Q4 2024 Fluor Corp Earnings Call
Thank you. Thank you.
Speaker Change: Good morning and welcome to FLUR's fourth quarter and full year 2024 results conference call. Today's call is being recorded. At this time, all participants are in a listen-only mode. A question and answer session will follow management's presentation.
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 Duck floor Dot com.
Speaker Change: I'll now turn the call over to David Constable Force, Chairman and Chief Executive Officer, David.
Speaker Change: Thank you, Jason and good morning, everyone and thank you for joining us today.
Speaker Change: Please turn to slide three.
Speaker Change: I would like to start by discussing the CEO transition announcement issued earlier this morning.
Speaker Change: It has been just over four years since we launched our building a better future strategy and set our long term financial targets.
Speaker Change: In 2024, we achieved our goals under this strategy with strong cash flow and a robust capital structure.
Speaker Change: So 40 in backlog that is not only majority reimbursable.
Speaker Change: But one that reflects our portfolio approach to our end markets.
Speaker Change: Importantly.
Speaker Change: We have met and in most cases exceeded our strategic targets, bringing our fixed unbilled portion of our strategy to a close.
Speaker Change: Consistent with our long term succession plans and with the full support of Fluor's Board. It is now the right time for me to transition into the role of executive Chairman and Chief Executive officer role onto Jim Brewer.
Jim Brewer: Starting on May 1st in my new role I'll be supporting Jim as he builds upon his relationships with clients and engage more fully with our stakeholders.
Jim Brewer: And Jim his new role he will be focused on developing the storylines for the next chapter of our strategy, which is thematically refocused on grow and execute.
Jim Brewer: This will include a revised growth targets and a laser focus on project delivery.
Jim Brewer: We look forward to sharing our view of the markets over the next four years at our upcoming strategy update event on April 2nd at one of our major <unk> sites.
Speaker Change: On a personal note back in 1982.
Jim Brewer: When I first started at Florida, as an engineer and our Calgary office.
Jim Brewer: I had no idea of the incredible experiences and opportunities at a weighted me and my family over the next five decades.
Jim Brewer: Filled with gratitude for the experiences traditions and proud moments.
Jim Brewer: Defined my journey with the Corporation and I'm really looking forward to seeing our new management team build upon floors legacy.
Jim Brewer: Now please turn to slide four.
Jim Brewer: Our revenue for the year was $16 3 billion, marking a five 4% increase from 2023.
Jim Brewer: In 2024, we recorded new awards totaling $15 1 billion achieving.
Jim Brewer: Achieving a book to burn ratio of just under one.
Jim Brewer: New awards for the year were 150 basis points above New award margins last year.
Jim Brewer: And well supports our established margin corridor of 4% to 6%.
Jim Brewer: Importantly, our 2024 net gross margin book to burn ratio was a healthy 107%.
Jim Brewer: Through our disciplined contract pursuits, 85% of New awards for 2024 were Reimbursable and.
Jim Brewer: And our total ending backlog is now approximately 80% reimbursable.
Jim Brewer: Moving to the new U S administration, and the rapid pace of announcements that are coming out of the executive branch.
Jim Brewer: We are tracking the executive orders closely.
Jim Brewer: While it's still too early to be definitive about the long term impacts we.
Jim Brewer: We are focusing on the broad economic themes of the administration's agenda, which are to promote capital investment and job creation.
Jim Brewer: Considering the underlying themes of pro domestic energy <unk> minerals production and AI infrastructure development in the <unk> of orders, we see these directives as.
Jim Brewer: Favorable to nuclear and thermal sources of energy.
Jim Brewer: Favorable to LNG exports and expedited permitting.
Jim Brewer: Favorable to increasing domestic mineral production and favorable to significant data center build outs.
Jim Brewer: Therefore, we see positive elements across all of <unk> business segments and stand ready as we always have to support our clients.
Speaker Change: Before I turn the call over to Jim I want to thank Joe for partnering with me through this journey and we're playing an instrumental role in strengthening our financial stability and positioning floor for long term success.
Jim Brewer: Jim will now take us through the fourth quarter highlights and prospects for 2025, Jim.
Jim Brewer: Thank you David and good morning, everyone. Let me start by saying that I'm very excited to assume the role of CEO in may and we'd like to thank the board for Entrusting me with this responsibility and honor.
Jim Brewer: Over my 31 years at Fluor I've learned to appreciate and share the values that define this great company.
Jim Brewer: I've seen firsthand the amazing work that we do around the world to support our clients in the many communities where we work.
Speaker Change: So David's leadership during these last four plus years, our company has healthier financially and poised to meet the demand driven growth we see around the world.
Speaker Change: As Fluor embarks on the next chapter of our strategy I look forward to working closely with our employees partners and other stakeholders to continue to serve our clients through excellence and project delivery.
Speaker Change: Now moving to the results of the quarter and full year, Please turn to slide six.
Speaker Change: Beginning with our <unk> solutions to <unk>.
Speaker Change: Segment reported a profit for the quarter of $81 million versus $147 million a year ago.
Speaker Change: New awards for the quarter totaled $1 4 billion.
Speaker Change: And ending backlog for the full year grew by 20% to $17 7 billion up from $14 8 billion a year ago.
Speaker Change: Please turn to slide seven.
Speaker Change: In <unk>, we received an incremental award of $243 million for ongoing efforts at Lilly's LP One project in Lebanon, Indiana.
Speaker Change: This project has grown from 200 to 1000 personnel in 2024.
Speaker Change: <unk> continues to progress with the installation of the facility's central utilities building.
Speaker Change: Along with steel and concrete placement at the peptides small molecule and tank farm areas of the facility.
Speaker Change: The workforce is expected to increase in size in the first half of 2025.
Speaker Change: On the semiconductor front based upon our project performance a major semiconductor manufacturer in Arizona has awarded Fluor more tool installation work.
Speaker Change: Growing our experience in tool install scopes like this one positions us well for future semiconductor opportunities in the United States.
Speaker Change: For 2025.
Speaker Change: We see a robust slate of opportunities, including the next expansion phase of Lilly's, Indiana project and another major peptide manufacturing facility in the U S.
