Q2 2025 Fluor Corp Earnings Call

Tiffany: Good morning and welcome to Fluor's second quarter 2025 earnings conference call. Today's call is being recorded. At this time, all participants are in a listen-only mode. A question-and-answer session will follow management's presentation. A replay of today's conference call will be available at approximately 10:30 A.M. Eastern Time today, accessible on Fluor's website at investor.fluor.com. The web replay will be available for 30 days. A telephone replay will also be available for seven days through a registration link, also accessible on Fluor's website at investor.fluor.com. At this time, for opening remarks, I would like to turn the call over to Jason Landkamer, Vice President, Investor Relations. Please go ahead, Mr. Landkamer.

Good morning and welcome to Fluor's second quarter 2025 earnings conference call.

Today's call is being recorded.

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

A question-and-answer session will follow management's presentation.

A replay of today's conference call will be available at approximately 10:30 a.m. Eastern Time today. Accessible on Fluor's website at investor.flur.com, the web replay will be available for 30 days.

A telephone replay will also be available for 7 days through a registration link. It will also be accessible on Fluor's website at investor.fluor.com.

Jason Landkamer: Thank you, Tiffany. Welcome to Fluor's 2025 second quarter earnings call. James Breuer, Fluor's Chief Executive Officer, and John Regan, Fluor's Chief Financial Officer, are with us today. Fluor issued its second quarter earnings release earlier this morning, and a slide presentation is posted on our website that we will reference when making prepared remarks. Before getting started, I would like to refer to our safe harbor note regarding forward-looking statements, which are summarized on slide two. During today's presentation, we will 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 2024 Form 10-K and our Form 10-Q, which was filed earlier today. During this call, we will discuss certain non-GAAP financial measures.

At this time for opening remarks, I would like to turn the call over to Jason Linker, Vice President of Investor Relations. Please go ahead, Mr. Linker.

Thank you, Tiffany, welcome to floors. 2025 second quarter earnings call, Jim Breuer, floors, chief executive officer and John Regan floors Chief Financial Officer or with us today.

Fluor issued its second quarter earnings release earlier this morning, and a slight presentation is posted on our website that we will reference while making prepared remarks.

Before getting started, I would like to refer to our Safe Harbor note regarding forward-looking statements, which are summarized on slide 2.

During today's presentation, we will be making forward-looking statements which reflect our current analysis of existing Trends and information. There is 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 2024 form 10K, and our form, 10 key which was filed earlier today,

Jason Landkamer: 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. With that, I'll now turn the call over to Jim Breuer, Fluor's Chief Executive Officer. Jim?

During this call, we will discuss certain non-GAAP financial measures and reconciliations of these amounts to the comparable GAAP measures, which are reflected in our earnings release and posted in the Investor Relations section of our website at investor.com.

Jim Breuer: Thank you, Jason, and good morning, everyone. Thank you for joining today. Please turn to slide three. To start, I wanted to provide an update on our ownership of NuScale Class B shares. In the next few weeks, NuScale will convert 15 million shares into Class A securities. We see this as a positive step in returning value to our shareholders. As NuScale's largest shareholder and the only firm with NuScale EPC expertise, we continue to be excited about our investment and the opportunities to deploy NuScale technology in the power market. John will provide additional details in his remarks. Now, let's turn to our operating review, beginning on slide four. Revenue for the second quarter was $4 billion. Consolidated new awards for the second quarter were $1.8 billion and 72% reimbursable.

With that. I'll now turn the call over to Jim Breuer florist Chief Executive Officer. Jim.

Thank you, Jason, and good morning everyone. Thank you for joining today. Please turn to slide 3.

To start.

I wanted to provide an update on our ownership of new scale Class B shares.

In the next few weeks, a new scale will convert 15 million shares into Class A securities.

We see this as a positive step in returning value to our shareholders.

As new scales largest shareholder and the only firm with new scale EPC expertise. We continue to be excited about our investments and the opportunities to deploy new scale technology in the power Market.

John will provide additional details in his remarks.

Now, let's turn to our operating review. Beginning on slide 4.

Revenue for the second quarter was $4 billion.

Jim Breuer: In addition to these awards, we recognize $1.7 billion in positive backlog adjustments for scope changes on existing reimbursable work. For the first half of 2025, new awards were $7.6 billion, with a book-to-burn PGM above one. Total backlog remains around $28 billion, of which 80% is reimbursable. Moving to our business segments, please turn to slide six. Urban Solutions reported a profit of $29 million in the second quarter. Results in this segment reflect a $54 million net impact of cost growth and expected recoveries on three infrastructure projects. I'll provide details on these charges in a moment. We also had lower takeup in the quarter on a couple of mining and metals projects as timelines were extended, and we saw a slower-than-expected ramp-up in revenue on a large life sciences project. New awards for the quarter were $856 million compared to $2.4 billion a year ago.

Consolidated new awards for the second quarter were $1.8 billion, with 72% being reimbursable.

Versible work.

For the first half of 2025, new awards were $7.6 billion with a book-to-burn ratio, PGM above 1.

Total backlog remains around 28 billion dollars of which 80% is reimbursable.

Moving to our business segments. Please turn to slide 6.

Urban Solutions reported a profit of $29 million in the second quarter.

results in this segment reflect a 54 million, net impact of cost growth and expected recoveries on 3 infrastructure projects,

I'll provide details on these charges in the moment.

We also have lower take up in the quarter on a couple of Mining and metals projects as timelines were extended.

And we saw a slower than expected ramp up in revenue on a large Life Sciences project.

New awards for the quarter were 856 million.

Jim Breuer: This includes the full release for the Ricoh-Dick copper and gold mining project in Pakistan and an incremental award for a life sciences project in the U.S. As a note, the Ricoh-Dick award is a services-only contract, and therefore it excludes the typical CFM associated with similar large mining projects. Ending backlog in Urban, now at $20.6 billion, represents 73% of Fluor's total backlog. Now, please turn to slide seven. During the quarter, we substantially completed the EPCM scope on two innovative co-location data centers in India for an important but confidential client. Prospects for the ATLS business in the second half of 2025 include a pharmaceutical facility and additional data center work under our MSA with a major technology provider. We remain excited about the opportunities in the semiconductor and data center markets over the longer term.

Compared to 2.4 billion a year ago.

This includes the full release for the RICO dick copper and gold mining project in Pakistan.

And an incremental award for a life sciences project in the US.

As a note.

the RICO dick award is a Services only contract and therefore

It excludes the typic, the typical CFM associated with similar, large mining projects.

Ending backlog and urban now at 20.6 billion dollars represents 73% of floors, total backlog.

Now, please turn to slide 7.

During the quarter, we substantially completed the epcm scope on 2 Innovative co-location data centers in India.

For an important, but confidential clients.

Prospects for the ATLS business in the second half of 2025.

Include a pharmaceutical facility and additional data center work under our MSA with a major technology provider.

Jim Breuer: Near-term, in semiconductors, our client's investment intentions have not yet translated into meaningful new awards. In the data center market, clients are refining their capital spending plans to solve for short-term demand in addition to addressing power and water needs for the ever-increasing scale of projects. Having said that, we continue to deepen our relationships with data center clients as they express a need for our capabilities, large-scale project acumen, and modularization expertise. In mining and metals, while the fundamentals for capital spending by our clients remain very strong, the immediate enthusiasm for major capital deployment is currently tempered by the potential impact of global trade uncertainty. During the quarter, we built upon our relationships with our traditional clients, including Anglo-American, Barrick, BHP, Freeport-McMoran, MADEN, and Rio Tinto.

We remain excited about the opportunities in the semiconductor and data center markets over the longer term.

Near-term in semiconductors are clients investment intentions have not yet translated into meaningful new Awards.

In the data center market, clients are refining their capital spending plans to solve for short-term demands, in addition to addressing power and water needs for the ever-increasing scale of projects.

Having said that?

We continue to deepen our relationships with data center clients.

As they express a need for our capabilities, large-scale project, Acumen, and modularization expertise.

In mining and metals. While the fundamentals for Capital spending by our clients remain very strong.

The immediate enthusiasm for major Capital deployment is currently tempered by the potential impact of global trade uncertainty.

During the quarter.

We built upon our relationships with our traditional clients.

Jim Breuer: We also maintain our strong focus on execution and are leveraging our global capabilities from our traditional energy solutions offices to deliver high-quality results on ongoing projects. For the next few quarters, our opportunities include additional scope on the Ricoh-Dick project, copper work in Canada, green steel production in Europe, and aluminum recycling in the Middle East. We are also very excited about opportunities in the United States, where we are already providing support and working on early engineering. These include several significant copper developments and a rare earth project in Wyoming. During the quarter, there were a number of announcements about the investment and development of mining projects in the U.S., including rare earth and critical minerals such as an opportunity for MP materials. We are also seeing interest in steel production.

