Fluor (FLR) 3 Nov 232023 Q3 Earnings call transcript

Good morning, and welcome to Fluor's Third Quarter 2023 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] 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. I'd also also for at Landkamer, accessible time, opening will a days investor.fluor.com. At Head replay the for link, turn registration on remarks, of telephone Investor be to X available through this call Relations. A over to Jason like Fluor's website go Please Mr. ahead, Landkamer.

Third to are Brennan, David Fluor's Financial Earnings Officer, Constable, Officer; Fluor's Thanks, Jordan. Quarter Executive Joe Welcome Chairman us and today. with Fluor's XXXX Call. and Chief Chief

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

Before forward-looking getting would statements, refer X. to regarding summarized our is you Slide on to started, I which note safe harbor like

analysis inherent During There and we today's making materially. that could risk forward-looking presentation, be existing current is of information. will an our results statements, differ and actual experience trends reflect which

discussion You was contribute in such differences potentially can risk our find XX-Q, could Form in a factors, which to earlier and today. Form XXXX of our our XX-K filed which

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

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

you Good joining Jason. and us thank morning, for Thanks, everyone, today.

shareholders, leveraging from Please provide into response is turn In to Fluor I technologies intelligence artificial wanted to our across X. investor inquiries to insight how the Slide some organization.

spanning this a expand large years, recall, develop on supplement to significant portfolio. the predictive industry partnership to exclusive across some our Based to in a XXX of continue use we over we an into for solution with of XXXX, of execution projects database As you platform had XX may entered analytics IBM projects.

time, materials we effort to same parallel our launched predictive on supply for an pricing AI to platform a provide At chain. create the

addition IT, across support AI-enabled using services. is these and platforms XX execution. proposal systems development and simulation to resources, number predictive plant to over solutions and have AI-derived tax, of X major is treasury, deployed project Fluor a of facility in currently we human Outside that This rule-based

are systems better and quality that management decision-making costs process helping and These Fluor to drive project data-driven control. leads a reduce

let's operating beginning for the quarter Slide Now straight X. of representing on XX% turn $X our prior growth our the to review billion, over Revenue quarter third was third year.

activities life of a in for awarded increase execution metals led by to remaining Solutions semiconductor track ramp and Our of relative were projects, a Urban plan project $X book-to-burn year ratio was our full sciences X. Consolidated on projects as project. a new greater recently on X billion, U.S., revenue the we including quarter large awards several than up in the

$XX And backlog which reimbursable. billion, is now New XX% total awards is XX% were reimbursable. our of

strong see services XX to the value new our above backlog. on continue demand existing for margin awards were and basis of our We the profile Margins we provide. points

The evident prospect demand for pipeline. our services our by is

led by slate of more & is and closely and fuels in current prospects opportunities XXx than a is track the to backlog. production size continue We chemicals, our by of followed This metals. that mining

drive As combined discipline, on execution financial focus few selectivity the you over our starting are and slides, will see with next to project results. our consistent

incentive a outcome large mining a a in Solutions included the on an segments. third fee to on favorable Slide earned mining Urban project is that completion quarter. as X. Results business million reported to separate Moving project. arbitration $XX a well our turn nearing Please as profit

reimbursable. New the awards billion billion $X $XX.X and quarter now and for were is backlog XX% ending

to Mining production In including number and green technologies. to critical & turn work Metals, a continue steel please minerals studies we on of Now X. Slide front-end

commodity and industry reimbursable the award the cancellations, inflation dollar backlog Potash Stage be we forward inputs This fourth starting to multibillion award We're their with a pricing. final Project and in Jansen from recognized Although there no for into today, decisions. clients been will announced investment have in Canada. been Earlier now BHP has move see monitoring quarter. X carefully of

half Looking ahead copper in XXXX, to we bring and the backlog. see first to of steel lithium, opportunities significant into