Speaker Change: In addition, we've recently signed a master agreement with a leading technology provider and have received initial data center work under this agreement.
Speaker Change: This builds upon our extensive data center project experience in Asia and Europe.
Speaker Change: Specific to the data center market. In addition to the opportunity I just mentioned, we're in conversations or have agreements with the top four data center developers, we continue to see this market as a significant contributor to the grow and execute phase of our strategy.
Speaker Change: Please turn to slide eight.
Speaker Change: In mining and metals, we received an award for a poor Debottlenecking project in Australia for a major mining company. This project will support increased production capacity across our clients' minds rail and related port infrastructure assets.
Speaker Change: Expect that completion date is 2028.
Speaker Change: For 2025, we see a continued focus by our clients on developing additional capacity for key resources, including copper Green steel lithium in iron ore.
Speaker Change: We're currently tracking mining and metals opportunities that represent tens of billions in awards over the next few years.
Speaker Change: Please turn to slide nine.
Speaker Change: Our infrastructure business continues to make good progress on the Gordie Howe project.
Speaker Change: Construction is now 94% complete and handover of the U S port of entry is in progress.
Speaker Change: Substantial completion is targeted for Q3 of 2025.
Speaker Change: Next the lax automated people mover project is now 93% complete and the forecasted substantial completion date remains on track for Q4 of 2025.
Speaker Change: On the I 635, LBJ project construction is now 70% complete substantial.
Speaker Change: Completion is forecasted for Q2 of 2026.
Speaker Change: For this business line as legacy projects wrap up we are selectively pursuing opportunities in markets, where we have strong client relationships and an appropriate risk profile.
Speaker Change: These include Texas, North Carolina, and the Netherlands.
Speaker Change: Moving on to slide 10.
Speaker Change: Energy solutions reported a fourth quarter segment profit of $63 million, a significant increase from the $26 million recorded in 2023.
Speaker Change: Quarterly results from last year included $33 million of cost growth for the Penguins legacy project.
Speaker Change: In the fourth quarter, New awards totaled $406 million, which included additional scope on a revamp project in Sweden.
Speaker Change: Full release on engineering for a re gasification and power plant in Indonesia and.
Speaker Change: And a front end award for the units three and four at the churn, Nevada nuclear power plant in Romania.
Speaker Change: This award marks a significant milestone in Romania as efforts to enhance sustainability and energy security in the region.
Speaker Change: Ending backlog for energy solutions was $7 6 billion.
Speaker Change: Compared to $9 7 billion a year ago.
Speaker Change: During the quarter, we help support key accomplishments for our clients, including the TCM project in Kazakhstan, achieving first oil.
Speaker Change: The <unk> project in China, achieving 50 million hours without a lost time injury in the recently completed lithium hydroxide project in China for all Tomorrow, which was named a 2024 global Best project by Engineering News record.
Speaker Change: At LNG, Canada project has surpassed the 95% completion Mark overall with.
Speaker Change: With 771 of 838 systems, having achieved mechanical completion.
Speaker Change: Additionally, the main refrigeration compression systems on train one are in final commissioning and preparation for <unk>.
The project is experiencing some challenges with the installation of installation on piping and equipment.
Speaker Change: Additional skilled labor has been mobilized to site in order to expedite completion.
Speaker Change: However, we are on track to support the client's target to ship first cargos by middle of 2025.
Speaker Change: And this project continues to track to management expectations.
Speaker Change: To date, our joint venture and the clients have not yet fully resolve certain outstanding issues for COVID-19 related impacts to the project.
Speaker Change: We believe that the client and our joint venture we will resolve these items fairly and equitably during 2025 similar to resolutions reached on previous changes on the project.
Speaker Change: Looking ahead to 2025, our energy solutions business will be focus on reloading with front end engineering and design packages to support future EPC work, including large chemicals facilities in the middle east carbon capture and de carbonization.
Speaker Change: We're seeing opportunities in the LNG space, including additional interest in mid scale LNG facilities.
Speaker Change: On the power front, we're actively deploying our strategy in both nuclear and thermal solutions to support additional energy demand from data centers and other broad power needs.
Speaker Change: Lastly, our new scale, we continue to negotiate with our strategic investor to reach an agreement on a long term monetization and revenue stream to fluor, while moving new scale closer to commercialization.
Speaker Change: We believe our current path is the best way to bring value to fluor shareholders and maximize our long term investment and new scale.
Speaker Change: Moving to mission solutions, Please turn to slide 11.
Speaker Change: Mission solutions reported a segment profit of $45 million in the fourth quarter <unk>.
Speaker Change: Compared to $31 million a year ago.
Speaker Change: New awards for the quarter were $429 million.
Speaker Change: Which included an eight month extension for the Portsmith decontamination and decommissioning program.
Speaker Change: And FEMA task orders for Florida, Georgia, and Virginia.
Speaker Change: Our ending backlog for mission solutions was $2 7 billion.
Speaker Change: Compared to $3 9 billion a year ago.
Speaker Change: And as a reminder, backlog does not include approximately $5 billion in annual revenue for projects related to our equity method investment where.
Speaker Change: Where we don't fully or partially consolidate our results.
Speaker Change: Finally, we are well positioned with our department of defense and department of energy customers on Recompete or extensions of existing contracts, including work for the army on our Logcap five contract in Africa and at the Portsmouth site.
Joe: With that let me turn the call over to Joe for the financial update.
Speaker Change: Joe.
Joe: Thanks, Jim and good morning, everyone. This morning, I would like to discuss an overview of our financial.
Joe: Performance and provide an update on the progress we have made in strengthening our capital structure. Please turn to slide 13.
Joe: For the full year floor reported revenue of $16 3 billion and a net income of $2 $1 billion or $12 30 per diluted share results for the year reflect the favorable impact of the new skilled deconsolidation and subsequent fair value accounting.
Joe: During the quarter, we recognized a 116 million provision related to a jury verdict against a floor joint venture on an infrastructure project completed over 12 years ago. The client's sued over alleged incorrect designs performed by a subcontractor, we believe that the jury verdict does not accurately.