Including Anglo American, Barrick BHP, Freeport-McMoRan, Modern, and Rio Tinto.

We also maintain our strong focus on execution.

And our leveraging, our Global capabilities from our traditional Energy Solutions, offices to deliver high-quality results on ongoing projects.

For the next few quarters, our opportunities include additional scope on their Rico de project.

Copper work in Canada.

Green steel production in Europe and aluminum recycling in the Middle East.

We're also very excited about opportunities in the United States.

Where we're already providing support and working on early engineering.

These include several significant copper developments.

And a rare earth project in Wyoming.

During the quarter.

There were a number of announcements about the investment and development of mining projects in the US, including Rare Earth and critical minerals, such as an opportunity for MP materials.

Jim Breuer: We have strong relationships with many of these companies and believe that this market will be a source of opportunity in the next few quarters. Moving to slide eight. As I mentioned, infrastructure experienced cost growth on three projects during the quarter. On Gordie Howe's cost increase in the second quarter, we experienced rework and additional efforts required to hand over both ports of entry. This project is now 97% complete, and we expect substantial completion this fall. The 635 LBJ project experienced cost increases in construction materials as well as labor productivity impacts. This project is 78% complete, with an expected substantial completion date in Q2 of 2026. Finally, on I-35 Phase Two, the project experienced increased costs due to a subcontractor default, third-party utility delays, and mitigation costs related to these delays. This project is 58% complete and targeting substantial completion in Q4 of 2026.

We're also seeing interest in steel production.

We have strong relationships with many of these companies.

And believe that this Market will be a source of opportunity in the next few quarters.

As I mentioned infrastructure, experience cost growth on 3 projects during the quarter.

On Gordie Howe.

Cost increased in the second quarter as we experienced rework and additional efforts required to handle both ports of entry.

This project is now. 97% complete.

And we expect substantial completion this fall.

The 635 LBJ project, experienced cost increases in construction materials, as well as labor productivity impacts.

This project is 78% complete, with an expected substantial completion date in Q2 2026.

Finally on I35 Phase 2. The project experience. Increased costs due to a subcontractor default.

Third-party utility delays and mitigation costs related to these delays.

This project is 58% complete and targeting substantial completion in Q4 2026.

Jim Breuer: To address the issues across these projects, we have increased operations oversight and strengthened the execution teams. We are also taking action against certain subcontractors, including designers, for recovery of costs caused by their poor performance. Other projects in the infrastructure portfolio continue to perform to management expectations. For example, we are pleased to report that the Chicago Transit Authority Red Purple Line project opened up four stations and celebrated its first rider on July 19th. The Oak Hill Parkway project in Austin successfully completed a traffic switch to newly constructed roadways and bridges. Moving to energy solutions, please turn to slide nine. Segment profit was $15 million compared to $75 million a year ago. Results reflect reduced contributions due to projects nearing completion and the recognition of an unexpected $31 million arbitration ruling for a fabrication project completed by our Mexico joint venture in 2021.

To address the issues across these projects, we have increased operations, oversight, and strengthened the execution teams.

Other projects in the infrastructure portfolio continue to perform to management expectations.

For example.

Opened up 4 stations and celebrated its first rider on July 19.

And the Oak Hill Parkway project in Austin successfully, completed a traffic switch to newly, constructed roadways and bridges.

moving to Energy Solutions, please turn to slide 9

Segment profit was $15 million compared to $75 million a year ago.

Jim Breuer: This impact is not reflected in our adjusted results. New awards for the quarter totaled $549 million. Prospects for the next few quarters are expected to be modest as the reload we discussed for 2025 is taking longer than expected. This is due to a number of factors, including reduced CapEx budgets, trade uncertainty, and soft battery and chemicals markets. We continue to engage in multiple power opportunities for the medium term that are aligned with our proven pursuit principles of fair and balanced risk allocation. This includes the improved market and policy environment surrounding nuclear power investments, as well as selective opportunities in the gas-fired power generation market. Turning to slide ten, we are extremely proud of the multiple accomplishments on LNG Canada in recent months. We achieved RFSU on train one in the quarter, and the clients shipped the first cargo of LNG, meeting their announced timeline.

Results reflect reduce contributions due to projects nearing completion and the recognition of an unexpected 31 million arbitration ruling for a fabrication project completed by our Mexico joint venture in 2021.

This in fact is not reflected in our adjusted results.

New awards for the quarter totaled, 549 million.

Prospects for the next few quarters are expected to be modest as the reload. We discussed for 2025 is taking longer than expected.

This is due to a number of factors including reduced, capex, budgets, trade, uncertainty and soft, battery, and chemicals markets.

We continue to engage in multiple power opportunities for the medium-term.

That are aligned with our proven Pursuit principles of fair and balanced risk, allocation.

This includes the improved market and policy environment surrounding nuclear power Investments.

As well as selective opportunities in the gas-fired power generation market.

Turning to slide 10.

We are extremely proud of the multiple accomplishments on LG Canada in recent months.

We achieved rfsu on train 1 in the quarter.

Jim Breuer: This milestone marks a significant achievement for the LNG Canada organization and for our joint venture responsible for EPC execution. I congratulate the project team and the thousands of workers who helped build this facility. Most importantly, this is a watershed moment for LNG Canada, who is now becoming a significant player in the increasingly important LNG market. Our team is now focused on achieving RFSU on train two. In line with our previous comments regarding timing of resolution, I am pleased to report that our joint venture has recently reached a settlement agreement covering our COVID claims and other matters. Finally, this morning we announced an award to our joint venture to update the feed package for a proposed Phase Two expansion. If built, this expansion would potentially double the size of the facility. We look forward to supporting LNG Canada as they work towards a final investment decision.

And the client shipped the first cargo of LNG meeting their announced timeline.

This Milestone marks a significant achievement for the LG Canada organization.

And for our joint venture responsible for EPC execution,

I congratulate the project team and the thousands of workers who helped build this facility.

Most importantly, this is a watershed moment for Canada, who is now becoming a significant player in the increasingly important LNG Market.

Our team is not focused on achieving rfsu, on train 2.

And in line with our previous comments regarding timing of resolution.

I am pleased to report that our joint venture has recently reached a settlement agreement.

Covering our Co claims and other matters.

And finally, this morning, we announced an award to our joint venture to update the feed package for a proposed Phase 2 expansion.

If built.

This expansion would potentially double the size of the facility.

Supporting LNG Canada, as they work towards a final investment decision.

Jim Breuer: Moving on to slide 11. Mission Solutions reported a segment profit of $35 million for the second quarter, compared to $41 million a year ago. Profits slightly declined due to a temporary stop work order for an existing project on Tinian Island. We look forward to the restart of the work in the near future. New awards of $363 million included short-term extensions at two DOE sites and additional funding for hurricane relief efforts. Ending backlog for the quarter was $2 billion. As a reminder, this excludes work reported under the equity method. For the balance of the year, we have the Portsmouth Recompete and key prospects for projects that are supporting HALO nuclear fuel efforts.

Moving on to slide 11.

Mission Solutions reported a segment profit of 35 million for the second quarter.

Compared to 41 million a year ago.

Profits slightly declined due to a temporary stop. Work order for an existing project on Tinian Island.

We look forward to the restart of the work in the near future.

New Awards of 363 million included short-term extensions at 2 doe sites.

And additional funding for hurricane relief efforts.

Ending backlog for the quarter was $2 billion.

As a reminder, this excludes work reported under the equity method.

Jim Breuer: We now expect the full release of work at the Savannah River Plutonium project in the first half of 2026, while we continue to work at full speed to progress engineering, long lead procurement, and early site work. Before I turn the call over to John, I want to provide an update on our view of the overall business environment. Please turn to slide 12. In our last call, I mentioned that some clients were forging ahead with their time-to-market prospects, while others were exercising caution as their businesses are more sensitive to economic factors. Over the past couple of months, we've seen more clients continue to take a wait-and-see approach due to a variety of reasons, including ongoing trade policy discussions and developments, cost escalation, and interest rates. In a few cases, we've seen project cancellations or extended deferrals. So what does that mean for Fluor?

For the balance of the year, we have the Portsmith recompete and key prospects for projects that are supporting Halu nuclear fuel efforts.

We now expect the full release of work at the Savannah. River plutonium project in the first half of 2026.

While we continue to work at full speed to progress, engineering, Longley procurement and early sight work.

Before I turn the call over to John.

I want to provide an update on our view of the overall business environment.

Please turn to slide 12.

In our last call.

I mentioned that some clients were forging ahead with their time to Market prospects.

While others were exercising caution, as their businesses are more sensitive to economic factors.

Over the past couple of months, we've seen more clients continue to take a wait and see approach.

