National security becoming an increasing area of attention for us also provides significant growth. So we feel good about the future, and we're going to target these markets in a very deliberate way, focusing on our ongoing selectivity and our focus on project delivery. But we do see the next four years to provide opportunity for some significant growth.

Speaker Change: And we're going to we're going to target these markets in a very deliberate way and focus on our ongoing productivity and our focus on project delivery.

Speaker Change: But we do see the next four years.

Speaker Change: We provide opportunity for some significant growth.

Andrew Kaplowitz: Okay, and maybe just on new scale, obviously, you know, it's tough to pin down timing, but you push it out a little bit to the first half of 25, despite the nuclear market obviously looking better.

Speaker Change: Okay, and maybe just on new scale, obviously, it's tough to pin down timing, but you pushed it out a little bit to the first half of 'twenty five despite the nuclear market, obviously looking better so why.

Andrew Kaplowitz: So, you know, why at this point does the potential agreement continue to get delayed? And is there anything you can do to lock in more value for Fluor? So, Andy, on a new scale, right, I mean, I think we all know there's a strong appetite for nuclear energy to meet. meet incredible demand for power globally, right? Interest has never been greater. The market potential for new scale SMRs to deliver carbon-free power, you know, just to industry and to utilities. is massive. So, you know, we continue to engage positively with our strategic investor. on the best commercialization model to capture Fluor and SMR shareholder value and also ensure that NuScale has a successful path forward in their markets.

Widest point does the potential agreement continues to get delayed and is there anything you can do to lock in more value for floor.

Speaker Change: So Andy on new scale right.

Speaker Change: I think we all know there is a strong appetite.

Speaker Change: For nuclear energy to meet.

Meet incredible demand for power globally rates interest has never been greater.

Speaker Change: The market potential for new scale out tomorrow is to deliver carbon free power it just to the industry and to utilities.

Speaker Change: Is massive so we continue to engage positively with our strategic investor.

Speaker Change: On the best commercialization model.

Speaker Change: To capture Fluor, and <unk> shareholder value and also ensure that new scale successful.

As a successful path forward in their markets.

Andrew Kaplowitz: We certainly remain committed to supporting the build-out of NuScale projects globally. And as I mentioned in the prepared remarks, we've started front-end design work for Row Power's SMR project utilizing new scales technology. And, you know, remember, New Scale is the only U.S. NRC-approved SMR technology in the market. There's a lot of smoke and mirrors out there. Other technologies, with other technologies, you know, if they ever get approved, are years and years behind New Scale. So, you know, that's a fact, unless you want to... go to Russia or China. That's where we're on a new scale.

Speaker Change: We certainly remain committed to supporting the build out of.

Speaker Change: Of new scale projects globally.

Speaker Change: As I mentioned on the in.

Speaker Change: In the prepared remarks, we've started front end design work for ROE powers <unk> project, using utilizing new skills technology.

Speaker Change: And.

Speaker Change: Remember new scales, the only U S. NRC approved yes, EMR technology in the market with a lot of smoke and mirrors out there other technologies.

With other technologies, if they ever get approved are years and years behind new scale. So.

Speaker Change: That's a fact unless you want to.

Speaker Change: Russia, China.

Speaker Change: So.

Speaker Change: That's where around new scale, we're very excited about the opportunities.

Andrew Kaplowitz: We're very excited about the opportunities for Fluor and for SMR shareholders and the commercialization model that we're finally Okay, I appreciate the coverage. Thanks, Andy.

Speaker Change: For Fluor and for SMA shareholders, and the commercialization model that.

Speaker Change: That we're finalizing.

Okay I appreciate the color.

Steven Fisher: Question comes from... Your next question comes from Steven Fisher from UBS, your line is now open.

Speaker Change: Thanks, Andy question It comes from.

Speaker Change: Your next question comes from Steven Fisher from UBS. Your line is now open.

Steven Fisher: Thanks.

David Constable: Good morning. Morning. If you could talk, David, just about the overall strength of the demand picture and whether you think at this point you're able to be as selective in your bookings as you'd still like and still hit your growth objectives. I think you talked about some no-bid things. So, you know, are we still able to be as selective as we were and achieve these growth objectives? Most definitely, right? We are sticking with our strategic priorities that we've had for the past four years, and going forward, fair and balanced contract terms and the reimbursable backlog targets will be at or above.

Thanks. Good morning, Good morning wondering if you could just.

Speaker Change: Good morning, and talk David just about the overall strength of the demand picture.

And whether you think at this point and you're able to be selective in your bookings.

Speaker Change: It's still like and still hit your your growth objectives, I think you talked about some some no bid things so.

Speaker Change: Are we good.

Speaker Change: We're able to to be as selective as we were and achieve these growth objectives.

Speaker Change: Most definitely right we are sticking with our strategic priorities.

Speaker Change: That we've had for the past four years and going forward fair and balanced contract terms and the reimbursable backlog targets will be at or above I think we've hit that and improved on that actually at 80%. So that will continue we're not going to to go anywhere but down the selectivity.

David Constable: I think we've hit that and improved on that actually at 80 percent, so that will continue. We're not going to go anywhere but down the selectivity path with stringent pursuit criteria and that CAGR growth that we'll be talking about for the next planning period in February is predicated on those same principles across the company. The business lines, the business segments fully understand that that's how we are running the company going forward, so no changes at all. And I just, you know, from a demand picture perspective, we've talked about it in past calls. You know, you look at our 12 commercial...

Speaker Change: Path with stringent pursuit criteria and that CAGR growth that we'll be talking about for the next planning period in February is predicated on those same principles.

Speaker Change: <unk> the company.

Speaker Change: Business lines business segments.