Joe: The evidence at trial and we are evaluating all options that may eliminate most if not all of the provisions taken.
Joe: The provision does not reflect any offsetting recoveries that we believe are owed to the joint venture are 2024 Form 10-K filed today contains additional discussion on this matter.
Joe: Segment profit for the year was $635 million and adjusted EBITDA was $530 million on an adjusted basis. Our 2024 results were $2 32 per diluted share.
Joe: Corporate G&A expenses for the year were $203 million compared to $232 million a year ago. The improvement over 2023 can be attributed to an ongoing focus on overhead optimization and a reduction in performance based compensation.
For the full year, we reported net interest income of $150 million as our cash management team invested fluor's cash and high quality interest bearing assets, which more than covered the $46 million in low cost fixed rate interest expense on our outstanding debt. Please turn to slide 14.
Joe: Cash and cash equivalents combined with marketable securities were $3 billion, representing a 14% increase from 2023.
Joe: Our operating cash flow for the year of $828 million, including mean meaningful distributions from two large joint ventures, and IRS refunds, but also reflects strong core cash generation. This was our best year for operating cash flow since 2015.
Joe: During the year legacy projects required $81 million in funding. We believe that these late stage legacy projects were will require up to $200 million of funding in 2025.
Joe: Over the course of 2024, we communicated our intent to restart our capital allocation program based on our strong financial footing and confidence of sustained cash flow generation. We started when we started our share repurchase program with $125 million.
Joe: Our $2 3 million shares purchased in the fourth quarter.
Joe: Under this initial phase of our share repurchase program, we are targeting targeting an additional $300 million in repurchases. During 2025 changes to our plan for share repurchases will hinge on potential proceeds from further monetization activities our performance over the past four years provides flexibility on capital allocation.
Joe: When including reinvesting in the business organically the size and timing of our share repurchases reinstating a dividend and the ability to make select bolt on acquisitions to support the continued growth in the business before we discuss our guidance for 2025 I want to review a few additional items. Please turn.
Joe: Turn to slide 15.
Joe: Last year, we purchased $57 million of our outstanding 2028 notes, we will continue to chip away at these notes opportunistically at or below par last month, we closed the sale of our stork UK operations, which essentially completes our transition to an asset light model.
Joe: Led by our transaction of Stork and right sizing our office in Houston, we have been able to reduce our real estate footprint by more than half to $3 7 million square feet.
Joe: Next our investment in new scaled was deconsolidation in October of 2024, resulting in a $1 6 billion pre tax gain subsequent mark to market gains based on his prevailing stock price through 12 31 resulted in an additional pre tax gain of $604 million for the fourth quarter of 2024.
Joe: Sure.
Joe: Since this will be my final earnings call I wanted to introduce Sean Regan as my successor, John has worked side by side with me over the past four years and was a key part of the finance leadership team that led to the rebuilding of Fluor's capital structure, John I will turn the call over to you.
Joe: Thanks, Joe.
Joe: What <unk> accomplished with the first chapter of our strategy has restored investor confidence and establish the foundation for the next chapter.
Joe: I am excited to support the business as we pivot to the grow and execute phase.
Back in December I had the opportunity to speak with the analyst community and I look forward to meeting our investors in the days ahead.
Joe: Please turn to slide 16.
Joe: Looking to 2025, our EBITDA guidance is $575 million to $675 million.
Joe: Which lends itself to an operating cash flow range of $450 million to $500 million.
Joe: Our estimated cash flow reflects the underlying operational performance and working capital needs under our largely reimbursable profile.
Joe: We expect our full year EPS to range between two and a quarter to $2 75 per diluted share.
Joe: We currently don't see any material items that need normalizing from our GAAP earnings.
Joe: Other than FX, and new scale, which is now mark to market to their screen price across our 126 million shares.
Joe: These expectations are based on our ability to successfully execute our strategic priorities.
Joe: As well as capturing the demand for our services across the end markets we serve.
Joe: To provide a bit more granularity on the outlook for 'twenty five our assumptions include a new awards book to burn ratio well above one.
Joe: Revenue growth of approximately 15%.
Joe: Net interest income of approximately $80 million.
Joe: G&A expense of around $180 million and despite a potentially wide range of outcomes. We also see an effective tax rate of approximately 30% to 35%.
Joe: Our expectations for 2025 segment margins are approximately 4% to 5% and Irvin three.
Joe: Three five to four 5% and energy and.
Joe: And 5% to 6% and mission.
Joe: For 2025, we expect a normal shaping of quarterly cash flow.
Joe: For EBITDA, we expect an acceleration in the second half of the year as we ramp up execution activities, particularly on our urban solutions portfolio.
Joe: As a housekeeping matter, we'll file an S. Three later today.
Joe: So we to refresh our ability to capitalize on expedited financing opportunities in the future.
Joe: Lastly, once new scale files their 10-K.
Joe: We will file an amended 10-K to incorporate their financial information into hours as required under the securities laws.
Speaker Change: Operator with that we're now ready for our first question.
Speaker Change: Thank you the floor is now open for questions. If you have dialed in I would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.
Speaker Change: If you would like to withdraw your question simply press Star one again.
Speaker Change: If you are called upon to ask your question and they're listening via loud speaker on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: We do request for today's session that you. Please limit to one question and one follow up.
Speaker Change: Again, the press star one to join the queue.
Speaker Change: First question comes from the line of Michael Dudas with vertical research. Please go ahead.
Michael Dudas: Good morning, gentlemen.
Michael Dudas: Mike and then more of a migraine.
Michael Dudas: Congrats Jim and welcome David.
Michael Dudas: First maybe for David or Jim as you.
Michael Dudas: Put together your outlook for 2025, and some of the cross currents that you highlighted in your prepared remarks.
Michael Dudas: So on the book to Bill that could be well above one maybe a little bit more thought on timing in the areas certainly you highlighted energy solutions reloading, but.
Michael Dudas: In the urban side with you even a big driver of the last couple of years maybe.
Michael Dudas: A little bit more.
Michael Dudas: How that will be booked in the margins that youre seeing in some of these opportunities in the European solutions area are relatively mixture business.