Due to a variety of reasons, including ongoing trade, policy discussions, and developments.

Cost escalation and interest rates.

In a few cases, we've seen project cancellations or extended deferrals.

Jim Breuer: It means that we are at a point in the cycle of short-term hesitation on our way to longer-term opportunity. We believe that the hesitation to release full EPC investments will subside once there is certainty in trade agreements and on their impact on client end markets, project costs, and importantly, the rebalancing of the supply chain. Furthermore, and specifically in the U.S., once the effects of the recently enacted pro-growth policies materialize, we expect clients to accelerate domestic investment in many of our end markets, such as manufacturing, semiconductors, data centers, power, mining and metals, and national security. With that, let me turn the call over to John for the financial update. John?

So, what does that mean for flu?

It means that we are at a point in the cycle of short-term hesitation, on our way to longer term opportunity.

We believe that the hesitation to release full EPC investments will subside.

Once there is certainty and trade agreements.

And under impact on client and markets project costs.

And importantly, the rebalancing of the supply chain.

Furthermore, and specifically, in the U.S.

once the effects of the recently, enacted, progrowth policies materialized,

We expect clients to accelerate domestic investment in many of our end markets.

Such as manufacturing semiconductors data centers, power mining metals and National Security.

John Regan: Thanks, Jim, and good morning, everyone. Today, I will cover our results for the second quarter and go over the revised guidance for the balance of the year. Please turn to slide 14 and the financial highlights. Jim already referenced revenue and new awards in the quarter, but as you can see, our consolidated segment profit for Q2 was $78 million. Our GAAP results notably reflect a $3.2 billion pre-tax mark-to-market gain for NuScale, with a related tax impact of $757 million. It also includes a $31 million unfavorable arbitration ruling related to our JV in Mexico for a job completed long ago. It includes a $13 million deferral of PGM associated with the $1.7 billion in backlog adjustments that Jim described. From a cash flow perspective, the cash payment for settlement of the NTTA matter that we accrued in Q4, which amounted to $33 million.

With that, let me turn the call over to John for the financial update. John, thanks Jim and good morning, everyone.

Today I'll cover our results for the second quarter and go over the revised guidance for the balance of the year.

Please turn to slide 14 and the financial highlights.

Jim already, referenced revenue and new Awards in the quarter. But as you can see our Consolidated segment profit for Q2 was 78 million,

Our Gap results, notably reflect a 3.2 billion pre-tax mark-to-market, gain for new scale.

With a related tax impact of 757 million.

It also includes a $31 million unfavorable arbitration ruling related to our JB and Mexico for a job completed long ago.

It includes a $13 million deferral of PGM.

Uh, associated with the 1.7 billion in backlog, adjustments that Jim described.

John Regan: With respect to the $13 million deferral of PGM, I would remind you in Q1 we saw an acceleration of PGM associated with some D scopes. The $13 million this quarter represents the inverse of that, but is unrelated to the same projects impacting Q1. Adjusted EBITDA for Q2 was $96 million compared to $165 million a year ago. Our adjusted EPS was $0.43 compared to $0.85 in Q4. The reconciliation to GAAP figures can be found in our earnings release, but adjusted EBITDA includes the infrastructure charges, but not the energy solutions arbitration matter. G&A for the quarter was $52 million, similar to the $50 million reported a year ago. However, results for this quarter reflect lower performance-based compensation offset by the recognition of some severance costs and a slight increase in our reserve for legacy legal claims.

And from a cash flow perspective, the cash payment for settlement of the NTTA matter that we, that we accrued in Q4, which amounted to 33 million.

With respect to the $13 million deferral of PGM, I'd remind you that in Q1, we saw an acceleration of PGM associated with some D scopes.

The $13 million. This quarter represents the inverse of that.

But is unrelated to the same projects impacting q1.

65 million a year ago.

Our adjusted EPS was 43 cents compared to 85 cents in 24.

The reconciliation to GAAP figures can be found on our earnings release.

But adjusted ibida includes the infrastructure charges but not the Energy Solutions arbitration matter.

GNA for the quarter was 52 million.

Similar to the 50 million reported a year ago.

however, results for this quarter reflect lower performance base compensation,

Offset by the recognition of some Severance costs, and a slight increase in our reserved, for legacy, legal claims.

John Regan: The restructuring activities principally relate to reductions in headcount in several non-U.S. energy solutions offices. Although we accrued the expected costs in Q2, the funding of the underlying obligations will occur across the back half of 2025. We continue to actively review our overhead footprint in light of our needs and scale of operations. This year, for example, we right-sized our efforts in global sustainability compliance and reporting as a result of the CSRD deferral. On another note, weakness in the dollar contributed to an FX impact of $41 million in the quarter. This was uncharacteristically large, but irrespective of its size, was also excluded from our adjusted results. Net interest income in Q2 is unchanged from the last quarter at $17 million, but compares to $38 million a year ago. This reduction results from lower cash balances for projects nearing completion, particularly at LNG Canada.

the restructuring activities, principally relate to reductions in headcount, in several non US Energy Solutions offices

Although we accrued the expected costs in Q2 the funding of the underlying obligations will occur our across the back half of 25.

We continue to actively review, our overhead footprint in light of our needs, and scale of operations.

This year, for example, we right-sized our efforts in global sustainability compliance and reporting as a result of the CSRD deferral.

On another note, weakness in the dollar contributed to an FX impact of $41 million in the quarter.

This was uncharacteristically large but irrespective of its size was also excluded from our adjusted results.

Net interest income in Q2 is unchanged from the last quarter at 17 million.

But compared to 38 million a year ago.

John Regan: Our share repurchases also impact the year-over-year decrease, as did the slowdown at our JV in Mexico. As a reminder, at the JV in Mexico, we have some unique credit protection features, including an ability to ramp down execution activities and to novate subcontractor obligations in the event of non-payment. With delays in payment, we unfortunately had to invoke some of those rights this quarter, which impacted the quarter from both PGM and interest income and does trickle into the additional effects in the back half of 2025 that are embedded within the revised guidance. Moving to slide 15. At June 30th, we had $2.3 billion of cash in marketable securities compared to $2.5 billion at March 31st. Operating cash flow for the quarter fell short of our expectations, with an outflow of $21 million compared to cash generation of $282 million a year ago.

This reduction results from lower cash balances for projects nearing, completion. Particularly at LGC.

Our share repurchases also impact the year-over-year decrease, as did the slowdown at our JV in Mexico.

As a reminder, at the JB in Mexico, we have some unique credit protection features.

Including an ability to ramp down execution activities and to innovate sub subcontractor obligations in the event of non-payment.

With delays and payment we unfortunately had to invoke some of those rights to this quarter.

which impacted the quarter from both PGM and interest income.

And this trickles into the additional effects in the back half of 2025 that are embedded within the revised guidance.

Moving to slide 15.

at June 30th, we had 2.3 billion dollars of cash and marketable securities compared to 2 and a half billion at

March 31st.

John Regan: This shortfall versus expectation was a result of a number of factors: increases in working capital on several large projects for a variety of factors, funding of some of the cost growth in the infrastructure space, and the timing of AR collections in Mission Solutions and at our JV in Mexico. As a reminder, the 2024 cash flow number reflected the resumption of dividends from LNG Canada and significant mobilization receipts for two then early-stage projects. As an update on our legacy projects, in Q2, we provided $44 million of funding. Our original expectation of funding about $200 million on legacy projects for all of 2025 holds true, although we now anticipate some more funding in 2026 based on the revised project estimates. Also, some of the claims associated with the recovery for these jobs will likely extend into 2026, which has a bearing on our OCF for this year.

Operating cash flow for the quarter, fell short of our expectations with an outflow of 21 million, compared to cash generation of 282 million a year ago.

This shortfall versus expectation was a result of a number of factors.

1 increases in working capital on several large projects uh for a variety of factors.

Funding of some of the cost growth in the infrastructure space.

And the timing of our collections in Mission Solutions and at our JB in Mexico.

As a reminder, the $24 million cash flow number reflected the resumption of dividends from LGC.

And significant mobilization receipts for 2, then early stage projects.

as an update on our Legacy projects in Q2 we provided 44 million dollars of funding

Our original expectation of funding about 200 million on Legacy projects, for all of 25. Hold true.

Although we now anticipate some more funding in 26 based on the revised project estimates.

Also, some of the claims associated with the recovery for these jobs will likely extend into 2026.

Which has a bearing on our OCF for this year.

John Regan: On the capital allocation front, we bought 4 million shares in the second quarter, spending $153 million. In light of our revised operating cash flow guidance, we are expecting to slow the repurchase cadence in the second half of 2025. Based on current projections, we expect total repurchases to be between $450 to $500 million versus the $600 million for all of 2025 communicated after Q1. At our investor day, we implied roughly $1 billion of stock repurchases across the planning cycle. Even at this reduced tempo, we still outpace the straight-line effect of that target, and we are not revising that figure. As a reminder, all of these repurchase expectations come on the back of our base operations, not through any SMR monetization. More on that in the outlook.