Speaker Change: Fully understand that that's how we're running the company going forward. So no changes at all and I just from a from a demand picture perspective.

Speaker Change: We've talked about it in in in past calls you look at our 12 commercial.

David Constable: top 12 commercial clients say spending $164 billion in CapEx in 2023. That is outlooking about $195 billion in 2024. And then in 2025 and beyond, that ranges from $195 to $210 billion. So, and then of course, you add in the government spending with the DOD and the DOE and intelligence agencies, which Jim mentioned here. And then just TxDOT alone, that that takes that spending, that CapEx is over a trillion dollars in 23. And it's over a trillion dollars here this year, and expected to continue. So I just think that the demand picture looks very strong.

Speaker Change: Top 12 commercial clients say spending.

Speaker Change: The $164 billion in Capex in 2023 that is out looking about 195.

Speaker Change: In 2024, and then in 2025 and beyond that ranges from.

Speaker Change: $195 to 210 billion.

Speaker Change: No.

Speaker Change: And then of course, you add in the government spending.

Speaker Change: With the Dod and the intelligence agencies, which Jim mentioned here.

Speaker Change: And then just txdot alone that that takes that spending that capex is over a trillion dollars in 'twenty three and it's over a trillion dollars here this year and expect it to continue so I just think.

Speaker Change: The demand picture looks very strong.

David Constable: And it's there's more than enough to stay grace over. So we can, we will continue to be selective. That's where it's at.

Speaker Change: Band.

Speaker Change: There is more than enough to stay grace over so we will continue to be selective that says that's where is that just a little more on energy solutions right.

David Constable: Just a little more on energy solutions, right? It feels a bit like the foot is being taken off the energy transition pedal somewhat, primarily in North America. You know, in energy transition, the stars really have to align completely for energy transition projects to get to FID in North America, right? One of our projects, which has done so, required government grants and tax holidays and a CO2 trunk line running past the site, up and running, installed near the facility. Having said that, we see significant energy transition prospect activity in Europe. You have to look at energy transition regionally.

It feels a bit like the foot is being.

Speaker Change: Taken off the energy transition pedal somewhat.

Speaker Change: Primarily in North America.

Speaker Change: In energy transition to starts we really have to align completely for energy transition projects to get.

Speaker Change: In North America right.

Speaker Change: One of our projects, which has done so.

Speaker Change: Required government grants and tax holidays in it.

Speaker Change: Ah Cotr trunk line running past the sites.

Speaker Change: <unk> up and running installed in near near this facility. So.

Speaker Change: Having said that.

Speaker Change: We see significant energy transition prospect activity in Europe.

Speaker Change: Kind of a regional you have to look at energy transition regionally.

David Constable: We currently have five energy transition EPCM projects in progress, and four of those five are in Europe. So, I think energy transition in the U.S. is going to be pivoting to energy addition. That's how we're talking about it internally, driven by multiple fuel sources, you know, thermal power, thermal power with carbon capture, nuclear, and that's right in Fluor's wheelhouse. So, we're excited about our opportunities in the power markets. And yeah, so ET product is going to be lighter in the U.S., however, with, you know, over in Europe it's a different world, right? They've got their CSRD, their Corporate Sustainability Reporting Directive over there, and it's driving energy transition to, you know, very high levels required for those, for our clients in the European arena.

We.

Speaker Change: We currently have five energy transition EPC projects in progress and for them for those fiber in Europe.

Speaker Change: Yes, I think energy transition in the U S is going to be pivoting to energy addition, that's at work.

Speaker Change: Talking about it internally driven by multiple fuel sources.

Speaker Change: Thermal power thermal power with carbon capture nuclear and Thats right in Fluor's wheelhouse. So we're excited about.

Speaker Change: R.

Speaker Change: The opportunities in the power markets and yes, so ETP ETE prices going to be lighter in the U S.

Speaker Change: With.

Over in Europe, it's a different world right, they've got their CSR to either corporate sustainability reporting directive over there.

Speaker Change: It's driving energy transition to very very high levels.

Speaker Change: Required.

For those for our clients in the European Arena, So that's where we see the strongest opportunities for our differentiated service offerings in the European region and.

David Constable: So, that's where we see the strongest opportunities for our ET differentiated service offerings in the European region. And I'll say in California and in Canada, so. That's the demand picture as we see it right now, Steven.

I will say in California, and in Canada. So.

Speaker Change: That's the demand picture as we see it right now Steven Kent can I just add I was just going to say, Steve and I think what's interesting through our diversification as we've grown urban solutions. We're now realizing that there is some additional opportunity even within the construct of tripling the size of that business, which will allow us to.

Jim Breuer: Can I just add, I was just going to say, Steven, I think what's interesting through our diversification, as we've grown urban solutions, we're now realizing that there is some additional opportunity even within the construct of tripling the size of that business, which will allow us to provide, you know, kind of a diversification ability to maintain growth as David discusses what's moving through the energy transition pipeline. So just because we see one portion of our portfolio kind of resetting here as it loads up on feeds, we do have other growth opportunities within our diversification. So it will maintain strong keggers moving forward.

Speaker Change: Provide kind of a diversification.

Speaker Change: <unk> ability to maintain growth as David discusses what's moving through the energy transition pipeline. So just because we see a portion of our portfolio.

Speaker Change: Kind of kind of resetting here is it loads up on fees, we do have other growth opportunities within our diversification. So it will maintain strong CAGR is moving forward from our perspective.