Michael Dudas: Good morning, Mike, maybe I'll start and ask Jim to comment as well.
Michael Dudas: As you look at the backlog at the end of the year.
Speaker Change: In 24.
Michael Dudas: Obviously, we've seen.
Speaker Change: Urban solutions.
Speaker Change: Kick up dramatically as we had.
Speaker Change: Tad laid out in <unk>.
Speaker Change: Planned for in our in our strategy to drive growth across the portfolio. So you see that backlog sitting at $17 7 billion energy solutions coming down as we expected as well in mission solutions holding holding firm. So we expect that to continue we do see a book to bill significantly above one.
Speaker Change: In 2025, just to emphasize that.
Speaker Change: And in the margins.
Speaker Change: We are.
Speaker Change: <unk> guided we're comfortable certainly comfortable with so.
Speaker Change: Where where it's coming from specifically Jim some comments on that please sure. Thanks, David and thanks, Mike for the words, there and looking forward to working with you on the.
Speaker Change: Dear colleagues going forward.
Speaker Change: Yes, so the book to Bill significantly above one.
Speaker Change: Good opportunities in Tls, even look at pharma.
Speaker Change: And the <unk>.
Speaker Change: The market that we've been very successful on in previous years. It is going to continue to be.
Speaker Change: Good growth market for us.
Speaker Change: If you look at.
Speaker Change: What we call the advanced technologies.
Speaker Change: Projects that includes semiconductors and data centers.
Speaker Change: Data centers is a market, we're focusing on very strongly and we've already had some some recent success on that in addition to building on our experience that we had in Europe and Asia.
Speaker Change: Mining has a significant slate of opportunities.
Speaker Change: Some of them in front end work some of them converting to eight bcm.
Speaker Change: And then of course in government, we have a very strong position and we will do and we expect some of those significant awards to come from from that client. So it's.
Speaker Change: It's urban and its mission primarily.
Speaker Change: With a lot of front end work in energy preparing for subsequent years.
Michael Dudas: Yes, just to Mike just kind of big picture support what what Jim has just mentioned we've got about in the next 12 months.
Michael Dudas: We've got prospects just in the larger EPC <unk> projects are in and not the not the front end work, but just the.
Michael Dudas: Full EPC.
Michael Dudas: Awards are prospects of about $46 $5 billion with again urban being about almost $24 billion of that and then evenly split between energy solutions and mission for the other 2000 $20 billion to $22 billion. So.
Michael Dudas: That kind of supports that where we are.
Michael Dudas: Where we're heading with our bookings in the coming year.
Michael Dudas: Just just to add you asked a little bit about timing I think it's encouraging to see some of the announcements through the mining group. This early in the year and also through kind of the data center activity that we're we're kind of we've got some inroads at the beginning of the cycle. So it should help and support the burn curves as we move through the year.
Michael Dudas: And maybe how when you look at the maybe upcoming data centers cycle relative to say, let's say life science or centers globally.
Michael Dudas: Where are we in the early inning or with engineering and the magnitude and scope of what you will be providing you with those numbers look like when you are the prospects.
Michael Dudas: <unk>.
Mike Mike we missed that.
Michael Dudas: Sorry, what was the specific area, we missed the beginning of the no I'm, sorry, I'm, sorry, I apologize on the datacenter side, maybe compared to like your life Sciences semiconductor electronics space and what inning, we're in and what when you convert those prospects what type of size of projects and what the scope of that you'd be providing as we move through this it looks like a long.
Michael Dudas: The cycle of a build out on the <unk>.
Michael Dudas: Ron.
Jim Brewer: Yes, Thanks, Mike I'll start that this is Jim.
Speaker Change: We're in early phases.
Speaker Change: Just if you look at the projections by just the big five data center or Hyperscale.
Speaker Change: Here in the United States.
Speaker Change: We're talking about several hundred billion dollars worth of announced investments.
Speaker Change: And I think given the given that the size of these projects is growing.
Speaker Change: They lend themselves to.
Speaker Change: Fluor's project delivery expertise and model.
Speaker Change: Now, we're going to remain diligent and methodical and taken on this work.
Speaker Change: But.
Speaker Change: Building on our track record of recent data center projects like I said in Europe and Asia.
Speaker Change:
Speaker Change: We believe we are well positioned for this big wave of data centers that is projected for the United States.
And as I said in the prepared remarks.
Speaker Change: We signed a major.
Speaker Change: We signed a master agreement with a major <unk>.
Speaker Change: Data Center company.
Speaker Change: We're kicking off the initial stages of the first project under this agreement this project as a co location.
Speaker Change: Datacenter, which is on a smaller scale.
Speaker Change: Call it between $5 billion and $1 billion in scale.
Speaker Change: But this agreement allows you to build and worked on.
Speaker Change: Data centers of all sizes, including Hyperscale or is that now you are talking about multiple billions of dollars.
Speaker Change: Now those jobs take a little more time to mature and.
Speaker Change: And develop.
Speaker Change: But the neat thing about this agreement is that.
Speaker Change: It allows us to build a longer term relationship with this client.
Speaker Change: On multiple projects and therefore.
Speaker Change: Take advantage of the benefits of replication efficiencies lessons learned on previous projects. So I think we are in the tens to answer specifically your question. We're on the early stages of the cycle.
Speaker Change: We're going to approach the market methodically and.
Speaker Change: With the proper project and pursue disciplined but we do believe that data centers will be a significant engine for our for our growth in this next chapter of our strategy and just adding to that Mike.
Speaker Change: As Jim said, a significant contributor to our grow and execute phase not.
Speaker Change: Not only for the in the facilities datacenter facilities themselves, but also where floor can add value on the power demand side of the equation right. Our expertise in power generation, both thermal and nuclear is going to play a key role in supporting our clients' needs and we're already currently ramping up our capabilities further on the power side.
Speaker Change: The numbers are just.
Speaker Change: Astronomical for power demand for data centers.
Speaker Change: We've got 26000 megawatts installed in the U S. Right now Thats going to go to 90, they say a 92000 as required by the by the end of the decade.