On the capital, allocation front.

We bought 4 million shares in the second quarter spending 153 million.

In light of our revised operating cash flow guidance.

We are expecting to slow the repurchase cadence in the second half of 2025.

Based on current projections, we expect total repurchases.

To be between 450 and 450 to 500 million.

Versus the 600 million. For all of 25 communication after quarter 1.

At our investor day, we implied roughly $1 billion of stock repurchases across the planning cycle.

This reduced tempo. We still outpaced the straight-line effect of that target, and we are not revising that figure.

John Regan: That said, there are a number of important milestones in the next 90 days, which will address the contingency wedge of my cash forecast wheel from investor day, which itself subsumes several items such as litigation, tax disputes, and other matters. The final outcome of these matters over the next quarter will influence where we land within that repurchase range. Coming back to LNG Canada, the JV remains focused on the completion of train two and the remaining open punch list items, with future releases of dividends to the JV partners tied to the completion of train two and the normal progression of the warranty period. The COVID settlement agreement largely mirrors the expectations we had embedded in earlier forecasts, but it does provide more insight into when the JV will be able to collect for such items and make future dividends to its partners.

As a reminder, all of these repurchase expectations come on the back of our base operations, not through any SMR monetization. More on that in the Outlook.

That said, there are a number of important milestones in the next 90 days.

Uh, which will address the contingency wedge of my cash forecast wheel from investor day.

Which itself subsumes several items such as litigation taxes, fees, and other matters.

The final outcome of these matters, over the next quarter will influence where we land within that repurchase range.

Coming back to LGC the JV remains focused on the completion of train 2 and the remaining open punch list items.

With future releases of dividends to the JV partners, tied to the completion of Train 2 and the normal progression of the warranty period.

The co settlement agreement largely mirrors. The expectations. We had embedded in earlier forecasts.

But it does provide more insight into when the JV will be able to collect for such items.

And make future dividends to its partners.

John Regan: For several quarters, we have described our efforts to monetize our ownership of NuScale. Within the strategic sale pursuit, most of the discussion centered around how to convey the P shares without converting them into the registered securities. With NuScale's stock performance in the last few months, we see it as increasingly difficult for the strategic buying community to consummate a transaction at fair value. Accordingly, we are more embracing of a stock market-facing solution, which can be better accomplished with the conversion into A shares. As Jim mentioned, we expect to complete a 15 million share conversion of NuScale shares this month. We further expect to unveil our monetization plan over the next quarter, but I do not want to be too specific on how or when at this juncture.

For several quarters, we've described our efforts to monetize our ownership of New Scale.

Within the Strategic sale Pursuit. Most of the discussion centered around how to convey the bee shares without converting them into the registered securities.

With new scale stock performance. In the last few months, we see it as increasingly difficult for the Strategic, buying Community to consummate a transaction that fair value.

Accordingly, we are more embracing of a stock market facing solution.

Which can be better accomplished with the conversion into a shares.

As Jim mentioned, we expect to complete a 15 million share conversion of new scale shares this month.

John Regan: In the meantime, the conversion will go a long way to utilizing the tax credits that I have mentioned before. In any event, we still expect to use NuScale to contribute to our capital return objectives across the planning cycle. Moving to the outlook on slide 16, we are revising our 2025 adjusted EBITDA guidance to $475 million to $525 million and our adjusted EPS guidance to $1.95 to $2.15. As you think about this revised guidance, the big factors causing the decrease are the hesitancy prevailing in the market and the related impact to book and burn, plus the decrease associated with infra and the slowdown in Mexico, roughly with similarly equivalent weighting. Our expectations for operating cash flow now range from $200 million to $250 million for the full year or $500 million to $550 million for the second half of the year.

We further expect to unveil our monetization plan over the next quarter. But I don't want to be too specific on how or when at this juncture.

In the meantime, the conversion will go a long way to utilizing the tax credits that I've mentioned before.

In any event, we still expect to use new scale to contribute to our Capital return objectives across the planning cycle.

Moving to the outlook on slide 16.

We are revising. Our 25 adjusted IBA guidance to 475 to 525 million, and our adjusted EPS guidance to a195 $2.15.

As you think about this revised guidance, the big factor causing the decrease is the hesitancy prevailing in the market and the related impact on book and burn.

Plus the decrease associated with infra and the slowdown in Mexico, roughly with similarly equivalent waiting.

Our expectations for operating cash flow. Now range from 200 to 250 million for the full year.

John Regan: This reflects the lower guidance range for EBITDA and the timing of expected claims recovery for the infrastructure projects, but excludes the effects, if any, on legal settlements. Key assumptions and expectations for 2025 include a new awards outlook of $13 billion to $15 billion, as we now expect the release for SRPPF, our largest prospect for 2025, will extend into the first half of 2026. New awards are also expected to be impacted by the economic observations that Jim made earlier. We see revenue growth of approximately 5% to 10% compared against 2024, alongside the other guidance listed on the slide. Our expectations for 2025 segment margins are unchanged, except for Urban, where we now expect a range of approximately 2.5% to 3.5%, largely reflective of Q2 results. With that, Tiffany, we are now ready for our first question.

Or 500 to 550 million for the second half of the year.

This reflects the lower guidance range for EBITDA and the timing of expected claims recovery for the infrastructure projects, but excludes the effects, if any, on legal settlements.

Key assumptions and expectations for 2025 include.

A new Awards Outlook of 13 to 15 billion as we now expect the release for srpp.

Our largest Prospect for 25 will extend into the first half of 2026.

New awards are also expected to be impacted by the economic observations that Jim made earlier.

We see revenue growth of approximately 5% to 10% compared against 2024.

Alongside the other guidance listed on the slide.

Our expectations for Cal 25 segments. Margins are unchanged, except for urban, where we now expect the range of approximately 2 and a half to 3 and a half percent.

Largely, we reflect on the Q2 results.

And with that, Tiffany, we're now ready for our first question.

Tiffany: At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. To withdraw your question, press star one again. Your first question comes from the line of Andy Kaplowitz with Citi. Please go ahead.

At this time, if you would like to ask a question, press star, then the number 1 on your telephone keypad to withdraw, your pres your question, press star 1 again.

Your first question comes from the line of Andy kaplowitz with City.

Jason Landkamer: Hey, good morning, everyone.

Please go ahead.

Jim Breuer: Hey, Andy. Good morning.

Hey, good morning, everyone.

Jason Landkamer: Jim, I know you talked about delays in project decisions. Maybe just talk about, if I look at the bookings environment these days, you have seen a little bit of stabilization in the tariff environment. Have you seen any sort of stabilization in customer conversations? I know John just talked about the $13 million to $15 million in new awards for this year. So should we be thinking that you really do not turn back to backlog growth in the first half of 2026? Is that the sort of goal at this point? Where is that going to come from besides the plutonium project?

Jim Breuer: Yeah, thank you, Andy, for the question. So, you hit at several points here, so let me try to hit them in order. As far as the trade policy topic, it is having a significant impact on client sentiment and their willingness to make long-term investment decisions. We have seen some clarity, as you say. There were some announcements around Japan, EU. I personally would like to see more progress in the conversations with China, with Canada, with Mexico. Those three countries are very relevant to our world. I think we are still seeing a developing story around tariffs, and all you need to do is read the headlines for the last few days. I think what our clients are looking for is a little more stability and certainty around where that is going to go in terms of several things. One, cost, project costs.

Jim, I know you talked about delays in project decisions. Maybe just talk about, if I look at the bookings environment these days, you know you've seen a little bit of stabilization in the tariff environment. Have you seen any sort of stabilization in customer conversations? I know John just talked about the $13 million to $15 million in new awards for this year. So should we be thinking that you really don't turn back to back low growth in the first half of '26? Is that the sort of goal at this point? And where is that going to come from besides the plutonium project?

Yeah, thank you. Andy, for the question. So,

Yeah, we you hit it several points here, so let me try to hit them in order. Um as far as the the trade policy.

It is having a significant impact on client sentiment and their willingness to make long-term investment decisions. We have seen some clarity, as you say; there were some announcements around Japan and the EU.

Uh I personally would like to see more progress uh, in the conversations with China with Canada with Mexico. Those just those 3 countries are very relevant to our world

And I think we were still seeing a developing story around tariffs and the um you all you need to do is read the headlines for the last few days. So I think what our clients are looking for is a little more stability and certainty around where that's going to go, in terms of several things 1.