Moving Slide X. to

will Our new Advanced the to Bayer's facility. be Last active business degenerative cell state-of-the-art therapies for produce Sciences manufacturing Technologies current we neurological and biopharmaceutical medical launch disorders, another global cardiovascular needs. Life line development announced therapy unmet and This month, first of quarter. cell and had completion facility disease, other used

its expansion ATLS was awards $XXX an new an of includes a also package and an the the off Northwest battery for award industrial-scale north for Denmark. for key were a million sodium Pacific in We feed award the strategic On facility second AB customer able facility. build first ion Altris in in semiconductor world's for awarded to production for front, successes of the initial quarter. This facility

the about of reimbursable excited are business in We line. opportunities this pipeline

the we life win opportunities few to are Over positioned sciences. additional multibillion work semiconductor next dollar in and quarters, significant

continue make quarter. projects on we progress to the infrastructure, significant during In non-legacy legacy and

entry. is Howe a Gordie celebrated the very of and In off August, the complete. at XXX productive XX% summer the bridge now the we tower with U.S. project Canadian the The progress and on Project, topping the feet. ports had On great U.S. of team

respect Fluor, with along mentioned and schedule discussions we Gordie with with client quarter, relief. the our last partners, continue to to collaborative cost Howe As have

in team joint resolve discussions is next few to venture Our these months. working the

Slide third the FEMA for for to to on a Results increased profit million reported Solutions Moving ago. year reflected execution for the support. activities compared quarter a segment hurricane million $XX Mission X. of quarter, $XX

A V the task new quarter Georgia. FEMA million X-month extension our and AFRICOM, our included award additional Portsmouth. under support New at for $XXX efforts awards awards order contract in and the hurricane-related LOGCAP to for under Florida contract

be for income. X program years Last recognized extended that will contracts through our was naval month, $X.X this we equity were from also NNSA's nuclear XXXX. as the Fees informed billion extension for propulsion

our X-year three with to quarter, billion bid our package X-year operations at XX contract the options for team valued Pantex period $XX the and submitted management base over the NNSA up includes years. to contract. This During a

to on expect update have We year. next this an contract

Solutions. Slide year entitlements to million turn XX. profit Results million several fixed-price reflect Energy the partially on ago. recovery improved from to to $XX recognition Moving cost Please $XXX also Segment a a significantly settlement initial gain $XX offset by growth projects, net in legacy charge on a claim. a million for our included expected Mexico. embedded on cost a large project and upstream of Results of long-standing derivative the

$X.X a North a project America. in quarter included chemicals New totaled confidential contract for the awards billion and for reimbursable large EPCM

are facility awards. new and a Europe include we battery Indonesia. quarter, fourth some project, anticipating an LNG large an the retrofit reimbursable sizable and in in For isocracker both Prospects project chemical

to LNG I'd is complete. now XX% meet like note Finally, expectations. Canada continues And this that project management to

results the call to X quarter our Joe that to ongoing want construction to indicative Joe? transformation over of engineering accomplishments and our and the over for update. world. financial notable turn I reflect the of companies progress the against leading call the into let me our note turn that, and Joe, I Before this corporate strategy, is With in

that key for results of and were executed David, that review our go the revised capital recently over good everyone. third structure support guidance. our morning, Thanks, highlight and quarter, outlook activities the will I Today, assumptions some financial

XX. Slide turn Please to

$X a for all for by increase ramp-up year. last mentioned, revenue the third the David execution quarter of quarter XXXX, billion, XX% the from segments. awarded was of on several X across was As recently Revenue driven activities projects

the at several was $XXX quarter Our recovery strong profit execution recognition higher initial driven by on million. well for contracts. consolidated as the as fixed-price segment cost performance was entitlements of This activity

Adjusted third EBITDA ago. a quarter $XXX $XX was million for compared the year to million