Speaker Change: And then the numbers are even larger globally, but the U S is about 40% of the market. So a big focus here on.
Data centers combined with power generation, which is obviously in our wheelhouse.
Speaker Change: Excellent thanks, gentlemen.
Mike: Thanks, Mike Good morning.
Your next question comes from the line of Sangeeta Jain with Keybanc capital markets. Please go ahead.
Sangeeta Jain: Great. Thank you so much for taking my question.
Sangeeta Jain: If I can ask one on new scale I believe that that wasn't executed term sheet for the strategic buyer. So I'm just wondering if that's still the case.
Speaker Change: The change in your thinking or the timing of the.
Sangeeta Jain: Monetization.
Speaker Change: Good morning, Thanks for the question.
Speaker Change: As Jim mentioned in his prepared remarks.
Speaker Change: We're in detailed negotiations right now.
Speaker Change: With our strategic investor to reach.
Speaker Change: Reaching agreement on a long term monetization and revenue stream.
Speaker Change: To floor, while at the same time, moving new scale closer to monetization and commercialization.
Speaker Change: And.
Speaker Change: We continue to believe that our current path is the best way to bring value.
Speaker Change: To fluor shareholders to the strategic Investor and also to new skills and for that the.
Speaker Change: The business strategy will be successful we need all three parties.
Speaker Change: To win so.
Speaker Change: So the timeline to monetization has been slower than desired.
Speaker Change: However, as you can as you can imagine anything in the nuclear space that is in <unk>.
Speaker Change: Startup pre commercialization mode.
Speaker Change: Does take patients and we want to get this right for decades to come.
Speaker Change: Not just for the next few years right. So.
Speaker Change: The overarching objectives are threefold first to ensure the.
Speaker Change: The successful commercialization of the new scale technology.
Speaker Change: With our strategic Investor.
Speaker Change: And then second to drive maximum value for <unk> shareholders our monetization.
Speaker Change: Third ensure fluids project execution services are considered.
Speaker Change: For new scale installations on a global basis wherever we can add value to an opportunity.
Speaker Change: So on a related note.
Speaker Change: I think you may know fluids executing front end design work for <unk>.
Speaker Change: <unk> project in Romania that is utilizing new scales.
Speaker Change: Still industry, leading technology.
Speaker Change: And Jim also talked about conventional.
We are.
Speaker Change: And nuclear power, which you've probably seen in the news recently, we've just kicked off with our joint venture partners on some front end design scope for conventional nuclear power, which is our scope on that program is being executed on a reimbursable basis. So work continues and.
Speaker Change: We're positive about new scales monetization in fact I'll be personally in a in a meeting later this week to to continue the discussion so.
Speaker Change: We will give you more information as it comes available.
Speaker Change: Great I appreciate that and I know you guys mentioned in your prepared remarks.
Speaker Change: And administration on the yields.
Speaker Change: But there's also been a lot of confusing news regarding spending three days. So maybe you can give us an update on where you stand with your federal government contracts.
Speaker Change: Tmall and then if the department of defense and if you're seeing any movement there.
Speaker Change: Yeah, I'd also ask Jim to comment here from what we can see because we've.
Speaker Change: Primarily in the mission solutions space.
Speaker Change: And based on.
Speaker Change: Our where we play and department of Defense and Department of Energy two of our key clients.
<unk> FEMA, the disappointment, which is still firmly in place so when you're talking about national security.
Speaker Change: Ah.
Speaker Change: Energy and nuclear cleanup plus.
Plus.
Speaker Change: The nuclear support of.
Speaker Change: In the nuclear deterrent space.
Speaker Change: All of that work that we're doing.
Speaker Change: In mission solutions really.
Speaker Change: His top priority and we've we've got.
Speaker Change: Indications that.
Speaker Change: Most of the work that we're focused on will we will continue because of that type of work.
Speaker Change: That we do for the <unk>.
For the for the country, Jim anything else.
Jim Brewer: You are right.
Speaker Change: Youre right, David I think we believe that.
The project work, we do in the support work we do for the government is tied to their very critical missions on these respective mission. So we expect that work to continue yes. There has been a lot of.
Speaker Change: News coming out of Washington, Sangeeta, but it seems like a lot of it's been updated and refresh soon thereafter, so they when it's all set and done.
Speaker Change: These programs are going to continue because there are mission critical.
Speaker Change: And we feel good about continuity of them and we feel good about our future opportunities admission also.
Speaker Change: With these two big departments with FEMA and other civil agencies that were pursuing workforce.
Speaker Change: I appreciate that thank you so much.
Speaker Change: Your next question comes from the line of Jamie Cook with <unk> Securities. Please go ahead hi.
Jamie Cook: Hi, good morning, and congrats Kim David and Joe I guess my first question just on LNG C. J.
Jamie Cook: <unk> announced cost increases I think last week in conjunction with their earnings and you mentioned some stuff in your prepared remarks, though can you just give us more color. There were there any cost increase that you guys incurred in the quarter associated with that project and your margins for E. S. Next year, three and a half to four 5% so at the low and the margins are.
Jamie Cook: Our lower than you're expecting this year at the low end of the range. So does that.
Jamie Cook: Reflect LNG say and then just my second question on the guide for the year I think you mentioned that it would be more backend loaded.
Jamie Cook: Could you just help us how we think about first half versus second half just said the street Calibrates estimates correctly. Thank you.
Jamie Cook: Jamie Thanks for the question.
Jamie Cook: Hi.
Jamie Cook: I'll ask Jim has been spearheading all of our.
Jamie Cook: Discussions at LNG C.
Speaker Change: And I'll ask him to comment on that and then Joe could comment on the Es margins in and.
Speaker Change: Regan can talk about the backend load and how we see the ramp up for the year, yes.
Speaker Change: Yes, Thanks, David.
Speaker Change: Hello, Jami, so as everyone knows LNG, Canada is obviously, an important project for us and we're working closely with our JV partner and our client in this final stretch.
Speaker Change: The commissioning efforts as I said are progressing well and are very advance.
Speaker Change: As I indicated train one is in advanced stages of commissioning and preparation for cool down now.