Jim Breuer: Almost equally important, how is that supply chain going to rebalance? We are having these conversations with our active clients and our bids right now as the tariff matrix, if you will, on one axis countries, on a different axis, the commodities. As that matrix continues to evolve, how do we shift and pivot and mitigate those risks on projects? That is an ongoing story. That has not fully sorted itself out. We hope that it does in the near future. Our clients need that stability. These are big decisions, big investments. As far as the opportunities for the near term, we feel very strong that we are pursuing work in the right markets. If you look at what we presented in April in our investor day, we said we would be focusing on mining, and there is a big push for mining work both in the U.S. and internationally.

Cost project costs.

But almost equally important uh how is that supply chain going to rebalance? We're having these conversations with our active clients, and our and our bids right now, as as the Tariff,

uh, Matrix, if you will

On 1 Axis countries on a different axis. The Commodities has that has that Matrix continues to evolve. How do we shift and pivot and mitigate those risks on projects? And that's, that is an ongoing story. So that that has not fully uh, sorted itself out. We hope that it does in in the near future

Our clients need that stability. These are big decisions, big investments. Now, as far as the opportunities for the near term, we feel very strong that we're pursuing work in the right markets. If you look at what we presented in April in our Investor Day,

Uh, we said we would be focusing on.

Jim Breuer: We said we would focus on advanced manufacturing, data centers, and life sciences. There is a lot of activity there. We talked about power. We talked about selective LNG. You saw the announcement on Phase Two. Phase Two, the feed that we announced, that is going to take some time, but it can be a really, really good opportunity for next year. In mission, national security, DOE work. Of course, SRPPF is the largest opportunity, but it is not the only opportunity we are pursuing there. Even though there is softness in some of the ES markets, namely, say, chemicals, which is we are very strong in chemicals, we are still pursuing a couple of interesting chemicals opportunities. I think, Andy, the portfolio is similar.

Mining. And there's a there's a big push for mining work both in the US and internationally. We said we would focus on Advanced manufacturing data centers and and life sciences.

and uh, there's a lot of activity there, we, we talked about power, we've talked about selective LNG, you saw the announcement on Phase 2, so

Uh, Phase 2, the the feed that we announced that's going to take some time, but it it can be a really, really good opportunity for next year.

Jim Breuer: I think we are seeing things slowing down a little bit. There is some hesitation today, but the opportunities will come from those markets that I just mentioned to you.

In Mission, uh, National Security doe work. Of course, SRP PF is the largest opportunity but it's not the only opportunity we're pursuing their. And even though there's uh, softness and and some of the es markets, namely say chemicals, which is we're we're very strong in chemicals. We're we're still pursuing a couple of interesting chemicals opportunities. So I think I think Andy the the the portfolio is similar. I think we're seeing things slowing down a little bit. There's some hesitation today.

But uh, the opportunities will come from those, those markets that I just mentioned to you.

Jason Landkamer: Helpful. Then, John, I know you didn't want to talk too much about the NuScale conversion, but obviously, it's a topic du jour these days. So maybe just the mechanics of the $15 million. Do you take a tasking when that Class B converts to A, and can you offset that? Then, if you just step back, I think you talked about sort of resolving it over the next quarter or so. Obviously, we've talked about this for a very long time. Do we think that you get more of a resolution here over the next quarter or so, as you said, and we get more of an update than we got today?

Jim Breuer: Yeah, without question, Andy. Several things in there. On the tax and then the credit utilization, absolutely, as I said in the prepared remarks, we do have a tax gain associated with the step-up. You can, it will all come to fruition when we make the conversion. You generally think about the tax gain being roughly equivalent to whatever their screen price is on that day, multiplied by the 15 million shares. We will be able to shield substantially all of that through the tax credit profile that we have. Not much in the way of cash leakage associated with the conversion. The monetization itself becomes one of not trying to top the market, but trying to do it in a way that captures a lot of the value without taking a steep discount associated with it. You know, again, we have got a long time to get that done.

Helpful. And then John, I know you don't want to talk too much about the new scale conversion, but obviously it's a, uh, it's a topic New Jersey, these days. So maybe just the mechanics of the 15 million. Um, you know, do you take a tax gain when that class B converts to a and can you offset that? And then, you know, if you just step back, um, I think you talked about sort of resolving it over the next quarter or so. Obviously, we've talked about this for a very long time do we think that you get more of a resolution here over the next, you know, quarter or so? As you said, we get more of an update then we got today.

Yeah, with our question, Andy, um, several several things in there of, on the tax and, and the credit utilization. Absolutely, as I said, in the prepared remarks, um, we, we do have a tax gain associated with the Step Up,

Gain being roughly equivalent to whatever their their screen price is on that day.

Um, multiplied by the 15 million shares.

Um, but we will be able to Shield uh, substantially all of that uh, through the through the tax credit profile, that we have.

Jim Breuer: I know there is a lot of anxiousness in the market for that to happen yesterday, but we are going to continue to be measured about it.

Um, so not much in the way of of cash leakage associated with the conversion and then the monetization itself becomes 1 of not trying to top the market, but trying to do it in a way, that captures, a lot of the value, uh, without taking a steep, discount associated with it. And, you know, again, we've got a long time to get that done. And I, I know there's a lot of, uh, anxiousness in the market for that to happen yesterday, uh, but we're going to continue to be measured about it.

Jason Landkamer: Appreciate the color, guys.

Tiffany: Your next question comes from the line of Jamie Cook with Truist Securities. Please go ahead.

Appreciate the color, guys.

Jamie Cook: Hi, good morning. Sorry, another follow-up question on NuScale just to make sure I understand. Beyond this 15 million shares, I mean, I think that was, it's a good start, but people probably expected more shares just given where NuScale stock is. Is this the path going forward? Has the conversations with the strategic buyer, is that dead? I am just trying to think through, is this the way forward, or are there other alternatives besides this to continue to reduce your percentage of ownership in NuScale? My second question, Jim, obviously, we want to be sensitive on LNG Canada. It is, I guess, a positive you have made an agreement on the COVID claims. Any more color you can add there on how positive, what it implies for cash flow? Last, what is the $1.7 billion in positive backlog adjustments? Thanks.

Your next question comes from the line of Jamie cook with truist security. Please go ahead.

Hi, good morning. Um, sorry another follow-up question. Um, on new scale, just to make sure I I understand um Beyond this 15 million shares. I mean, I think that was it's a good start, but people probably expected more shares, just giving where new scale stock is, is this, the path going forward and is the, um, has the conversations with the Strategic buyer? Um, is, is, is, is that dead? I'm just trying to think yours is just the, the way forward or are there other alternatives?

Jim Breuer: Maybe I will start, Jamie, then I will pass it on to John. On LNG Canada, we are very pleased with the settlement of the COVID claim. As I think, John, you mentioned, there is no significant change to management expectations as a result of that change order. You go ahead on the NuScale question.

Natives besides this to continue to reduce, um, you know, your percentage of of ownership and new scale. And then my second question, Jim. Obviously, we want to be sensitive, you know, on LGC um, you know, and it's I guess a positive you've made uh, uh, agreement on on the co claims but any more color you can add their on how positive what it implies for cash flow and then, sorry. Last, what's the 1.7 billion in positive backlog adjustments? Thanks.

Maybe, maybe I'll start Jamie and then I'll pass it on to John. So uh,

On LGC, um, yeah, we're very pleased with the settlement of the co-claim.

As I think John you mentioned, there's no significant change to management expectations as a result of that uh, change order correct. Um,

Uh and uh, so anyways.

John Regan: Yeah, so on the NuScale front, Jamie, I think the $15 million has a lot of applicability. One, it does go a long way toward consuming the tax credits, as we just talked about. Two, it does demonstrate the path to the B to A conversion. Importantly, we are expecting a monetization of those figures to more than cover our initial investment in NuScale. It suggests that the remaining 111-ish million shares or so are all upside opportunity from that initial investment. Now, admittedly, it does not cover cost of capital over that period of time that we have invested in them, but we do recoup that initial investment through this transaction. As I said in my prepared remarks, we do see it increasingly difficult for the strategic buying community to transact at this relative screen price, for the 100, I will say the 111 million shares.

You go ahead on the new scale question. Yeah, so on the new scale front. So uh Jamie, I think the 15 million has a lot of applicability. 1 it does go a long way to consuming the, the the tax credits. As we just talked about, uh, 2. It does demonstrate the, the path to the the bday conversion and importantly, uh, we're expecting a monetization of those figures to, uh, more than cover our initial investment in new scale. And so it suggests that the remaining

111 ish Megan shares or so. Um,

Are are are all upside opportunity from that initial investment now. Admittedly it doesn't cover, you know, cost of capital over that period of time that we've invested in them. Uh, but we do recoup that initial investment through this uh, through this transaction.

