Fluor Corp Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jamie Cook - Truist Securities - Analyst : Two questions. One, Joe, just on the guide. The fourth quarter guide still implies a pretty significant ramp in revenues, I think, like up 30%. So just trying to understand your comfort level there and what would be driving the acceleration in revenues. And then your implied margins in energy solutions, given your lower margin guide, implies like a 3% margin in energy solutions. So just trying to understand what's happening there. And then on the positive, obviously, the free cash flow guide was better. Is that just less funding of problem projects? Or is there something structural and handicap the opportunity for you guys to start buying back the stock given the increased authorization? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 08, 2024 / 1:30PM, FLR.N - Q3 2024 Fluor Corp Earnings Call

Question: Jamie Cook - Truist Securities - Analyst : Sorry, I thought I was getting cut off. Just obviously, the share -- increased your authorization is a positive there. But how would you handicap you guys actually doing something and also an opportunity for reinstating the dividend?

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

Question: Andrew Kaplowitz - Citi - Analyst : Okay. And maybe just on NuScale. Obviously, it's tough to pin down timing, but you pushed it out a little bit to the first half of '25 despite the nuclear market, obviously, looking better. So why at this point does the potential agreement continue to get delayed? And is there anything you could do to lock in more value for Fluor? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 08, 2024 / 1:30PM, FLR.N - Q3 2024 Fluor Corp Earnings Call

Question: Steven Fisher - UBS Equities - Analyst : Wondering if you could just -- if you could talk, David, just about the overall strength of the demand picture and whether you think, at this point, you're able to be as selective in your bookings as you'd still like and still hit your growth objectives. I think you talked about some no-bid things. So are we still able to be as selective as we were and achieve these growth objectives?

Question: Steven Fisher - UBS Equities - Analyst : Okay. That's very helpful. Part of the reason I was asking was because we talked about Mexico a few quarters ago. And it just seems like it's still creating challenges from performance execution, but we're still booking more work there. And so I'm just wondering if that was just out of necessity to keep the business going, but it sounds like you have other prospects there. And I guess related to that, the follow-up then, is about staffing levels. As you go through this transition, I'm curious how well your staffing levels align with the opportunities you have over the next year or so. As you're rolling off some of these bigger projects. I'm just wondering if we should be concerned about overstaffing and maybe how that -- if there's any context here or relationship to this new execution model that you talked about on the call today.

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

Question: Sangita Jain - Keybanc Capital Markets Inc. - Analyst : Got it. And my follow-up is also for urban solutions. So you talked about an Intel project cancellation, but you also referenced in the deck that you're talking to them about additional semi projects. So I'm just trying to understand what gives you conviction that this time it's for real when you're talking to them about new projects, and if they're doing anything else different in structuring your contract.

Question: Andrew Wittmann - Robert W. Baird & Co lnc - Analyst : I guess I just wanted to dig in a little bit more to the energy solutions segment. And specifically, I heard you guys talk about the delayed profit recognition in the quarter. I guess first question is, is it all just delay? Or was it reduced at all? Were there any other factors that we should be aware of that contributed to the performance of -- in the quarter? And I guess maybe bigger picture. Obviously, you've had one very large project there and a couple of other ones as well. As those are now ramping down, are we getting a glimpse this quarter of what the energy solutions contribution could be when those projects are done, done, if you will? Or is there enough other underlying work here to find growth off of this new lower base when the megaprojects maybe are done?

Question: Andrew Wittmann - Robert W. Baird & Co lnc - Analyst : The underlying earnings power question, Jim, did you want to touch on that one?

Question: Andrew Wittmann - Robert W. Baird & Co lnc - Analyst : Great. Then just as my follow-up, I guess I wanted to look at the implied fourth quarter guidance and just understand it a little bit more. We talked about you're going to pick up some of the delayed revenue recognition in energy solutions. I think in the prepared remarks, there was a comment on some timing around an infrastructure recognition item as well. Maybe, Joe, could you comment about other more chunkier things that we should understand or know about that are implicit in that fourth quarter guidance? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 08, 2024 / 1:30PM, FLR.N - Q3 2024 Fluor Corp Earnings Call Obviously, the thing that, I think, we're all trying to get at here is what the underlying earnings power could be or is for Fluor as we turn the calendar to 2025. And not looking for guidance, but just trying to get a sense of what the underlying run rate is maybe on an EBITDA basis. And having some of these moving pieces, I think, would be helpful.

Question: Andrew Wittmann - Robert W. Baird & Co lnc - Analyst : Just any other items -- again, you talked about the delayed -- yes.

Question: Michael Dudas - Vertical Research Partners - Analyst : Maybe back to nuclear, a couple of things. One, in the traditional nuclear -- and we're seeing all the news about large companies wanting to directly restart nuclear plants. So how does your experience and your long-time profile in that space align with your current opportunities for risk mitigation? And are those real opportunities that Fluor might be involved with somehow? And I'll just start there, and I have a couple -- just a follow-up after that.

Question: Michael Dudas - Vertical Research Partners - Analyst : That's encouraging to hear. My follow-up is on NuScale. Maybe, David, two parts. One, David, your thoughts on such a lead that the technology has over competitors, certainly, which has been better documented. When do you think, in the United States, one of those will be up and running, maybe just a little estimate on that front? Has that happened before or after Romania? And then given the excitement and the valuation of NuScale and certainly things have changed dramatically in the -- versus, say, 6, 12 months ago when you're starting this process, how do you think about, going forward, ownership, having investment, balancing that versus monetizing and certainly rewarding shareholders for their patience in this as we move to the 2025 plan?