Speaker Change: Now despite the fact that we have had to expand additional resources on the installation work.
Speaker Change: We are still on track to meet our clients' objective our first cargo middle of this year.
Jamie Cook: The project continues to perform Jamie tracking to management expectations.
Jamie Cook: And we expect it to be a very successful project when it's all set and done.
Jamie Cook: We continue our conversations with applying on the on the final commercial resolution.
Jamie Cook: Had some good fruitful discussions and in recent weeks and days.
Jamie Cook: And again, we're confident this was going to be a successful project at the end of the day.
Jamie Cook: Tracking to our expectations.
Jamie Cook: So.
Speaker Change: Joe do you want to comment on how that weaves into.
Margin guide for energy solutions.
Jamie Cook: Jamie Thanks for the question, yes, if we look at kind of.
Jamie Cook: The burn off of some major programs flowing into kind of a reload.
Jamie Cook: Situation with for energy solutions around feed work, what Youre seeing is kind of a pivot.
Jamie Cook: A lot of those resources as we move over to the demand driven growth side of the model. So youll see a little bit of a drag in the beginning of the year and I think youll see better strength in that margin performance as we get to the end of the year, but really this is kind of the pivot as we as we shift over to the urban solutions side of the model.
Jamie Cook: In terms of where we see the demand driven growth in the types of teams that we need in order to support that and open the aperture to that debt.
Jamie Cook: Opportunity, but then growth in our backlog growth. So that's really where it's at right now it is kind of the trail off of the projects that we're executing and as we pivot into a pivot some of those resources over to to the urban solutions out of the business, bringing interest and I think a little bit of a testimony to the portfolio approach that you know as you are coming out.
Jamie Cook: These big projects and EES, you really see a ramp in the in the urban side in the back half of the year. So.
Jamie Cook: I'm not going to give you too much color on the shaping but.
Jamie Cook: I'll say we.
Jamie Cook: We will see a really high exit velocity from from an EBITDA as we get into the second half of the year.
Thank you.
Jamie Cook: Thanks, Jamie.
Your next question comes from the line of Andy Wittmann with Baird. Please go ahead.
Andy Wittmann: Yeah, great and thanks for taking my questions.
Speaker Change: Joe One for you just kind of looking at the cash flow guidance here $4 5500, that's at or maybe slightly above the net income guidance, which is pretty good outcome.
Speaker Change: Particularly concerned here, you've got I guess $237 million of burn associated with these legacy projects yet pretty good <unk> number. So I guess my question is kind of a couple of parts to it.
Speaker Change: Which is what are the offsets that are leading to maybe.
Speaker Change: Considering you've got this burn for legacy what's the offset on the positive side are there more JV cash distributions that are kind of propping up the the ocs guidance that you gave here.
Speaker Change: Are you expecting in 2024, you came into the year expecting to burn a lot more on the legacy projects than you actually did because during the year you've got some you've got some relief on those projects I'm thinking about <unk> Im thinking about L. A X some of those things I think helps offset some of the cash burn. So are you looking for some of these offsets in 'twenty.
Speaker Change: Five.
Speaker Change: Deliver this number or can you just talk maybe about some of the moving parts inside of that so no I think I think you laid it out.
Speaker Change: Pretty correctly as we're looking at.
Speaker Change: The the bar that we set relative to the funding of the legacy projects at the beginning of the year.
Speaker Change: We had a similar number in 2024, and we drove that number down.
Speaker Change: This is what the planning basis has laid out for us. So the $4 50 to 500 cash flow guide that we're providing absorbs that $200 million into that discussion.
Speaker Change: And we will fight obviously as we head into 2024 to bring that number to the lowest possible common denominator and I would suggest there is maybe 20% to 30% of that guide that is wrapped up into some of the additional dividends that we are repatriating in not so much for Mexico.
Speaker Change: Principally probably from from our operations up in Canada at this point, but yes. There is a piece of it it's probably a smaller piece $20 to 30% I would suggest the $4 50 to 500, probably represents is a better representation of what the ongoing business is going to present and generate over the.
Speaker Change: Over the course of the planning period coming up.
Speaker Change: Yes, Okay I appreciate that and then I guess, maybe David one for you you talked about the.
Speaker Change: The potential to attach power generation, including thermal to the data center and being a more holistic solution I think obviously that makes a lot of sense and stands to reason.
Speaker Change: Just as it relates to the thermal side I mean this is a business. Obviously you guys have had a long history, you mentioned that but.
Speaker Change: From Investors' point of view. This was a business that was kind of shut down because of the fixed price nature of the business I would imagine that the experts that you had in the company might not any longer be with the company. How how do you position the business rebuilding a team a presumably you would only do it on a reimbursable basis, how do you credibly rebuild that.
Speaker Change: The team.
Speaker Change: To deliver that solution and can you just as part of the answer to that question can you just talk about how advanced any discussions on the power generation side or for you on the thermal side. Thank you.
Speaker Change: Thanks, Andy Good morning, Thanks for the question, Yes, it's exciting.
Speaker Change: UCLA is telling me, it's exciting and electric times in the in.
Speaker Change: In the power generation in World right now everyone out there is scraped.
Speaker Change: Scraping and scratching for for where they can get power generated.
Speaker Change: Including coal to gas fired <unk> and thermal.
Speaker Change: Thermal power I had the opportunity to run our power business back in the.
Speaker Change: Mid two thousands had a great run there.
Speaker Change: With.
Speaker Change: With thermal power buildup, Jan and some clean coal facilities as well so.
Speaker Change: Definitely.
Speaker Change: We do know how to execute that was all fixed price back then but youre right.
Speaker Change: We want to move into this space.
Speaker Change: Strategically and follow R. R.
Speaker Change: Risk processes risk management processes as we as we look to to build out power generation.
Speaker Change: To support to support.
Speaker Change: The broad power demands.
Speaker Change: Going forward so.
Speaker Change: We are rebuilding and the capabilities that you know when you see our traditional I think of our traditional clients the likes of Chevron and Exxonmobil.