John Regan: It is a big number for someone to swallow. If we can get this monetized through the normal stock market mechanisms, then that might harbinge the way we are going to do this moving forward.

Jamie Cook: Okay, that's helpful. Sorry, on the $1.7 billion backlog adjustment, any color you can add there?

Um and then I think as I said in my prepared remarks, you know, we we do see it increasingly difficult for the, the Strategic buying Community to to transact at at this relative screen price. Um, you know, for the hundred I'll say the 1111 million shares, so it it's a big number for, uh, for, for someone to swallow. So, uh, if if we can get this monetized through the the normal stock market mechanisms, then uh, you know, that might be might harvest. The, the way we're going to do this moving forward.

Jim Breuer: Yeah, I missed that, Jamie. So, those were adjustments to ongoing work on reimbursable work. A lot of it is CFM. If you recall, last quarter we had the reverse effect on different projects; they are not the same projects, but it is an unusually high CFM and backlog adjustment number. That is why we felt it was important to disclose it. I think, John, it resulted in a deferral of PGM to the tune of about $13 million in the quarter.

Okay. That's helpful. Sorry. And on the 1.7 billion, backlog adjustment any code. You can add there. Yeah, yeah, yeah.

It's I missed that Jamie. So yeah that those were adjustments to ongoing work on reimbursable work. A lot of it is CFM.

If you'll recall, last quarter, we had the reverse effect on different projects—not the same projects.

Um, but it's an unusually high.

CFM and and backlog adjustment number. That's why we felt it was important to disclose it. Um,

John Regan: Yes, that's correct. That's just going through the normal POC calculation. It's not abandoned profit. It's profit that we'll scoop up later in the year or across the execution profile of those projects.

Jim Breuer: It was solid reimbursable work. It was mostly urban, I think, with a little bit of, yes, it was all urban.

Jamie Cook: Okay, thank you.

And I think John had resulted in a in a deferral of PGM uh to the tune of about 13 million in the quarter. Yeah that's correct. And and so that's just going through the normal PC calculation. So it's it's not abandoned profit. It's just profit. That will will scoop up later in the year or across the, the execution profile. Those projects. It was uh, it's all of reimbursable work. It was mostly Urban. I think was a little bit of, yes, that was all. It was all.

Okay, thank you.

Tiffany: Again, if you would like to ask a question, press star, then the number one on your telephone keypad. Your next question comes from the line of Andrew Wittmann with Robert W. Baird. Please go ahead.

Again, if you would like to ask a question, press star, then the number 1 on your telephone keypad.

Your next question comes from the line of Andy Wittmann with Beard. Please go ahead.

John Regan: Okay, great, thanks. I just want to build on the last one because I think for many people, these accounting things about delayed profit and CFM customer furnished materials and gross profit margins, these are complicated topics. Last quarter, and I think you said it was a chemical project, you de-scoped it. That allowed you to recognize profit. This quarter, different project, it sounds like you didn't have the CFM, and now you do have the CFM. So that increases your backlog, and then the profit recognition is the opposite of that. You're delaying it now, and you'll get it in the future. I just wanted to kind of say it another way for everyone's benefit because these are complicated topics. John, do I have that pretty close to right or not?

Jim Breuer: Yeah, good morning, Andy. Yeah, I think it was you that was proven on this in Q1, and yeah, you've got it nailed.

John Regan: Okay. All right, so then I guess my other question, where do I want to go next here?

Okay, great thanks. Um, I just want to build on the last 1 because I think for, for many people, these accounting things about delayed profit and and CFM customer uh, furnish materials. And, uh, and and gross profit margins. These are complicated topics. So last quarter, uh, and I think you said it was a chemical project, you you descoperit recognition is the opposite of that. You're, you're delaying it now and you'll get it in the future. I just wanted to kind of say it another way for everyone's benefit because these are complicated topics. John do I have that pretty close to right or not? Yeah, good morning Andy. Uh, yeah, I think I think it was you that was proven on this in q1 and yeah you you you've got it nailed.

Jim Breuer: Andy, while you are thinking about it, in its simplest terms, the project has equivalent profitability before and after the additional scope. It is similar, a little bit more, but generally speaking, similar. It is just saying that as those furnished materials have not yet landed, when they land, that is when I will take up the profit. What we saw was the percent of complete from an accounting perspective goes slightly backwards as a consequence of the additional scope. I do not know if that is helpful or not.

Okay. Um all right so then uh I guess my other question. Um, what do I want to go next here? Um,

Andy while you're thinking about it. So in its simplest terms, the project has equivalent profitability before and after the the additional scope similar a little bit more but generally speaking similar, but it's just saying that as those furnished materials haven't yet landed when they land, that's when I'll take up the profit. So what we saw was the percentage complete

from an accounting perspective, go slightly backwards as a consequence of the additional scope.

John Regan: Yep, no, makes sense. Because it is large, the urban revenue burned, because now you are recognizing the customer furnished materials through that segment, your revenue burned all else equal would go up. Now there are other moving pieces, but that is what people otherwise should expect, right?

so I don't, I don't know if that's helpful or not, but

Jim Breuer: Yeah.

John Regan: Fair. Okay. My next question is kind of related to this, but in mining, you said that the copper mine here is services only. It is a little bit unusual. Historically, you have booked EPCM on that, which would have come with customer furnished materials. Here, you are just getting services here. The implication there is that this should be higher margin work. I do not know if you could give some subjective commentary on how we as the investment community should think about what these margins are. I think historically, when you have had the EPCM, it has been like 3%, maybe 4% margin stuff because there is a lot of pass-through. Here you do not have that. What is the profit profile that we should think of on a project like this one?

Yep. No makes sense. And because it's large the urban Revenue burn because now you're recognizing the, the the customer finish materials through that segment, your Revenue, burned all SQL would go up. Now, there's other moving pieces but that's what people um, otherwise should expect, right? Yeah.

Fair. Yeah. Okay, so I guess my next question is kind of related to this but in mining you said that the copper mine here is Services only it's a little bit unusual. I guess it's historical. You've booked epcm on that which would have come with customer, finish materials here. You're just getting Services here. So the implication there is that this should be higher margin work. I don't know if you could get some subjective commentary on how, um, we, as the investment Community should think about what these margins are. I think, historically, when you've had the epcm, it's been like, you know, kind of 3, maybe 4% margin stuff because there's a lot of pass through but here you don't have that. So, so what's the what's the prophet profile? That we should think of

On a project like this 1.

Jim Breuer: So, Andy, I think your assessment is correct. In this particular case, given the nature of the scope of work, we did not take CFM. The magnitude of effort from us is similar to a traditional project. You can assume that the magnitude of services and therefore the magnitude of margin is very similar to a project that would otherwise have attracted CFM. I think your estimation of the margin percentages is correct if this had been a fully CFM project. Maybe put differently, the services margin is akin to what it would be on a services margin on a different mining project.

So Andy that's I think your your assessment is correct. Um, in this particular case, given the nature of the scope of work.

We did not take CFM.

uh, the magnitude of

Effort from us. It's similar to a traditional project so you can assume that the magnitude of services and therefore the magnitude of margin is very similar to a project that would otherwise have attracted CFM

um, and I think your estimation of the margin percentages is

Is uh, correct.

Is this have been a fully CFM? Um,

Project.

Maybe you put differently, the the services margin is akin to what it would be on a, on a different. The services margin on a different mining project.

John Regan: Okay. Then just final question for me on LNG Canada Phase Two. Obviously, the feed here puts you in a good position. The execution on Phase One, frankly, puts you in a probably a pretty good position here for Phase Two. Obviously, going back many years now, that Phase One was done on a largely fixed price basis. Through COVID and through all this, you guys have negotiated yourself to a pretty good position through all of these things. So congratulations on that. Now I think investors are going to turn their attention to what the risk profile could be and should be or might be for Phase Two. I understand that that contract has not been inked. I know that just given that that is a negotiation that has to evolve here still.

Okay. And then just final question for me on. Um LGC uh Phase 2, obviously the feed here, uh puts you in a a good position. The execution on Phase 1, frankly puts you in a probably a pretty good position here for Phase 2.

John Regan: What can you tell investors about how you're thinking about that as you sit here today, what you're willing to do, recognizing the general success you had on Phase One, and how that might be applicable to how investors should be thinking about Phase Two? Thanks.

Jim Breuer: Thank you, Andy. That is a very relevant question. Appreciate that. We are well positioned with our partner for Phase Two. I think our performance on Phase One has proven that we can deliver on a large, complex project with the right execution, contractual, and commercial model. I will tell you that Phase Two will have largely lump sum elements to it, but you are right. We are having those discussions with the client right now, so I do not want to get too far ahead of myself. Part of the feed update is a negotiation of the contracts. The advantage here, though, Andy, is there are so many positive learnings from Phase One. If you look at what has transpired on Phase One, we have a proven project delivery model, the self-perform part, the part that we relied on third-party contractors and vendors.