David Constable: Okay, thanks very much. Part of the reason I was asking was because, you know, we talked about Mexico a few quarters ago. And, you know, it just seems like it's still creating challenges from performance execution, but, you know, we're still booking more work there. And so I'm just wondering if that was, you know, just out of necessity to kind of keep the business going. But it sounds like you have other prospects there. And I guess related to that, the follow-up then is about staffing levels. As you go through this transition, I'm curious how well your staffing levels align with the opportunities you have over the next year or so, you know, as you're rolling off some of these bigger projects.

Speaker Change: Okay. Thanks, very healthy is it part of the reason I was asking was because we talked about Mexico, a few quarters ago.

Speaker Change: And.

It just seems like it's still creating challenges.

Speaker Change: From performance execution, but we're still booking more work there and so I was just wondering if that was.

Speaker Change: Just out of necessity to kind of keep the business going.

But it sounds like you have other prospects there.

And I guess related to that the follow up then is about staffing levels. As you go through this transition I am curious how well your staffing levels aligned with the opportunities you have over the next year or so as you are rolling off some of these bigger projects.

Jim Breuer: Just, you know, wondering if we should be concerned about overstaffing and, you know, maybe how that fits, if there's any context here or relationship to sort of this new execution model that you talked about on the call today.

Speaker Change: Okay.

Speaker Change: Wondering if we should be concerned about overstaffing and maybe how that that.

Any context here our relationship to sort of this new.

Speaker Change: Execution model that you're talking about on the call today, yes.

David Constable: Yeah, Steve and Jim can definitely answer the resources question and maybe touch on Mexico as well. Steve, two good points you're bringing up. Let me start with Mexico first. And I spent quite a few years there in my floor career. So yeah, this challenge project is an outlier. and then otherwise extremely successful portfolio projects. If you look at our joint venture there, I think David has said this in the past, it's perhaps our most successful joint venture in the history of the company. and a JV that had its most successful years in the last two or three years, executing very successfully.

Yes, Steve much Steven Jim can definitely answer the resources question, and maybe touch on Mexico as well as <unk>.

Jim Brewer: Two good points, you're bringing up for let me start with Mexico first I spent quite a few years Airlines, Florida career. So yes. This challenge project is an outlier.

Jim Brewer: And then otherwise extremely successful portfolio of projects. If you look at our joint venture there.

David has said this in the past, it's perhaps our most successful joint venture in the history of the company.

Jim Brewer: And our JV that had its most successful years in the last two or three years executing very successfully.

Jim Breuer: large number of refinery projects. So this specific project is just an outlier in an otherwise very successful enterprise. And we continue, with the new elections just having passed in Mexico and the new administration coming in for a new six-year cycle, it's going to take a little bit of time for the country to get its agenda, its Catholic agenda, established, but we expect another wave of work coming up in the coming years. As far as staffing... The other... We would expect there are projects that are winding down and there are other projects that are picking up and have quick demand for resource growth.

Jim Brewer: Large number of <unk>.

Jim Brewer: Refinery projects. So there's specific projects as an outlier in an otherwise very successful enterprise.

Jim Brewer: We continue with.

Jim Brewer: With the new elections.

Jim Brewer: Having passed in Mexico on the New administration coming in for a new six year cycle, that's going to take a little bit of time for the country.

<unk> agenda, it's Capex agenda established so we but we expect another wave of work coming up in the coming years.

Jim Brewer: As far as staffing.

Jim Brewer: Yes, there are.

Jim Brewer: As you would expect there are projects that are winding down and there are other projects that are picking up and have a quake demand for resource growth.

Jim Breuer: On the net side, we see net growth. If you look at some of these major programs and and the current backlog and the work that we're bidding that's going to be Decided in the next few months A lot of these projects require fairly quick ramp-up. And so we do. The need to shift resources from certain parts of the company to other parts and hence increased focus on having a more flexible workforce. and trying to optimize the equation globally as opposed to having to optimize locally. so that we can more quickly and more efficiently transfer. It's not just people, it's people, but it's also work processes, it's office space, it's information systems tools.

Jim Brewer: On the net side, we've seen net growth if you look at some of these.

Major programs and.

Jim Brewer: And the current backlog and the work that we're bidding thats going to be decided in the next few months.

Jim Brewer: A lot of these projects require a fairly quick ramp up.

Jim Brewer: And so we do see the need to shift resources from certain parts of the company to other parts enhance.

Jim Brewer: The increased focus on having a more flexible workforce.

Jim Brewer: And look in trying to optimize the equation globally as opposed to having to optimize locally.

Jim Brewer: So that we can more quickly and more efficiently transfer and it's not just people. It's people, but it's also work processes its office space.

Information systems tools.

Jim Breuer: and fully leveraging our large project.

Jim Brewer: And fully leveraging our large project.

Unknown Executive: Unknown Executive, Jason Landkamer, Sangita Jain, James Breuer, Fluor Corp. It's a task that we need to go through, but I think it's something we can manage to make sure we continue to drive high utilization in our research.

Jim Brewer: Capability to these newer markets. So I think we.

Jim Brewer: Yes.

Jim Brewer: It's a task that we need to go through but I think it's something we can manage to make sure. We continue to drive high utilization and our resource pool.

Unknown Executive: Terrific. Thank you very much. Thanks, Steven.

Speaker Change: Terrific. Thank you very much.

Speaker Change: Thanks, David.

Sangita Jain: Your next question comes from Sangita Jain from KeyBank Capital Markets. Your line is now open.

Speaker Change: Your next question comes from Sidney.

Speaker Change: <unk> from Keybanc capital markets. Your line is now open.

Sangita Jain: Great, thank you so much for taking my question. My first one will be on data centers. You referenced that in your prepared remarks, and I'm curious as to whether your discussions are focused on one-off project opportunities or more programmatic global opportunities, and then the modular capabilities that you're developing. I'm wondering if they're being developed on behalf of a client or if you're doing that preemptively to secure some bookings.