$X.XX EPS $X.XX to compared QX in of XXXX. was Our adjusted

results quarter stock QX be million for XXXX. of $XX positive for was FX derivative million expenses the were $XX a price from in which ago. in of for up $XX to Mexico. adjusted performance-based Our influence including embedded compensation forecasts, is million, income quarter the year driven the paid by expected effects This in G&A higher compensation the exclude

was million quarter to $XX quarter million ago. million last the compared $XX a in income $XX interest year Net and

positive our interest with Our reinforced us securities. net liquidity income will the to on marketable prevailing generate and year interest position rates deposits enable throughout

of ending balance backlog to earlier, billion. the X a anticipate we awards ratio in on of for for year. our $X Based pipeline prospect quarter QX, book-to-burn billion David excess advised our in improved $XX New as full the and

on to XX. Moving Slide

Our billion. amounts cash . quarter and was the marketable by securities balance held NuScale This $X.X for excludes

not the client expect to the currently Project than arrangements we the Canada, cash flow, positive distributions for cash on projects. Howe are Gordie our year. additional potential cash be joint Any venture operating from flow This to outlook. covers legacy which more our concessions and in includes full Mexico included for relates in needs it As

on XXXX to meaningful from important this it cash not expect call, guidance to do be significant our start year we to are we for generation While as non-legacy a see growing think I discussing contributions we portfolio. note flow XXXX that is

European quarter, Bilfinger. agreement Stork to During an businesses sell to the reached we

remaining At next this also have to point, QX transact expect close transactions operations. all effort We year. launched an Stork's we to by

turn Now Slide to please XX.

December convertible XXXX successful address our to offering very a debt Senior completed we Notes. August, In

by and in a lock offering premium of were a coupon result X.XXX% As Xx, of conversion rate oversubscribed we of being our to a able XX.X%.

of share issuance, than price that transactions have call, capped lower section of $XX. the slide on works trades double into than retiring. more approximately effective capped our the would cost a this transaction If until we XX are simplified notes We of of been appendix the call prevent also X.X% we we A cost the above of dilution straight in capped debt the Including pursued this found slightly call how our and cost X.XX% debt entered estimate be is December deck. had share can funds market-leading our example our rate. effective any

X%, advance the have primarily proceeds I should securities in outearning from the debt of the of by XXX in that rate been over XXXX maturing basis offering note X.X% points. invested yielding fixed notes, over our retiring

our we of cost million, conversion mandatory remaining further was of convertible full undiscounted $XX announced the September, this conversion structure. than in The $X stock, the our approximately million which Lastly, preferred simplifies less capital dividends.

have these reflected our in share will any already to shares as our calculations EPS count. were We estimated not change adjusted

billion. our more And $X by will now been XX-Q upward filed, cap than that market our adjust has

pressured we as transactions, have capital a into a years past lower structure risk rebuilt we transition was that back the these over With few portfolio.

to XX. Slide turn Please

to are $XXX $X.XX We per adjusted year a adjusted our earnings approximately our guidance $X.XX to to guidance million. XXXX of EBITDA range full increasing share raising and

Our Adjusted XX%. approximately approximately of more billion. And the fourth for assumptions million. G&A rate include $X expense $XX of tax of an than quarter revenue effective

on depending is in which vary revenue may This countries generated.

We to moderate in our expect revenue as advantage locations tax start increase. tax rates to

margins Energy are Solutions. segment QX approximately X% for approximately in in X% Our X% and in to approximately Urban expectations Solutions X.X% Solutions, Mission

we Finally, our we as guidance reaffirm million, in to this EBITDA Operator, ready now $XXX our earnings for release first adjusted of our morning. XXXX are question. also million $XXX indicated

the first Your from Steven comes UBS. line Fisher question from of

mix. backlog reimbursable you one-offs had in quarter, language And the to lot the growth release good with initial recognition And related There projects. to there cost of entitlements. were though, a cost that the the this see that segment of older recovery in said

recognition So that those I'm going might into in? bake of the benefits to And be curious guidance you what be? for that? guess did the How I more there's means if consistent coming

contract, recovery way is through I'm Steven. drive And the on the had what's Mexico. was of to part clearly to of and process, financial those relative looking some we it. recognition costs of work it's that in a way entitlement are the we driving our of really the kind of projects. our sum discipline but execution through positive the principally our And in the some it conclusions at to as more our lump activities

outlooked that. we We it in to QX, QX. but So there's were able in portion of recognize a had it always

majority So it close think was those But of XX% overall. part guidance projects our to I complete. of are the now

significant expect forward. recognition uptick in these that going of cost do to a recoveries see around not type I So

