FLUOR CORP Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Hurricane Impact: Acknowledged the impact of hurricanes Helene and Milton in the Southeast, with Fluor's Greenville, SC office sustaining moderate damage but remaining functional. Employees in the area were affected, and Fluor helped with recovery efforts, including clearing roadways for North Carolina DOT.
• Revenue and Awards: Revenue for the third quarter was $4.1 billion. Consolidated new awards were $2.7 billion, including a downstream project in Mexico and a Mining and Metals project in Australia. Backlog is now $31.3 billion (80% reimbursable).
• Business Segments: Urban Solutions had segment profit $68 million, new awards $828 million, and backlog growth. Mining and Metals well positioned for large EPC projects. ATLS saw backlog growth and engagement with tech companies. Infrastructure had project progress. Mission Solutions had segment profit $45 million and recovery efforts. Energy Solutions had segment profit $50 million and new awards.
• Strategic Planning: Discussed portfolio diversification, execution model changes (new model for distributed execution centers in Philippines, Poland, India), and growth in non-traditional oil and gas (revenues at 75% of total, surpassing 70% target).

Segment Performance

• Urban Solutions: Reported segment profit of $68 million. New awards in the third quarter were $828 million, and ending backlog was $19 billion, a 72% increase in the past 12 months. Mining and Metals within Urban Solutions received a $289 million incremental award for a rare Earth minerals refinery in Australia, representing almost half of Urban Solutions' backlog.
• Mining and Metals: Received a $289 million incremental award for a rare Earth minerals refinery in Australia and is well positioned for large EPC projects in the near-term, including a port debottlenecking project in Australia and lithium work in the US.
• Advanced Technologies and Life Sciences (ATLS): New awards included an incremental award for the current phase of the Eli Lilly project in Indiana and the design award for the next phase. Backlog for ATLS has increased nearly 90% over the past year. Engaged with large tech companies on data centers, developing cooling process concepts and offsite modularization. Semiconductor work with Intel had a cancellation but the team was redeployed; Life Sciences work continued on the Eli Lilly facility in Indiana.
• Infrastructure: Progressed on the Gordie Howe International Bridge Project and LAX Automated People Mover project. A JV consortium filed a $1 billion breach of contract lawsuit against the New York State Thruway Authority.
• Mission Solutions: Segment profit was $45 million. New awards were $274 million, and ending backlog was $3.1 billion. Over 200 people deployed in the Southeast for hurricane recovery, with expect 300 more to be deployed. Selected for NNSA centrifuge pilot plan.
• Energy Solutions: Segment profit was $50 million. Lower than expected contributions from a large project and $18 million cost growth. New awards totaled $1.5 billion, including a downstream project in Mexico and a refinery unit in Texas. Progressed on RoPower's small modular nuclear reactor project and LNG Canada project (over 95% complete).

Guidance

• Tightened 2024 adjusted EPS guidance to $2.55 to $2.75 from $2.50 to $3.
• Lowered 2024 adjusted EBITDA guidance to $525 million to $575 million from $625 million to $675 million.
• Increased cash flow guidance for the full year to approximately $700 million.
• Plan to return capital to shareholders, with the board increasing the share repurchase program to 30.5 million shares authorized for repurchase.

Risks

• Inherent risk that actual results could differ materially from forward-looking statements, as discussed in 2023 Form 10-K and 10-Q.
• Challenges in Energy Solutions with project delays and cancellations impacting margins.
• Potential issues with legacy projects and their funding requirements.

Question and Answer

Q: Jamie Cook asked about the revenue ramp in Q4 and Energy Solutions margins, and the free cash flow guide and share buybacks.

A: David Constable discussed managing legacy challenge projects, reallocating resources, and the plan to return capital to shareholders.

Q: Andy Kaplowitz inquired about the 2026 EBITDA target, 2025 outlook, and NuScale.

A: David Constable and Joe Brennan talked about strategic planning, NuScale's position, and commercialization model.

Q: Steven Fisher asked about demand strength, staffing, and data centers.

A: David Constable and Jim Breuer discussed demand picture, staffing shifts, and data center modularization.

Q: Sangita Jain questioned about data centers, modular capabilities, and Urban Solutions' Intel project.

A: David Constable and Jim Breuer addressed data center programmatic opportunities, modularization, and Urban Solutions' Intel work.

Q: Andrew Wittmann asked about Energy Solutions margins, underlying earnings power, and Q4 guidance.

A: David Constable and Jim Breuer discussed Energy Solutions' front-end work, planning cycle, and reduced volatility.

Q: Michael Dudas asked about nuclear opportunities and NuScale.

A: David Constable and Jim Breuer talked about conventional nuclear opportunities, NuScale's lead, and timeline for US projects.