Speaker Change: Get just announcing this this quarter both of them that they are developing power solutions for U S data centers and we've got our traditional clients looking at that so which helps us obviously with our relationships and how to get involved with those projects.
Speaker Change: But we do need to look at.
Speaker Change: Deal shaping and.
Speaker Change: And either reimbursable or hybrid models.
Speaker Change: The risk is put in the right places on these on these generators so.
Speaker Change: I'll ask Jim to comment a little more because he is close to having them.
Speaker Change: As Chief operating officer, working closely with energy solutions, and what they're doing to get ready.
Speaker Change: Thanks, David.
Speaker Change: And are you.
Speaker Change: You brought up some interesting points in your question stuff that we are discussing internally to make sure.
Speaker Change: We are approaching this the right way.
Speaker Change: Let me just first say, we have not forgotten the lessons of the past.
Speaker Change: And when we pursue power work, we're going to be very deliberate.
Speaker Change: And our approach to the market.
Speaker Change: I think there are great opportunities out there.
Speaker Change: Driven by data centers, but in general just driven by greater demand for power.
Speaker Change: For a variety of reasons.
Speaker Change: Today, we are currently involved selectively in several power projects, both nuclear and natural gas.
Speaker Change: We've entered these projects early at the front end.
Speaker Change: Working closely with our clients looking for the best Technical solutions.
And during the front end, we're shaping the EPC EPC in phases to a commercial profile that makes sense for everyone.
Speaker Change: So we are doing that today.
Speaker Change: Like I said nuclear and thermal.
Speaker Change: And we're going to follow the same process for future opportunities as David said, we're in discussions with several utilities.
Speaker Change: About their project needs and we believe we have a lot to add there in terms of our execution and project management capabilities.
Speaker Change: And let me add our expertise and supply chain. So much of the success of our project today is driven by supply chain not just the main equipment, but all the other ancillary equipment and making sure all of that.
Speaker Change: Gets deliver on time, both for engineering and for the construction so.
Speaker Change: I think theres a lot of fluor can add value in this market without having to go to a competitive lump sum bidding process late conversions, partially reimbursable hybrids theres a lot of models, we can implement in the clients today are more amenable.
Speaker Change: To follow these more innovative created models given that they know Theres limited.
Speaker Change: Apache out there in that <unk>.
Speaker Change: <unk> delivery certainty is what they need.
Speaker Change: Yes, Theres a lot of.
Speaker Change: The existing power EPC service providers or stretch stress.
Speaker Change: Stretched right now in their execution capability so.
Speaker Change: That brings opportunity for floor.
Speaker Change: Jim said, we need to be very very careful and have patients right.
Speaker Change: One of the bigger issues in this in this space is that the turbine the turbine Oems are sold out till 2028. So that's that's another challenge that we've got on our projects to to make sure. We can we can get the supply chain right and the timing right but.
Speaker Change: It can be very very careful and measured in this space.
Speaker Change: Thank you thanks Andy.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Steven Fisher with UBS. Please go ahead.
Steven Fisher: Thanks, Good morning, and congratulations to you all with the new roles.
Steven Fisher: Just wanted to follow up on the new scale discussion I'm, just curious David I mean has anything changed in.
In terms of the negotiations I mean are you actually making progress.
Speaker Change: Investors are kind of sitting a little bit anxiously, hoping you're able to lock in some of the value in the marketplace. So I understand it's probably hard to discuss.
Speaker Change: Negotiations that are ongoing but I'm just wondering if there was any other comfort you can offered investors that that you are actually making.
Speaker Change: Tangible progress towards towards some monetization.
Steve: Yes, good morning, Steve.
Speaker Change: As you said, we're going to go into specific.
Steve: Negotiations.
Steve: Not a lot I can say other than we are.
Steve: These are detailed discussions and.
Steve: As I said I'll be participating in.
Steve: Later in the week so.
As I said it takes patience in the nuclear space and.
Steve: We're at the very front end were in the first inning on.
Steve: <unk> and commercialization of the new scale technology.
Steve: But the demand and the interest in in that type of business model going forward.
Steve: <unk> really off the charts.
Steve: As soon as.
Steve: As soon as some.
Steve: Power purchase agreements get get signed up.
Steve: I really think the floodgates are going to going to open up wide. So I'm very positive.
Steve: On on.
Steve: The opportunity for Fluor and for our strategic investor and for and for new scale supporting with their technology.
Steve: And like I said, we're in we're in detailed discussions.
Steve: To have some news for you soon.
Jamie Cook: Okay. That's helpful. And then just a follow up on Jamie's question about the energy solutions margins I guess.
Steve: A little unclear.
Steve: Why the first half at least is a little bit low given that it sounds like the mix should be.
Steve: Much higher in terms of engineering services, which should be higher margin as it was the point that you basically theres just an under absorption of the project management.
Steve: Resources and staffing that you have and that offsets that.
Steve: The higher engineering mixed and then I guess more broadly David I think a lot of your tenure.
Steve: The message has really been about a focus on putting higher margins into backlog.
Steve: And I'm wondering if you know.
Steve: Is that.
Steve: Jim and John is that is that going to be sort of still the ongoing message here is anything kind of changed in that regard.
Steve: Yes.
Steve: Talk a little bit about yes, maybe maybe what I'm trying to describe is the pivot as we came off the back end of some of these bigger programs. We have a significant amount of infrastructure that was in place to support those big programs and as they start to trail off and we pivot to demand driven growth there is a little bit of <unk>.
Steve: And in that process as we get the right people in place in order to open the aperture into what we see is.
Steve: A fairly robust opportunity slate within urban solutions. So that's just a bit of the friction that's going to occur in the beginning of the year through the first quarter into a portion of the second quarter, but as that starts to shift youll start to see better leverages coming through energy solutions and Youll start to see better backlog grew.
Steve: <unk> into urban solutions, and that'll help normalize your margin profile across the spectrum of the segments that we have.
Steve: Right and then on.
Steve: On higher margins and a focus on higher margins and a healthier backlog going forward and also moving to primarily reimbursable.
Steve: Backlog as part of that.
Steve: Our strategic priorities, which we'll talk about in April with you.