I think, about macro, activity. Okay. when the I you're talking guess, And David, just, picture bigger mining

things I'm You about guess moving kind I there's to related and curious of forward. stronger -- longer cancellations the for interest environment. no mentioned just rate

your that Are pipeline any set value do macro from of impact about hear project that Does your of engineering? do picture to Is What the create insulated? What opportunities topic? you more you you that? about of kind for think sort there looking more do delays? customers big

got plant, Steven, Metals a our with with award long just Mining a it's Saskatchewan as you BHP perspective, them. David. client due -- this great a morning execution their BHP & potash From we here saw, for to a great relationship up from in earlier performance project had with

see So great to was it that.

Metals work of have the important in got we've to on also $XX make We sight about work. Mining billion best right across we Obviously, our generally, front-end about our line sure More is and another the engineering of value right and & base now. solutions value ongoing of see for $XX another continuing customers. that front-end billion drive always can client

mining are energy transition, Minerals clients investing & Metals. So yes, in big picture,

see So we that continuing.

are of some Some big softening not right point. don't clients' their all that we projects, CapEx multibillion mid-tier at the we And this CapEx track after but see clients going levels, dollar the levels quarterly. our at

we in good the work, & we're and with really we our Metals going and being copper feel on business mining specifically that leader space, such being forward. -- to position Mining all a front-end especially So in continue confident the in remain copper

of comes next from Baird. from Your J. question the Andrew Wittmann line

Great. I that know to I I noise and for the ran to as ask hear things you're here, various statement other settlement, your to through that and this going as Joe, quarter. not would claims us. quantify upstream all do that the charge the through income would we cut thought love much the

a going in I'm ask to aggregate So that question way. different

And quarter so for $XXX EBITDA was your adjusted million. the

in it run your EBITDA. of have about Was fact, out range? that at big previously in you the you your release, demonstrated, run called it million talked would if in ex quarter's last items look result, was $XXX different rate rate quarters and several EBITDA of around that the Or million of kind You $XXX from that? of the

the forward could had got X. recognize where done happened with needed What's is cost to quarter to our position that occur It in those X. pulled to we Andy, anticipated quarter work the in to be recoveries we client into order get

in of the you're $XXX call. laid seeing So we distortion rate run bit the over that of had that QX, out period a the little million QX last

$XXX that of that think but some as in earlier, comfortable is range into I going million being to still million recognized So feeling X we're quarter well. $XXX

helpful. That's to wanted just your drill And commentary. Okay. then on in I

a bit reluctant cash talk You flow in XXXX. about previously have been to little

made that of think I a lot sense.

the of to is Is it year? you gives business 'XX significant today you're there that performance something just say the closer make more confidence that now confidence that could business' that there to that gave cash we're be confidently seeing Or you next free to flow general the in that comment? terms in

I Andy, appreciate the question.

lot challenges. I work legacy think this is in the the result of out hard of a clearing

flowing the You that can we where are in of settlements getting see some those books We're comfortable more position. today. through significantly

high-quality New QX very as Award out to continue then in We at and experienced very in relative quarter. to add next rates good $X billion coming backlog

combination a really all those it's things. So of

the X, year not our some underpinning, of to but this the kind that's levels generation only cash ramp-up thing into other repatriation the see to the communicating been have is QX, form. QX of of we in of starting the we're The market liquidity X comfort of that around moving to highlighting XXXX in over you'll And to start that dividends see the quarters. of return the last

comes of Your from Thielman D.A. Brent next line from Davidson. question the

some quarter. Congrats year-to-date. was there were X% at the the Yes. outstanding slide seen expectations in on I that for what quarter. for a here below just be XQ margins third deck, great you've Would Energy understand to the I segment X.X%. looking benefits

pieces specific just the some business? in we of of influences business -- be to in there's group given if that wondering trying just I'm prudent the quarter should fourth sort the that consider moving

No.