Obviously, um, going back many years now uh, that that Phase 1 was done on a largely fixed price basis and through Co and through all this, you guys have negotiated yourself to a pretty good position through all these things. So congratulations on that but but now I think investors are going to turn their attention to what the risk profile could be and should be or might be for Phase 2 and I understand that that contract has not been Inked. Um, and I know that just given that that is a negotiation that has to that has to evolve here still. But what can you tell investors about how you're thinking about that as you sit here today, what you're willing to do recognizing the general success you had on Phase 1 and how that might be applicable to how investors should be thinking about Phase 2. Thanks.

Thank you. Andy. That's, that's a very relevant question and I appreciate that. So,

To I thank our performance on Phase 1.

Uh, has proven that we can deliver uh on a large complex project with a right.

Uh execution, contractual and Commercial model. Um,

I will tell you that Phase 2 will be.

Will have largely lump sum elements to it, but you're right.

Uh, we're having those discussions with a client right now, so I don't want to get too far ahead of myself.

Uh, part of the feed update is

a negotiation of the contracts.

Jim Breuer: We have established working relationships with the local unions, the First Nations, extremely important in this case, the local government community. We are going to use, to a large extent, the same subcontractors and vendors that were used in Phase One. By the way, on Phase Two, for those who are interested in engineering, 80%, 80%, 80% of the design is replicated. So we have that design. We are tweaking it in the feed update, but 80% is replicated. We have extensive experience in self-performed construction in Canada. All these ingredients, and let me add another ingredient, we have a very collaborative, good relationship with the client.

But the advantage here though, Andy is, there are so many positive learnings from Phase 1. If you look at what has transpired on Phase 1, um we have a project a proven project delivery model uh the self-performed part. The part that we relied on on third party, contractors and vendors.

We have established working relationships with a local unions. The First Nations extremely important. Uh, in this case,

Uh, the local government community.

Uh we're going to use to a large extent, the same subcontractors and vendors that were used in Phase 1, by the way, on Phase 2.

Uh, for those who are interested in engineering 80%, 80, 80% of the design is replicated.

So we have that design, we're we're tweaking it in the feed update, but 80% is replicated. Uh,

And we have extensive experience in self-performed construction, in Canada. So all these ingredients and let me add another ingredient. We have a very collaborative.

Jim Breuer: You put all these ingredients, we are confident that at the end of the planning period, if the project gets funded and moved forward, that we are going to come up with a contract that reflects those learnings, has the proper allocation of responsibilities between the JV and the clients, and we are going to end up with a better contract and a better execution plan than Phase One in a way that we are going to be confident that Phase Two is going to be a very successful project.

Uh, good relationship with a client, you put all these ingredients. We are confident that at the end of the planning period. If the project gets funded and move forward that we're going to come up with a contract that reflects those learnings,

Has the proper allocation of responsibilities between uh the JV and the clients and we're we're going to end up with a better contract and the better execution plan than Phase 1. In the way that we're going to be confident that Phase 2 is going to be a very successful project.

John Regan: Thank you.

Thank you.

Tiffany: Your next question comes from Michael Dudas with Vertical Research. Please go ahead.

Michael Dudas: Good morning, gentlemen.

Your next question comes from Michael dudus, with vertical research. Please go ahead.

Jim Breuer: Morning, Mike.

Good morning, gentlemen.

I want to make.

Michael Dudas: Jim, maybe you could share some further thoughts on the infrastructure projects. Yeah, obviously, you have been seeing the creep into the process here. Where do we stand? I know you talked about it at a lower completion, but some of the issues behind that and other projects that maybe we had not seen, the GALI-X, I guess, was not mentioned, but is this how ring-fenced is this as we kind of move through the planning period over the next 6 to 12 months?

um,

Jim. Maybe you could share some further thoughts on the infrastructure projects. Um,

you know, obviously you

Jim Breuer: Good morning, Michael. We're, I would say that we're disappointed with the results in the quarter on these three projects. As I said in my remarks, the impacts were caused for a variety of reasons, specifically limited to the three projects, whether it's design errors by third parties or material escalation or labor challenges. We are addressing very aggressively these issues and have taken actions both on the execution front and on the recovery from third parties. Yes, it is true that unfortunately, we are still experiencing some pain from projects that were bid many years ago with different pursuit principles and cover targets. Having said that, we are committed to finishing them as safely and as expeditiously as possible. Michael, we've learned valuable lessons that have shaped and will continue to shape our strategies going forward.

Keep getting to creep into the process here. Uh, where do we stand? I, I know you talked about it where completion, but some of the issues behind that and other projects that maybe we hadn't seen in the galley X I guess is that wasn't mentioned. But is this ring? How ring fence does this as we kind of move through the planning trade over the next 6 to 12 months?

Good morning, Michael. Uh, yeah, we're I would say that we're disappointed with the results in the quarter on these 3 projects. Uh, as I said in my remarks, um,

the impacts were a cause for a variety of reasons specifically limited to the 3 projects. Whether it was design Errors By third parties, or material, escalation or labor challenges,

we are addressing very aggressively these issues and had taken actions both on the execution front and on the recovery from third parties.

And yes it is true that unfortunately we are still experiencing some pain from projects that were bid many years ago.

With different Pursuit, principles and cover targets.

Uh, but having said that, we are committed to finishing them as safely and as expeditiously as possible.

Jim Breuer: Specifically for these three projects, as I quoted in my remarks, one of them is essentially almost done. One of them is well advanced. The other one's about 58%. So you got 97%, 78%, and 58%. We're going to be tracking them very closely to make sure we keep them within the current forecast.

John Regan: Yeah, Mike, I just might add too that the current results reflect the probable recoveries, and the possible recoveries are substantially larger than we've embedded into the project forecast. Just as we did earlier this decade across Gordy and across LEX, where things haven't been our fault, we're going to fight real hard to reach an equitable outcome on those things as well. The story here is not done.

Michael. We've learned valuable lessons uh that have shaped and will continue to shape our strategies going forward. Uh and specifically for these 3 projects as I quoted. In my remarks, 1 of them is essentially almost done. 1 of them is well Advanced, the other ones about 58% so you got 97 778 and 58% and we're going to be tracking them very closely to make sure we we keep them within the current forecast.

Tiffany: upside perspective. Just as we've done before, we'll continue to ply away at that.

As well. So uh the story here is not done from from an upside perspective and just as we've done before we'll we'll continue to to uh fly away at that.

John Regan: I appreciate that. Jim, as you assess the second half of the year, maybe into 2026, can you share how relative to a normalized level on project performance and executing against the margin, how that has been, saved for these brief projects in the Mexican project? You know, that maybe success relative to the deferrals from some clients, do you expect that could bleed a bit more into 2026 as some of these issues have to sort through?

I appreciate that. Jim as you assess the second half of the year maybe into 2026. Can you share like how relative to a normalized level on Project performance and executing against the margin how that's been? You know, you can save to these 3 projects in the Mexican project and um you know that

maybe success relative to the deferrals from some clients. Um, you expect that could bleed a bit more into 2026 as some of these issues have to sort through.

Tiffany: Michael, the project performance outside of the three infrastructure projects and the slowdown in Mexico is going very well. As I think we alluded to earlier, there is some reimbursable work that is just burning a little bit slower than initially anticipated, but that is just a pace issue. It is not a performance issue. We had the Q2 due to the additional backlog adjustments. I would say that by and large, the rest of the portfolio is doing very well, in some cases exceeding initial expectations. As far as the outlook for this rest of the year and next year, Michael, I think it just depends on whether the economic environment settles down. I think some of the prospects we are pursuing have a high certainty of going forward regardless. In other cases, clients really need that certainty.

Michael. Um, so the the project performance outside of

The 3 infrared.

Uh, we had, as I think we alluded to earlier, there's there's some reimbursable work, that is just burning a little bit slower than initially anticipated, but that's just a a pace issue. It's not a performance issue.

And we had the, uh, saw to due to the additional, uh, backlog adjustments.

But I would say that by and large the the rest of the portfolio is doing very well. In some cases, exceeding initial expectations.

um, and as far as the outlook for this,

Rest of the year. And next year I I just Michael I think it just depends on whether the economic.

Environment. Settles down.

Uh, I think some of the prospects were pursuing have a high certainty of going forward regardless.

Tiffany: I think if you look at some of the commodities that may be affected by tariffs, whether it is steel or copper, even rebar that is tied to the steel market, piping, electrical equipment that comes from overseas, these are pretty significant imports to projects, and clients are looking for certainty on cost and on origin of supply. I think we do need to see the market settle down a little bit and have some further clarity to be able to properly predict when exactly those projects are going to start taking off.