Speaker Change: Great. Thank you so much for taking my question.

First one would be on data centers.

Speaker Change: That in your prepared remarks.

Speaker Change: Curious as to why they are discussions are focused on one off project opportunities are more programmatic global opportunities and then the modular capabilities have been developing I'm wondering if they're being developed on behalf of a client or if youre doing that preemptively to secure some bookings.

Sangita Jain: So thanks, Anita, for the question. Yeah, the data center market is very exciting for us, both co-located data centers and hyperscale data centers going forward. You know, the clients. the clients in that space, the big tech companies. You know, they want they want those colos and hyperscale centers, not now, but right now. So, hence the comments around time to market that you've heard, and we really are not just looking at one offs, we're looking at at, to your term, programmatic opportunities in this space. And with one large tech company, we've signed off an umbrella master agreement that allows us to go after many, many standardized data centers.

Speaker Change: So thanks Anita for the for the question.

Speaker Change: Yes, the data center market is.

Speaker Change: Very exciting for us both Colo Colo.

Speaker Change: Co located data centers and Hyperscale data centers going forward. It is.

Speaker Change: Yeah.

Speaker Change: The clients.

Speaker Change: Clients in that space, the big Tech companies.

Speaker Change: They want they want those colo and Hyperscale centers, not now, but right now so hence the comments around time to market.

Speaker Change: <unk> heard and we really are.

Speaker Change: We're not just looking at one offs, we're looking at.

Speaker Change: And to your near term programmatic.

Speaker Change: Opportunities in this space.

Speaker Change: And.

Speaker Change: With the with one large tech company, we've we've signed off.

And the umbrella.

Speaker Change: Master agreement that allows us to.

Speaker Change: Should go after.

Speaker Change: Many many.

Speaker Change: Standardized.

Speaker Change: Data centers.

Speaker Change: Okay.

Jim Breuer: for them, primarily in North America, but we're actually working with them over in Asia as well. So, I think that's where we're, how we're looking at it from a modularization perspective. That was, that study was done for a specific client, and it's certainly adding value and putting us, you know, ahead of the other competition, in fact, potentially putting us in a sole source position for a large number of data centers with a tech company that you would certainly know. Yeah, and the only other thing I would add to that, David, is we've got some good experience in providing, you know, kind of combined cycle power solutions.

Speaker Change: For them, primarily in North America, but we're actually working with them over in Asia as well. So I think that's that's.

Speaker Change: Where were how were looking at it from a monetization perspective.

Speaker Change: That was that study was done for a specific client.

Speaker Change: And it's certainly adding value and putting us.

Ahead of ahead of the other competition in fact.

Speaker Change: Potentially putting us in a sole source position.

Speaker Change: For.

Speaker Change: A large number of data centers.

With the with a tech company that you would certainly know yes.

The only other thing I would add to that David is we've got some.

Speaker Change: Good experience in providing.

Speaker Change: 10, a combined cycle power solutions, we have conventional nuclear experience and we have an SME companies. So we can also provide kind of the power solution to support their time to market and then.

Jim Breuer: We have conventional nuclear experience, and we have an SMR company, so we can also provide kind of the power solution to support their time-to-market investment through the AI data center model.

Speaker Change: Through the AI data Center model.

Sangita Jain: Got it.

David Constable: And my follow-up is also for Urban Solutions. So you talked about an entire project cancellation, but you also referenced in the chat that you're talking to them about additional semi-projects. So I'm just trying to understand what gives the conviction that this time is for real when you're talking to them about new projects and if you're doing anything else different in structuring your contracts. No, on the Intel work, yeah, that was a project that has gone away for now, it's been paused basically, it was a mega project, but we're still doing work at that specific site, and there's additional work within the project that we're currently completing, and we're also looking at interesting projects with Intel in the tool install space, where we bring direct hire capabilities for tool installations within their facilities, and we continue to work with them over in Asia on their program, so like I said, the relationship is strong, and as they go through their planning process and their CapEx, which expansion programs which they are committed to, we'll be there to support Intel.

Speaker Change: Got it and my follow up is also for urban explanation. So you talked about an internal project cancellation, but you also referenced the fact that you're talking to them additional semi project.

Speaker Change: So I'm just trying to understand what gives you conviction that this time, it's corneal when youre talking to them about new projects and if they're doing anything else different instruction GAAP context.

No it's us.

Speaker Change: On the Intel work that was that was a project that.

Speaker Change: That has gone away for now.

Speaker Change: There has been paused basically it was a it was a mega project, but.

Speaker Change: But we're still doing work at that specific site.

Speaker Change: And there is additional work.

Speaker Change: Within the project.

Speaker Change: We're currently completing and we're also looking at interesting projects.

Speaker Change: With Intel in the tool install space, where we bring direct hire capabilities.

Speaker Change: For tool installations within their facilities and we continue to work with them over in Asia.

Speaker Change: There.

Speaker Change: On the program.

Speaker Change: So like I said the relationship is strong and.

Speaker Change: As they go through their their planning process and their capex, which expansion programs, which they are committed to.

Speaker Change: We will be there will be there to support Intel.

Sangita Jain: I appreciate the feedback. Thanks, Sanita.

Alright, I appreciate the feedback.

Speaker Change: Thanks Anita.

Andrew Wittmann: Your next question comes from Andrew Wittmann from Baird. Your line is now open.

Speaker Change: Your next question comes from Andrew Wittmann from Baird. Your line is now open.

Andrew Wittmann: Yeah, great.