XXXX, flowing bit Solutions -- cost of in of the recoveries after this not year, recognition the X.X% to that's settling run a culmination a the moving X.X%. we Mexico. of just lumpiness a look and for to we that, forward at the for giving a through, getting forward for being just is Energy you of bit but the And as do full the X.X%, see at guide point. a this X% rate of but It's are reset to We we're more

on taking Okay. of cost core Appreciate legacy the business, more I a look, by in guess that. than offset still projects positive some growth And I you're execution just items mean, some facing kind back, recoveries. step that's

of legacy sort confident more new work. that more I profitable activities these you kind ramping stages typical are to into want we of up here? move some Is if offset late that of projects sense, some get of legacy You're position the in with sort sort just a more growth ahead? of see now do a cost more quarter-to-quarter these diminishing? risk to than associated is Companies even better

more legacy say I'll a confidence I'd start, remaining with are we're much remaining you along. well. few that only in chime well getting projects are as Joe, There can work. the

In handed that client. looking And XX% the is it hopefully the projects offshore and end by over of to fact, the finish January we're commissions. complete large that complete XXX% off be to will

well that's So along.

I is well revenue and Los with As the Howe having complete, we're client on mentioned, getting project the great progress and Mover and discussions out along good People LAX recovery Gordie Angeles. on in there XX%

I we as speak. complete XX% think it's

are So very place a the required. and in these good clients is revenue with projects there discussions where now good recovery with

as healthier we've of good So that the XXXX. numbers we've margins talked continue the right we now, on our in said, and to our hit of at as-sold that forward. point and the in confidence backlog gives cash Joe an to us that well inflection passed much about company we lot allows that a confidence now cash in that as year going above have execute us And brought

cost discipline financial XX relative to I some the the see clients. add claims work in over bring to that's these of of thing you're I the to is that's conclusions the hard -- our with only very would maybe last the positive of XX months recognition No, and to gone some to think starting

So kind I outlook to here. think that all the contributing positive is of

of from next Andy Your question Citigroup. line from comes the Kaplowitz

said these QX the I your positive guidance, but year. you your or recoveries just moved significantly they EPS you raised still David that think for cost but into Joe, early part of are guidance

So is what lead else going that to to right raise?

us And margin would that and fair it an growth for significant EPS then 'XXs you backlog without say expect you with growth base? Is significant EPS and expect still underlying guide improvement, the higher have to 'XX. of off giving

yet. guide I 'XX Well, don't to want into

resolution David we one we're what on, the a projects of hard think having I conclusions of we're through lot work. expected to touched the that the coming of and it. element challenged That's

into, And higher starting I this leaned existing quality than David's think awards seeing and just quality margin is to higher burn better we're intake and P&L. it backlog the through those we're

just it's as conditions. to that out consistency So in get that headline quality and be of a start how have higher a contracts we cash generation around that reporting next flow combination story terms kind going all the backlog the seeing much year lot back better of you're more to we're around margin and

I that giving a think are things So confidence. level that few us combination a of it's of

we we'll year XXXX billion in to year. $XX that the the type this may but really is we quite of we're Yes, again with this And be doing We getting profile. booked get $XX billion, same that well close -- in booked that's that as it margin Andy, not $XX in -- billion to strong there. margin

we're And the reimbursable our We end we've or year. as-sold. be earlier, said of excellence as executing execution to , by XX% near at above that I expect on got the

company there's So to XXXX for out over got the we've plays several well next they XXXX, the lot run -- right? of lot running the burn hours years, years. the jobs right a future -- of now, will a into to jobs so are These positive that and because over all several here volume trajectory

our sight forward. gives around 'XX in 'XX And at us We'll the will so line pretty guidance lead that margins of plan to good and be that and looking in operating going mid-December, growth. for reviews certainly

