Fluor Corporation

Good morning and welcome to Floor's second quarter 2023 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 Floor's website at investor.floor.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 Floor's website at investor.floor.com. At this time for opening remarks, I would like to turn the call over to Jason Landkamer, Head of Investor Relations. Please go ahead, Mr. Landkamer.

Thanks, Regina. Good morning and welcome to Floor's 2023 Second Quarter Earnings Call. David Constable, Floor's Chairman and Chief Executive Officer, and Joe Brennan, Floor's Chief Financial Officer, are with us today. Floor issued its second quarter earnings release earlier this morning, and a slide presentation is posted on our website that we will reference while making prepared remarks. Before getting started, I would like to refer you to our Safe Harbor Note regarding forward-looking statements, which is summarized on slide two. During today's presentation, we will be making forward-looking statements which will 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 2022 Form 10-K and our Form 10-Q, which was filed earlier today. During the call, we will discuss certain non-GAAP financial measures. Reconciliations of these amounts to the comparable GAAP measures are reflected in our earnings release and posted in the investor relations section of our website at investor.floor.com. I'll now turn the call over to David Constable, Floor's Chairman and Chief Executive Officer. David? Thank you, Jason.

Good morning, everyone. Thank you for joining us today. Please turn to slide three. During the second quarter, I visited our New Delhi office and hosted a town hall meeting that was attended by over 1,100 of our floor colleagues. It was great to see the vibrancy and enthusiasm of our team who will continue to play a critical role in supporting our current projects as well as our significant pipeline of growth opportunities worldwide. While in India, I also met with the CEO of Tech Mahindra to sign a strategic partnership agreement. Tech Mahindra is a leading provider of digital transformation, consulting, and business re-engineering services. Under the partnership, both Fluor and Tech Mahindra will combine our respective expertise to help support the growing client demand for digital handovers. The seamless integration and interoperability of data is critical to support professional services teams in driving successful project delivery and optimizing lifecycle operations and maintenance costs. I'm looking forward to providing updates on this strategic partnership in future quarters. Now let's turn to slide four. Revenue for the second quarter was $3.9 billion. representing our second straight quarter of 20% growth over the prior year. Our increase in revenue was led by energy solutions, as execution activities accelerate on refinery projects in Mexico, mid-scale LNG projects, and recently awarded chemicals projects in China. New awards for the quarter were $3.7 billion, and on track relative to our full-year plan of a book-to-burn ratio of one or greater. New awards were 70% reimbursable, and our total backlog is now $25.5 billion, of which 64% is reimbursable. Margins on new awards continue to be strong, coming in over 200 basis points above our total backlog margin. Our optimism for the future of FLUR is further supported by a robust prospect pipeline. We are currently working on, or have recently completed, feed and study packages that represent an estimated $300 billion of installed cost, high quality new award prospects. In the near term, we are tracking key EPC and EPCM prospects totaling approximately $49 billion across the company. Moving to our business segments, please turn to slide six. Urban Solutions reported a $76 million profit in the second quarter. Results included a positive forecast adjustment related to a legacy infrastructure project, as well as increased execution activities on newly awarded projects. New awards for the quarter were $2.3 billion, and any backlog is now $11.7 billion and 58% reimbursable. Please move to slide seven. In mining and metals, we are actively working on a number of front-end studies supporting the advancement of critical minerals production. including two pre-feasibility studies for lithium developments in North America, another lithium project feasibility study in Europe, and a metals recycling facility in Europe. We also recently completed engineering services on a major new steel mill in the United States using electric arc furnace technology and have two additional electric arc furnace projects entering the feasibility study and execution phases. These are just three projects in green steel technology, which we consider to be a strategic growth market for Fluor. Near-term prospects in this segment include projects relating to potash, lithium, and copper. Moving to slide eight. Our advanced technologies and life sciences business continues to win new work in an expanding, reimbursable growth market. During the quarter, we announced that we received a $574 million award for the first phase of a new life sciences production facility in the central U.S. We also won a $487 million expansion for an existing biotech facility with a key client in Denmark. Looking ahead, we are well positioned to expand our existing portfolio