Andrew Wittmann: Thanks for taking my questions, guys. I guess I just wanted to dig in a little bit more to the energy solutions segment. And specifically, You know, I heard you guys talk about the delayed profit recognition in the quarter. I guess the first question is, is it all just delay or was it reduced at all? Were there any other factors that we should be aware of that contributed to the performance of that in the in the quarter? And I guess maybe kind of bigger picture. Obviously, you've had, you know. One very large project there and a couple other ones as well.

Andrew Wittmann: Yeah, great. Thanks for taking my questions guys, I guess I just wanted to dig in a little bit more.

Two the energy solutions segment.

And specifically.

Speaker Change: I heard you guys talk about the delayed profit recognition in the quarter.

Speaker Change:

Speaker Change: First question is is it all just delay or was it reduced at all.

Speaker Change: Were there any other factors that we should be aware of.

Speaker Change: That contributed to the performance of <unk> in the quarter and.

Speaker Change: I guess, maybe kind of bigger picture, obviously you've had.

Speaker Change: One very large project there in a couple of other ones as well.

Andrew Wittmann: As those are now ramping down, are we getting a glimpse this quarter of what the energy solutions contribution could be when those projects are, you know, done, done, if you will? Or is there enough other underlying work here to find growth off of this new lower base when the megaproject projects maybe are done?

Speaker Change: As those are now ramping down or weakening a glimpse this quarter of what the energy solutions contribution could be when those projects are.

Speaker Change: Done done if you will or is there enough other underlying work here to <unk>.

Speaker Change: <unk> growth off of this new lower base when the megaproject projects maybe are done.

Joseph Brennan: Maybe I'll take the LNGC discussion around the margins, Andy, and then we can talk, maybe Jim can take it. So what I would tell you about LNGC, where we are, even though we have some of the experience of the project variability kind of regarding earnings recognition at this point, the project overall continues to perform within management's expectations. It is a timing issue only related to revenue recognition, really within the POC calc, Andy, and we would expect to pick this up in outward years. So it is not a function of where we are in terms of performance on the job and being able to meet the client's expectations of mid-2025.

Maybe I'll take the LNG see discussion around the margins Andy and then we can talk maybe Jim can take years. So what I would tell you about LNG see where we are even though we have some of the experience of the project variability kind of regarding earnings recognition at this point in the project overall continues to perform within management's expectations.

Speaker Change: It is a timing issue only related to revenue recognition really within the POC calc, Andy and we would expect to pick this up in outward years. So it is not a function of where we are in terms of.

Speaker Change: Performance on the job in being able to meet the clients' expectations of mid 2025 guests.

Jim Breuer: The underlying earnings power question, Jim, did you want to touch on that one? Andrew, so yeah, it is true that there are several large programs that are winding down, and you know which ones they are. As I said before, Energy Solutions is reloading the hopper with significant front-end work, both in traditional markets, energy transition. We're putting together a very deliberate strategy around power and low carbon power. You heard about the nuclear work. and so our expectation is and we're again we're still working through the strategic plan that we're going to share with you early next year but the expectation is that That new wave of projects will come to fruition to EPC, EPCM on the second half of the planning cycle.

Speaker Change: The underlying earnings power question, Jim did you want to touch on that one Andrew So yes. It is true that there are several large programs that are winding down.

Which ones they are as I said before.

Speaker Change: Energy solutions as <unk>.

Speaker Change: <unk> loading the hopper with significant front end work both in traditional markets energy transition.

We're putting together a very deliberate strategy around power and low carbon power and you heard about the nuclear work.

Speaker Change: And so our expectation is that we're again, we're still working through the strategic plan that we're going to share with you early next year, but the expectation is that the that that new wave of projects will come to fruition two EPC PCM on the second half of the planning cycle.

David Constable: So the major contributors for our plan are going to be in the urban arena in the first half, and then urban is going to pick up and contribute a higher contribution in the second half of the planning cycle. Got it. Okay. Let me just add there that We're talking about, again, we'll talk about the CAGR growth over the planning period that's coming and energy solutions will be contributing significantly. Energy clients are starting to invest more in traditional oil and gas work and then you've got all the chemicals work. So as we look at our front-end programs right now, front-end work that's in-house and field feed programs, front-end engineering and design programs that are likely to progress, so we've scrubbed them, it's like $254 billion of total installed cost and $174 billion of that is in energy solutions, whether it's chemicals and liquids to chemicals or LNG or nuclear power or downstream production in fuels, there's still obviously a huge chunk of work coming forward in energy solutions.

Speaker Change: The major contributors for our plan are going to be in the urban arena in the first half and then urban is going to pick up and contributed.

Speaker Change: Higher contribution in the second half of the planning cycle.

Speaker Change: Got it okay.

Yes.

Speaker Change: And let me just add there that.

We're talking about again, we'll talk about the CAGR growth over the planning period, it's coming and energy solutions will be contributing significantly energy clients are starting to invest more in traditional.

Oil and gas work and then you've got all the chemicals work. So as we look at our front end programs right now front end work its in house and field.

Feed programs front end engineering and design programs that are likely to progress right. So we've scrubbed them.

Speaker Change: So like 254 billion of the total installed cost and $174 billion of that is in energy solutions, whether it's chemicals and liquids to chemicals or LNG.

Nuclear power or downstream production and fuels.

Speaker Change: There's still obviously a huge chunk of work coming.

Speaker Change: Coming forward in energy solutions and in the prospects that we're chasing for front end out of that 230 billion in front of us in the next 18 months energy solutions is 133 billion of that so again spread across chemicals nuclear production fuels LNG and chemical so.

David Constable: And in the prospects that we're chasing for front-end, out of that $230 billion in front of us in the next 18 months, energy solutions is $133 billion of that. So again, spread across chemicals, nuclear production of fuels, LNG, and chemicals. So we still feel very good about it going forward and we will see that in the planning period and talk about it more in February.