Is can look about would thinking you how us some you thinking an the would give helpful. monetize the you on there you more you're the point year. have maybe said NuScale That's then, any it capital that update NuScale? needs JV? about into to how David, are of funding possibility But to know of by I And moving end Fluor the forward? inject

discussions monetization. as with -- do said, the discussions We're monetization strategic Those our NuScale. investor in we're and new up Yes. things we talk the investor if end or have we for are about able proceeding of sheet that early we'll the And a be a well. all with term of correctly, that to in more at the strategic line year year on

a we're I'd say, of any that's focused industry. offering the by ahead years So has well easily. right other in NuScale where great They're SMR now. technology, X

forward. your and supporting earnings can so about commercialization And And of NuScale we're the where around believe they more look have going I an how next excited that. they comments very Wednesday, they at talk about call obviously cash

Your line Dudas comes Michael from next the Vertical Research. from question of

your there maybe the extraordinary David, how is you guys talked going you about current industry are be remarks because difficult -- pipeline in you're what through your could you're you thinking or working it such on metrics backlog. prepared Can mentioned and are guys sectors, either to clients allocating share relative for your about? how certainly, that you set services, how demand you up

now, be the to a not pretty you future? only strong labor And to and execute but have your your what seems how opportunity what in is capacity steep

time time Michael, is our clients. these so right of right, places we great success we getting at staffing the have for right our people talent, all the right where right most the of and right now that's the execution can projects spend in

we get pursuit -- the we And details. other question process, only where the the we have teams structured if right have into before process bid/no-bid forward That's, we all place. in the first this I ask we move guess, will very

the brought of we to continue into great management folks company. couple rehires. is resources hiring just Fluor of to years, to job those grow a want the whole again. Done the -- talent laser-focused Over over family People hiring as XX% and people. come the back and on of team are So, attraction over in last X,XXX

make that So, really and can't spend of we sure we in bringing time projects where a our execute. not is we're that lot that

allocation we we -- goes, required. it's cross-pollinate different as can as fortunately, far a business it's As where do businesses into --

For inserted the our multibillion-dollar control product projects product skills, million to We've ramping doing execution business into HLS up skills Solutions from $XXX project from Energy business. projects. skills, HLS million, example, with dramatically $XXX successfully management

So there's all us fortunate on, and procedures give always people to in company that more which that us us around going our that we're processes flexibility regard. follow allow of and the and move

So We've -- us. yes, task and -- force it's XXXX, place early really place. well it's nonstop. We've got since that's a in working in it talent had for

that backlog, trend backlog? for your this regarding environment degrees, look And can the capacity given continue mentioned, even and book the into for from the but margins bps XX your several as future? should we indicated, improve also a up foreseeable services, your and -- we is growing margins your see that you Not quarters as that that the up next in certainly it's booking anticipate, as you demand but over show

say, It is, a few I few there's a would or customers times. our who into specifically markets maybe challenging run pockets in

you to us challenged give on you're look our of coming we of we're clients that client work sight to along line the quarterly see pulse If finger -- -- pipeline. that have on a the in process back keeps all front-end Europe, you we were the and that -- look a customer down voice track we CapEx, we've with gives key everything what's to seeing, feedstock at bit. pull account management chemical a with But and got may

or government you lay It's the then And is of including must don't across budgets growing. our client -- I up forget at say, base either that. business not our But always top energy an on softening where government our and the all. are flat transition up CapEx

we'll great So I with guess continue is all resources, strong and to now. the bit in think how to a reimbursable war drive it's backlog market will direction. expect margins, able to that see. I And of right on at that's And the I work, look it. stay for And I seller's talent margin right be in a which

into level you're very how full doing the as of comes work margin just services that affects or the EPC, all And it's dependent whether on obviously definitely and front-end backlog well.

it's going as as-sold burn above think So it's -- to well. Michael, I forward, we're margins going off and it positive those

that's helpful. So

There are no I to like to presenters turn further the over time. remarks. would questions the for back at this call closing

you, Many our on thanks for Thank performance operator. supports quarter to with that of it very all call our pleased you participating our I'm today. All belief this as right. further to shareholders. are our inflection capital we're or services, deliver to point demand for really and on with we positioned a well increased structure And strong past our high now. value our

appreciate we today. So time Thanks your you your again Fluor, for interest thank and in

That concludes today's conference.

You may now disconnect.