Steve: Have not changed we've got a little more focus on projects project delivery.
Steve: Because we are growing and we have to make sure we cover all our bases and execute with excellence as we grow and not get stretched.
Steve: So the strategic priorities are pretty well the same that you'll hear about and when we talk about fair and balanced contract terms.
Steve: And getting paid properly for the value. We provide that is still firmly in place going forward and again thats, what youll be hearing more about here in April.
Steve: So.
Steve: Yes, I should turn it.
Speaker Change: Jim in your you're going because you've asked them the question as well Jim that's right David.
Speaker Change: There's going to be a focus on the proper returns on a risk adjusted basis. The fact that the.
Portfolio is majority of Reimbursable helps.
Speaker Change: That.
Speaker Change:
Speaker Change: Yes, there is a there is a pivot in energy solutions and <unk>.
Speaker Change: Market I know well because I ran that business for several years.
Speaker Change: We're reloading with a lot of significant work, including the power discussion, we had a minute ago.
Speaker Change: But theres other opportunities LNG and de carbonization in downstream and chemicals, So we expect that market.
Speaker Change: Probably in the 2006 timeframe to start picking up in the meantime, urban is going to be our primary.
Hedge and the growth.
Speaker Change: So yes, there is a lot of focus on margin, but there's also a lot of focus on risk.
Speaker Change: Risk and making sure the margins we are getting are proper for the risk profile. So.
Speaker Change: The priority is going to be the same.
Speaker Change: And in a methodical way.
Speaker Change: Rigorous manner.
Speaker Change: I would like to add I would just add.
Speaker Change: Okay.
Speaker Change: Continue to be a focus I think the phenomenon of.
Speaker Change: The absorption issue that you raised is real I think as Jim pointed out that will normalize as we get closer to 2026.
Speaker Change: And we will see some of the leverage to the margins in Es as as we get into that latter half of the year. So.
Speaker Change: Your question was intuitive and a bad leading but I think you've heard us I'll echo that.
Speaker Change: Continued focus on the margins coming into the backlog.
Speaker Change: Terrific. Thank you very much.
Speaker Change: Thanks.
Speaker Change: Your next question comes from the line of Brent Thielman with D. A Davidson. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Hey, Thanks, good morning, congrats as well to everyone.
Speaker Change: I just had a question on the financial guidance inputs and specifically just around.
Speaker Change: The interest income expectation of $80 million in 2025, I think you've realized 150 in 2024.
Speaker Change: Can you bridge. The difference there are there any other cash outflows need to be aware of I understand youre going to have some share repurchases in there, but I just wanted to understand that.
Speaker Change: Yes. Good morning, Thanks for the question Brent.
Speaker Change: So as we think about your intuition is again spot on.
Speaker Change: You are seeing a little bit of the impact of the share repo, which kicked off and we will remain in progress and Ernest.
Speaker Change: All of the 25.
Speaker Change: The biggest thing that maybe youre not.
Speaker Change: Thinking about is the cash that we held at above our significant joint ventures, notably in Canada, and Mexico, and so we had significant repatriation of those dollars back into the report.
Speaker Change: And out of the JV.
Speaker Change: And so you wouldn't have necessarily seen that cash.
Speaker Change: And it has now come back into the.
Speaker Change: Corporate portfolio and so we were kind of generating interest on cash you couldn't see because of the nature of the JV accounting. So the biggest the biggest difference there in addition to a little bit lower interest rates.
Speaker Change: Across the balance of the year, but the biggest thing is really the JV cash.
Speaker Change: That has now been redeployed back to the JV partners.
Speaker Change: Okay. Okay.
Speaker Change: And we're returning and we're returning shareholder yet and we're buying back shares too right. So.
Understood Yes.
Speaker Change: I guess, just a follow up and all the conversation around the.
The stronger book to burn I think well understood urban solutions is going to continue to be a nice driver here I guess I'm more curious on the timing and energy solutions as we advance through 2025 are you.
So cautiously optimistic or optimistic we might see an inflection in this kind of downward trend in backlog.
Speaker Change: More recently I'm, just trying to get a sense.
Speaker Change: And do you think some of these opportunities start to.
Speaker Change: Accelerate there.
Jim Brewer: Yes, Brent this is Jim.
Jim Brewer: Yes, 2025 is the reloading year so.
Speaker Change: Look we don't always control the timing of awards, we can get ready for the projects we.
Speaker Change: Developed the teams the proposals the execution plans, sometimes these front end efforts dragged on because the declines.
Speaker Change: As an interesting declines in the energy market.
Speaker Change: Had been a little more careful and prudent and launching there.
Speaker Change: And the clients we see in other markets that are more time to market and are willing to jump the gun earlier.
Speaker Change: So when you ask when will the inflection point turn upward.
Speaker Change: It depends a little bit on these <unk>.
Speaker Change: <unk>.
Speaker Change: I would say.
Speaker Change: 26 has a higher chance for sure than 25.
Speaker Change: Perhaps even the second half of 2006, so we're doing everything we can to setup to projects for success doing quality front end work, helping the clients maneuver the <unk>.
Speaker Change: <unk> of the supply chain.
Speaker Change: Helping them maneuver the challenges of potential tariffs and other issues. So theres a lot of good work that happens on the front end to set these projects for success the exact timing of them, it's up to the clients.
Speaker Change: Specifically to your question I'm, probably looking at a 26 timeframe.
Speaker Change: Okay. Good thank you.
Speaker Change: Thanks Brent.
Speaker Change: Due to time constraints. This concludes our Q&A session I will now turn the call back to David Constable Chief Executive Officer for closing remarks.
Speaker Change: Thank you operator, and many thanks to everyone for participating on our call today.
Speaker Change: As we close out 2024 financier really pleased with our cash generation trajectory on our and our ability to return capital to shareholders.
Speaker Change: In addition, we've.
Speaker Change: We have significant near term prospects that will support further revenue growth and broad based industry diversification for the company. So we appreciate your interest in Fluor Corporation and thanks again for your time today.
Speaker Change: This concludes today's conference call. Thank you for joining you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].