Speaker Change: We still feel very good about it.

Going forward and we will see that in our in the planning period and talk about it more in February.

David Constable: Andy, not to beat this a little bit, but with the regulatory environment changing with the new administration, I think there's the plan that we had built up considered kind of the regulatory environment that we were working in. What's it going to look like as we move forward? Is the regulatory environment going to be more favorable? There are things that we'll figure out as we move forward in the next two to three months as things become clear and what impact that has across our energy solution.

Speaker Change: Andy.

Speaker Change: To be to us a little bit, but with the regulatory environment changing with the New administration I think there is the plan that we had built up.

Speaker Change: Considered.

Speaker Change: The regulatory environment that we were.

Speaker Change: Working in.

Speaker Change: What's it going to look like as we move forward as the regulatory environment going to be more favorable there are things that we'll figure out as we move forward in the next two to three months as things become clear in and what that what impact that has across our energy solutions business here.

Andrew Wittmann: Great. Just as my follow-up, I guess I wanted to kind of look at the implied fourth quarter guidance and just understand it a little bit more. We talked about you're going to pick up some of the, you know, delayed revenue recognition and energy solutions. I think in the prepared remarks there was a comment on some timing around an infrastructure recognition item as well.

Speaker Change: Great just as my follow up.

Speaker Change: Yes, I wanted to kind of look at the implied fourth quarter guidance.

Just to understand it.

Speaker Change: A little bit more.

Speaker Change: We talked about youre going to pick up some of the delayed revenue recognition and energy solutions I think in the prepared remarks. There was a there was a comment on some timing around an infrastructure rich.

Speaker Change: Ignition item as well.

Joseph Brennan: Maybe, Joe, could you comment about other kind of more chunkier things that we should understand or know about that are implicit in that fourth quarter guidance? Obviously, the thing that I think we're all trying to get at here is what the underlying earnings power could be or is for Fluor as we turn the calendar to 2025. And not looking for guidance, but just trying to get a sense of what the underlying run rate is maybe on an EBITDA basis. And having some of these moving pieces I think would be helpful.

Speaker Change: Maybe Joe could you comment about other kind of more chunkier.

Speaker Change: So we should understand or know about.

Speaker Change: That are implicit in that fourth quarter guidance, obviously, the the thing that I think we're all trying to get at here is what the underlying earnings power could be or is for fluor as we turn the calendar to 2025 and not looking for guidance, but just trying to get a sense of what the underlying run rate is maybe on an EBITDA basis and having some.

Of these moving pieces I think it would be helpful.

Joseph Brennan: Yeah, Andy, I think we're having less and less reliance on one-offs. The Q4 number was bolstered by or will be bolstered by a settlement that we thought we were going to achieve, but it's a tens of million dollar type settlement that we thought we would achieve in third quarter, and it will shift out into fourth quarter in that regard. And then the second part of your question, sorry. Does any other items, again, we talked about the delayed, yeah. Let me put it in this context, Andy. We're down to $850 million worth of legacy projects to complete and close off the books.

Speaker Change: Yeah, Andy I think we're having less and less reliance on one offs. The Q4 number was bolstered by or will be bolstered by a settlement that we thought we were going to achieve but it's tens of million dollar type settlement that we thought we would achieve in third quarter and it will shift.

Speaker Change: Out into.

Speaker Change: The fourth quarter in that regard and then the second part of your question sorry.

Speaker Change: So is there any other items again, we talked about the delay yeah, let me put it in this context Andy.

Speaker Change: We're down to $850 million worth of legacy projects, two to complete and close off the books, we had a starting point for the year of $260 million worth of cash calls that we've reduced dramatically. So we've made a significant amount of progress on what we would consider to represent.

Joseph Brennan: We had a starting point for the year of $260 million worth of cash calls that we've reduced dramatically. We've made a significant amount of progress on what we would consider to represent the volatility portion of our P&L, which is becoming more and more part of our rearview mirror at this point. So I would expect more and more, less and less volatility moving forward as we transition into possibly a larger portion of our backlog being contained within the urban solutions business at this point. But I would tell you there's going to be a lot less volatility moving forward.

Speaker Change: The volatility portion of our P&L, which is.

Speaker Change: Becoming more and more part of our rearview mirror at this point, so I would expect more and more less and less volatility moving forward.

Speaker Change: As we transition into.

Speaker Change: Possibly a larger portion of our backlog being.

Speaker Change: Contained within the urban solutions business at this point, but I would tell you theres going be a lot less volatility moving forward. Some of these cancellations and delays are normal cyclical challenge that occur challenges that occur in our in our normal operating quarters, but.

Joseph Brennan: Some of these cancellations and delays are normal cyclical challenges that occur in our normal operating quarters. But in terms of the one-offs and the real volatility relative to the P&L and the legacy projects we've been pulling forward, I'll tell you the majority of that is behind us.

Speaker Change: In terms of the one offs and the real volatility relative to the P&L in the legacy projects. We've been pulling forward I will tell you. The majority of that is behind us.

Michael Dudas: Thank you.

Speaker Change: Okay. Thank you.

Michael Dudas: Your next question comes from Michael Dudas from Vertical Research. Your line is now open.

Speaker Change: Your next question comes from Michael Dudas from vertical research. Your line is now open.

Michael Dudas: Morning, gentlemen. Good morning, Mike. Maybe back to nuclear, a couple of things. One, in the traditional nuclear. And we're seeing all the news about large companies wanting to directly restart nuclear plants.

Speaker Change: Okay.

Speaker Change: Morning, gentlemen, good morning.