But another case is clients really need that certainty. And I think if you look at the...

some of the Commodities that may be affected by tariffs, whether it's steel or copper,

Uh, even uh rebar. Um that's tied to the steel Market piping.

Uh, electrical equipment that comes from overseas.

Uh, these are pretty significant inputs to projects and clients are looking for certainty on on.

Cost, and on.

Uh, origin of supply. And so I think we do need to see the market settle down a little bit and and have some further Clarity to be able to properly predict when exactly those projects are going to start taking off.

John Regan: Thank you, Jim. Thank you, John.

Tiffany: Thanks, Mike.

Thank you, Jim. Thank you, Jim.

Thanks Mike.

Operator: Your next question comes from the line of Judah Aronovitz with UBS. Please go ahead.

Jason Landkamer: Good morning. Thank you for taking my question. I just wanted to ask about the long-term target, the 10% to 15% EBITDA CAGR with the reduction in guidance for 2025. I guess, how are you thinking about that target? Now implies a pretty big acceleration. Is it fair to say that we are trending towards the lower end? If not, what gives you confidence in re-acceleration?

Your next question comes from the line of Judah aronovitz with UBS. Please go ahead.

Good morning. Uh, thank you for taking my question. Just wanted to ask about the long-term Target the 105% ebita.

Tiffany: Thanks, Judah, for the question. We feel pretty good about our strategy, Judah. If you go back to what we presented in April at Investor Day, those same markets are poised to do a lot of growth or to experience a lot of growth in the coming years in the planning cycle. We are seeing a greater extent of hesitation today than we would have predicted two or three months ago. We are hopeful that that hesitation is short-term and that the clarity will take place, and therefore, the decisions for investments will accelerate as the economy here is doing well. In general, the world economy is progressing in a positive manner. You see the bill recently enacted here that has some very targeted and strong policy endorsements around certain industries that we feel strongly we can play a big role.

Thanks Judah for the question. So um we feel pretty good about our strategy Judah. If you go back to what we presented in April at investor day,

Uh, those same markets uh are closed to do a lot of growth to experience a lot of growth uh in the coming years in the planning cycle.

Um, yes. We're seeing

um,

A greater extent that has hesitation today than we would have predicted 2 or 3 months ago.

uh we're hopeful that that has hesitation is short term and that the uh Clarity will take place and therefore the decisions for investments will accelerate as

As the economy here is doing well in general, the world economy is progressing in a positive manner.

Uh, you see, the build recently enacted here that has some very

Tiffany: Europe is starting to show some level of increased economic activity. In Mexico, Judah, Mexico had elections late last year. It is very normal that in the initial cycle of the Mexican presidential six-year term, the initial cycle is a little slow, and then the country starts picking up. As you know, we have a presence in Mexico. We have been very successful there in the past. If you add up all these ingredients, I think we feel pretty good about the strategy and the long-term objectives of the four-year planning cycle. We just need some short-term clarity so that this distraction and this uncertainty at least gets reduced. I do not know if it is going to be eliminated completely, but at least significantly reduced so that we can see some decisions going forward.

Targeted and strong, uh, policy and endorsements, around certain industries that where we feel strongly we can play a big role.

Uh, Europe. It's starting to show some level of uh increased economic activity.

Uh, in Mexico Judah, uh, Mexico had elections late last year. It's very normal that in the initial cycle of the Mexican presidential 6 year term, the the initial cycle is a little slow and then the country starts picking up.

And, as you know, we have a presence in Mexico. We've been very successful there in the past.

For your planning cycle. We just need some short-term Clarity. So that the this distraction and this uncertainty

uh,

John Regan: Yeah, I definitely think that the one big beautiful bill should create some tailwinds domestically, and it's in all the markets that we're playing in. Jim covered them in his prepared remarks. You just basically go down the line where we operate. I think from a strategy perspective and across the planning cycle, I do not see a need to pivot at this point. I think as the trade policy settles, as our customers are better able to assess their end markets, I think we're going to have a lot more clarity in the coming quarters.

at least gets reduced. I don't know if it's going to be eliminated completely but at least significantly reduced so that we can see some decisions going forward. Yeah, I I I definitely think that the, the 1 big, beautiful Bill, uh, should create some Tailwinds domestically and it's in all the markets that we're playing with plain in and, and Jim covered them in his prepared remarks, you know, you just basically go down the line where we operate. So I think from a strategy perspective and across the planning cycle, uh, don't see a need to Pivot at this point. And, you know, I think as the as the trade policy settles, as our customers are better able to set to assess their end markets, I think we're going to have a lot more clarity in the in the coming quarters.

Jason Landkamer: Okay. Are you already having conversations kind of around the bill? I mean, how are customers thinking about prospects, maybe across copper, domestic mining, manufacturing, pharma, life sciences? Are you hearing that from customers already?

Okay. And are you already having conversations uh kind of around the bill and um yeah I mean how our customers thinking about prospects uh maybe across copper uh domestic mining manufacturing. Pharma Life Sciences are are you hearing that from customers already?

Tiffany: Judah, we are hearing. It is a little early. The bill was just passed a few weeks ago. These things take time. But even before the bill, we were already talking to these customers. I do not want to give you the impression that just after the bill, we started to talk to new customers. If you look at Rare Earth in the U.S., we have relationships with two clients that are working in that space. If you look at copper in the U.S., we have a longstanding relationship and have a lot of project work under our belts, very successful project work domestically and internationally with the largest copper producer in the U.S. We obviously, we are doing a very large life sciences project, so we have a strong resume there. So, yes, our existing clients will benefit from the bill and those incentives and favorable conditions.

Judah, it's... we are hearing it's a little early, and then the bill was just passed a few weeks ago. These things take time.

But even before the bill, we were already talking to these customers. So I, I don't want to give you the impression that just after the bill was starting to talk to new customers. I mean, if you look at Rare Earth,

In the US we have relationships with with 2 clients that are working in that space. If you look at Copper in the US we have a long-standing relationship and have a lot of project work under our belts. Very successful Project work domestically and internationally with the the largest copper producer in the US.

um, we obviously we, you know, we're doing a very large Life Sciences project, so we have a strong resume their

and so,

yes, our existing clients will benefit from will benefit from the bill.

Tiffany: I just think it is not about flipping a switch and it happens overnight. I think it takes a little bit of time.

And those uh, incentives and favorable conditions.

John Regan: Yes. It is helpful to the industries that specifically get called out in the bill, but more generally, things like a more ability to deduct interest, R&D expenditure deductions, and bonus depreciation are kind of agnostic as to industries, but they all feed into, you know, feeding the machine from a capital investment perspective. We think that is going to be a net positive in the quarters to come.

I just think it's it's not about flipping the switch and it happens overnight. I think it takes a little bit of time. Yeah. And and it's helpful to the industry is that specifically get get called out in the bill but more generally things like, um, a more ability to deduct interest. Um, R&D expenditure deductions and bonus depreciation are kind of agnostic as to Industries, uh, but they all feed into, you know, feeding the machine from a

Jason Landkamer: Okay, fair enough. Then just a clarification question on the LNG, the change order. It sounds like maybe it won't impact margin, but what about the cash flow? I do not know if I heard that right. Thank you.

From a capital investment perspective, we think that's going to be a net positive in the quarters to come.

John Regan: That's exactly what I was intimating in the prepared remarks. The JV structure there creates a little additional nuance. The JV itself needs to collect the money attendant to the amendment and then subsequently make dividends. As pertains to Fluor Corporation, the operating cash flow will come to us when the dividends are made. The JV collecting it is an important first step, and they should have additional clarity by virtue of the amendments.

Okay, fair enough and then just say uh clarification question on the LNG. Uh the change order it sounds like maybe it won't impact margin, but what about the cash flow? I don't know if I, if I heard that right, thank you.

Yeah, that's exactly what I was intimating in the, uh, in the prepared remarks. So, uh, the the JV structure there creates a little additional Nuance. So the the JV itself needs to collect the money, uh, attendant to the amendment and then subsequently make dividends. So, um,

As pertains to fluer. Uh, the operating cash flow will come to us when the Dividends are made. So uh, the JV collecting it is an important first step and they have, they should have additional Clarity by virtue of the amendments.

Operator: That concludes our question and answer session. I will now turn the call back over to Jim Breuer for closing remarks.

That concludes our question and answer session. I will now turn the call back over to Jim Breuer for closing remarks.

John Regan: Thank you, operator, and many thanks to all of you for participating in our call today. We appreciate your interest in Fluor, and thank you again for your time.

Thank you, operator, and many thanks to all of you for participating in our call today.

We appreciate your interest and fur.

And thank you again for your time.

Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Ladies and gentlemen, this concludes today's call thank you all for joining. You may now disconnect