of semiconductor work, particularly in the U.S. I'm also pleased to report that our portfolio of infrastructure projects, including legacy projects, met our forecast expectations for the quarter. Specific to our legacy infrastructure portfolio, we are starting to see some very positive momentum from our efforts last fall. This included strengthening leadership and execution at the project and management levels, as well as working effectively with our joint venture partners to align our strategy to manage claims. On the Gordie Howe project, Floor, along with our partners, have had a number of successful and productive conversations with the client as it relates to cost and schedule relief, including costs related to COVID. Negotiations are progressing with the client, which should result in a positive path forward by the end of the year. Finally, during the quarter, we booked a $700 million award for the I-35 CELS project in San Antonio for the Texas Department of Transportation. This project is a crucial step in our ongoing efforts to enhance the state's transportation infrastructure and to further support the demands of population growth and business expansion in one of America's most rapidly developing regions. Moving on to slide nine. Mission Solutions reported segment profit of $40 million for the second quarter, compared to $28 million a year ago. Results for the quarter reflect increased execution activities on a European logistics support project for the Army and our ongoing work to support NuScale's carbon-free power project. Regarding the protest of our winning bid for the Hanford tank's integrated disposition contract, we learned that the judge has set aside the award and sent it back to the DOE for corrective action. While we await the department's path forward on the acquisition, The incumbent has been extended on the contract for the time being. The floor continues to be well positioned for Hanford and other future nuclear remediation opportunities with the DOE. Looking ahead, Q3 is shaping up to be an exciting quarter for this group. We recently announced that our joint venture with Amentum was successful in securing the contract for the Portsmouth Gaseous Diffusion Plant decontamination and decommissioning contract. This contract has an estimated value of $5.9 billion over a 10-year ordering period and includes potential task orders for up to an additional five years. We expect to book our initial annual portion of this contract in the third quarter. Finally, the request for a proposal for Pantex was recently issued. Fluor was successful in the original bid and is currently working on this RFP package, which we expect to submit in September. The revised RFP includes a five-year base period with three five-year options valued up to $30 billion over 20 years. Moving to energy solutions, please turn to slide 10. Segment profit improved to $89 million from $65 million a year ago. Results reflect the ramp-up of execution activities on refinery projects in Mexico through our EcoFluor joint venture. We also had positive forecast adjustments totaling $74 million on two projects. Q2 results also included a $34 million charge for cost growth and schedule extension on a large upstream legacy project. During the quarter, this project experienced a number of challenges arising from lower than anticipated subcontractor productivity, unexpected discovery work, and delays from weather and activist protests. Our new estimated completion date is December. New awards for the quarter totaled $753 million and included an EPC contractor Mitsubishi's ethylene vinyl alcohol copolymer facility in the UK, as well as incremental awards on existing LNG projects. Moving to slide 11. During the quarter, we had a number of accomplishments at the LNG Canada project. Last month, we announced that the 215th and final module was delivered to the site. This represents a significant milestone for the project and for the teams that led our fabrication efforts. With the project at 85% complete overall, our efforts now turn to module installation and hookup in advance of pre-commissioning and commissioning activities that will commence next year. In past earning calls, we've discussed our collaborative conversations with the client related to fabrication and construction costs. We continue to have successful resolution to ongoing variation orders. I'm also pleased to report that, as a result of the tremendous effort by our project team, we continue to execute LNG-C per our current expectations. Regarding the Phase 2 expansion, LNG Canada's five joint venture participants continue to evaluate the timeline and scope. For the balance of 2023, we are anticipating some significant new awards. This includes a multi-billion dollar full EPCM award for Dow's Path to Zero Ethylene and Derivatives Chemical Complex in Canada, the $1.4 billion Salina Cruz Refinery in Mexico, nuclear engineering work in Romania, and a large chemical project in Europe. Before I turn the call over to Joe, I want to note that our results and accomplishments this quarter reflect notable progress against our corporate strategy and is indicative of our ongoing transformation into one of the leading engineering and construction companies in the world. With that, let me turn the call over to Joe for the financial update. Joe?