Speaker Change: Maybe that's the nuclear couple a couple of things one.

Speaker Change: In the traditional nuclear and we're seeing all the news about large companies wanted to directly restart nuclear plants.

Michael Dudas: And so how does your experience in your longtime profile in that space align with your current opportunities for risk mitigation and are those real opportunities that Fluor might be involved with somehow? And I'll just start there and I have a couple other follow-up after that.

Speaker Change: How does your experience and your longtime profile in that space.

Speaker Change: Aligned with your current.

Speaker Change: <unk> for risk mitigation and are those real opportunities that might be involved with somehow.

Speaker Change: And.

Speaker Change: Just to start there and a couple of other follow up after that okay. So thanks, good morning, Mike.

Michael Dudas: Okay, so thanks.

David Constable: Good morning, Mike. Yeah, conventional nuclear, right, that's I think Fluor has built over 70 nuclear plants right around the country, going way, way back in time, very successfully, by the way. There are obviously, as you said, there's interest in conventional nuclear, both restarts and... life extensions, and potentially additional new projects, certainly in North America and in Europe, which I mentioned a couple of units over in Romania that we're looking at. That will be on a reimbursable basis. Just want to make sure that that's clear, that the Cernavoda plant in Romania will be reimbursable.

Yes conventional nuclear right.

I think Florida built over 70 nuclear plants right around the country.

Speaker Change: Going way way back in time.

Speaker Change: Very successfully by the way and.

Speaker Change: There are obviously as you said there's interest in it.

Speaker Change: Conventional nuclear both.

Speaker Change: Restarts in.

Life extensions and potentially potentially additional.

Speaker Change: New projects certainly in.

Speaker Change: In North America, and in Europe, which I mentioned, a couple a couple of units over in Romania that we're looking at that will be on a reimbursable basis, just want to make sure that that's clear.

Speaker Change: That said.

Speaker Change: Churn devoted plant in Romania will be Reimbursable and exactly we're not as I said in an earlier to an earlier question, we are not changing our selectivity or risk profile whatsoever.

David Constable: Exactly. As I said to an earlier question, we're not changing our selectivity or risk profile whatsoever for any of the new markets and growth markets that we'll be looking at, certainly in power. It'll be fully aligned with our risk profile that we have for the company.

Speaker Change: For any of the new markets and growth markets that we'll be looking at certainly in power and it'll be fully aligned with with our our risk profile.

That we have for the company so.

Jim Breuer: Could you look at some hybrid scenarios where you could fix services costs and potentially procurement costs to support the project? That's something we'd be comfortable with, but each project will be looked at standalone and we'll go through the normal selectivity and pursuit criteria as usual.

Speaker Change: Could you could you look at some hybrid.

Speaker Change: Scenarios, where you could fixed services costs and potentially procurement costs.

Speaker Change: To support the project, that's something where we'd be comfortable with but.

Speaker Change: But each each project will be looked at a standalone and we will go through the year as normal.

Jim Brewer: Selectivity pursuit criteria is as usual Jim Yes, let me just add.

Jim Breuer: Jim? Yeah, let me just add, Mike. Absolutely. We are. working very closely with several technology providers in the nuclear space and conventional nuclear. There's one partner we're working with on this Romania project. talking to a U.S.-based technology provider for a variety of opportunities around the world, mostly in the U.S. and Europe. We're doing a study, we've done a study with them this year on a potential project in Western Europe. But it's, as David said, we're going to be very diligent in our commercial profile on these projects, and I think the technology providers understand that. The True Clients understand that.

Speaker Change: Mike.

Speaker Change: We are.

Speaker Change: Working very closely with.

Speaker Change: Several technology providers in the nuclear space in conventional nuclear.

Speaker Change: There's one partner, we're working with on this Romanian project.

We're talking to a U S based technology provider for a variety of opportunities around the world.

Speaker Change: Mostly in the U S and Europe.

Speaker Change: Europe.

Speaker Change: We're doing the study we've done a study with them this year on a potential project in Western Europe.

Speaker Change: But as David said, we're going to be very diligent in our commercial profile on these projects and I think the technology providers understand that.

Speaker Change: The mature clients understand that.

Jim Breuer: Everyone's going to have to come to the table on these projects to make them happen. It's not going to be a... Give me a price for the whole thing, and you take all the risks, and there, I think, is going to have to be a much more nuanced commercial solution to get these projects built.

Speaker Change: <unk>.

Speaker Change: Everyone's going to have to come to the table in these projects to make them happen, it's not it's not going to be a.

Speaker Change: Give me a price for the whole thing and you take all the risk scenario I think is going to have to be a much more new ones commercial solution to get these projects built.

Speaker Change: Next year Okay.

Michael Dudas: That's encouraging to hear.

Speaker Change: That's encouraging to hear my follow up is.

Michael Dudas: My follow up is on a new scale. David, your thoughts on such the lead that the technology has over competitors certainly. better doc When do you think in the United States one of those will be up and running? estimate on that front. Has that happened before or after State of Maine? And then given the excitement and evaluation of new scale and certain things have changed dramatically. versus, say, 6-12 months ago when you were starting this process. How do you think about, going forward, ownership, having investment, balancing that versus monetizing, and certainly... and shareholders for the patients in this.

Under scale.

Speaker Change: Maybe David.

Speaker Change: <unk>, David your thoughts on this.

Such non lead.

Speaker Change: Technology has over competitors, certainly which has been better documented.

Speaker Change: When do you think in the United States, one of those will be up and running maybe civil estimate on that front and as that happened before after Stanley.

Romania, and then given the excitement and the valuation of this scale and certainly since we've changed dramatically.

Speaker Change: Versus say 612 months ago when Youre, starting this process, how do you think about.

Speaker Change: Going forward ownership.

Speaker Change: Having invested in balancing that versus monetizing and certainly good morning shareholders for the patients in this trial.

Speaker Change: 25.

Joseph Brennan: So yeah, two parts there.

Speaker Change: So yeah two parts there.

David Constable: I'll let Joe talk about the ownership balance. you know, making sure. We capture value for Fluor shareholders and SMR shareholders, but also think about the upside that we believe is coming. in the SMR. I'll let Joe talk about that in a minute. From a leadership perspective, New Scale is clearly the leader because of their NRC approval. You can go to the NRC website and see, it's mostly all about New Scale's approvals and their expected approval for the uprate that's coming in the first half of 2025. So again, heads and shoulders above the competition. And so, as far as timing goes, as you mentioned, Romania is actually probably leading right now.

Speaker Change: I'll, let Joe talk about the ownership balance.

Joe Brennan: Making sure.

Joe Brennan: We capture value.

Joe Brennan: For <unk> shareholders and <unk> shareholders, but also.

Joe Brennan: Think about the upside that.

Joe Brennan: That we believe is coming.

Joe Brennan: In the SME space.

Joe Brennan: Space.

But I'll, let Joe talk about that in a minute.

Joe Brennan: From a.

Joe Brennan: From a leadership perspective, new scale is clearly the leader because of their NRC approval you can go to the NRC website and see it's mostly all about new scales.

Joe Brennan: Sure.

Joe Brennan: Approvals and expected approval for the Uprate Thats coming.

Joe Brennan: In the first half of 2025, so again heads and shoulders above the competition and so as far as timing goes.

As you mentioned, Romania is actually probably leading right now, but you asked about the U S.

David Constable: But you asked about the U.S. where New Scale and their developer. Their commercialization developer is looking at different opportunities, primarily with utilities, that are trying to get a jump on solutions, new solutions, new technologies, and with the tech companies. heavy, heavy discussions with tech companies, where SMRs will, will play. And again, they're going to play first there because they've got an approval. So that's why we're we're very positive on it. And that's, that's how we're looking at it right now.

Joe Brennan: Where new scale and Theyre developer.

Joe Brennan: There are commercial utilization developers is looking at different opportunities, primarily with utilities that are trying to.

Joe Brennan: To get a jump.

Joe Brennan: Jumped on on.

Joe Brennan: Carbon free power solutions, New solutions New technologies.

Joe Brennan: And with the tech companies.

Joe Brennan: Heavy heavy discussions with tech companies, where <unk> will play and again theyre going to play first there because they've got an approval. So thats why were very positive on it.

Joe Brennan: And.

Joseph Brennan: And as I've said, we're very, very supportive of, of new scales, and new scale build out of projects in the US here going forward, Joe. My good question. I mean, we're, we're, we're extremely supportive. You know, what's occurred over the last four to six months is you see the kind of the strategy within New Scale Crystallizing in terms of how they pointed themselves into the data center market, and our strategic investor and the work that he's done has pulled together kind of a strategy that has symmetry as to, you know, in terms of what's going on within the macroeconomy, and it's driving valuations.

Joe Brennan: That's how we're looking at it right now and as I've said, we are very very supportive of.

Of new scales.

Joe Brennan: New scale build out of projects in the U S here going forward Joe.

Joe Brennan: Mike Good question I mean, we're extremely supportive.

Joe Brennan: Whats occurred over the last four to six months as you see the kind of the strategy within new scale crystallizing in terms of how they appointed themselves into the data center market and our strategic investor and the work that he's done has pulled together kind of a strategy that has cemetery is too in terms of what's going on within the macro.

Joe Brennan: And it's driving valuations.

Joseph Brennan: And we are at a position in the process here where we want to do something that allows for both companies to continue to be successful and be accretive to their shareholders.

Joe Brennan: And we are at a position in the process here, where we want to do something that allows for both companies to continue.

To be successful and be accretive to their shareholders. So I don't want to get into the details of what we're going to do well.

Joseph Brennan: So I don't want to get into the details of what we're going to do, and we'll talk about, you know, that as we get out into the February phone call. But we do want to capture value for our shareholders, but we want to maintain the value for the overall transaction across all the constituents at this point. And I think there's a clear pathway to get there with the events that have occurred over the last four to six months.

Joe Brennan: We will talk about that as we get out into the February phone call, but we do want to capture value for our shareholders, but we want to maintain the value for the overall transaction across all the constituents at this point and I think there's a clear pathway to get there with the events that have occurred over the last four to six months.

Unknown Executive: Excellent, gentlemen. Thank you so much. Thanks, Mike.

Speaker Change: Excellent gentlemen, thank you so much thanks, Mike.

David Constable: This concludes our Q&A session.

Speaker Change: Okay. This concludes our question and answer session I would now like to hand back over to David Constable for further remarks.

David Constable: I'd now like to hand back over to David Constable for further remarks. Right. Thank you, operator. Many thanks to all of you for participating on our call today as we Closeout 2024, very pleased to see our cash generation trajectory and the opportunities. to support the return of capital to shareholders. We appreciate your interest in Fluor, and thank you again for your time today.

David Constable: Alright, Thank you operator, and many thanks to all of you for participating on our call today as we.

David Constable: Closeout 2024, very pleased to see our cash generation trajectory and the opportunities.

David Constable: To support the return of capital to shareholders and we appreciate your interest in Fluor and thank you again for your time today.

Unknown Executive: for attending today's call.

Speaker Change: Attending today's call you may now disconnect have a wonderful.

Unknown Executive: You may now disconnect.

Unknown Executive: Have a wonderful day.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Yes.