Fluor Corporation

Today's call is being recorded. At this time, all participants are in a listen-only mode. A question and answer session will follow the 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 website replay will be available for 30 days. A telephone replay will also be available for seven days through the 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.

Thank you, Ellie, and good morning. Welcome to Floor's 2024 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'll 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 2023 Form 10-K and in our Form 10-Q, which was filed this morning. 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? Well, thank you, Jason. Good morning, everyone. Thank you for joining us today. Please turn to slide three. To get started today, I wanted to briefly highlight the Fluor Fellows program. Fluor Fellows are a distinguished group of world-class subject matter experts whose knowledge and experience contribute significantly to Fluor's success both internally and externally. Our Fellows' technical expertise sets Fluor apart from its competitors. and frequently become the decisive factor for clients when selecting Fleur for future work. The Fleur Fellows Program involves a robust nomination process. Candidates are nominated by department managers, executive management, and existing fellows and senior fellows. Fellows are selected based on their expertise, recognition from both peers and clients, and the value they bring to the company on a global basis. These leaders have roles beyond projects, helping drive innovation and performance across the organization. I'm pleased to say that with the 2024 class, we now have 91 fellows and senior fellows driving world-class technical excellence. Now let's turn to our operating review beginning on slide four. Revenue for the second quarter was $4.2 billion. Consolidated new awards for the second quarter were $3.1 billion, led by key awards in our urban solutions segment. Awards for the quarter do not reflect our substantial minority ownership in a joint venture that recently won the $30 billion Pantex M&O contract. More on that in a moment. New awards were 82% reimbursable, and our total backlog is now $32.3 billion, of which 81% is reimbursable. Strong demand for our services continues to drive new award margins above the 4% to 6% segment margin range that underpins our strategy. Specific to the margin profile, new award margins continue to outpace margin on existing backlog by an average of over 150 basis points for the past six quarters. Our margin story is driven by strength in service margins, which have been in the 20% range this year for our traditional EPCM businesses. This strong demand for our services is driving our investment in resources and people. Our shift to an asset-light company provides us the opportunity to move resources quickly as we pursue a wide range of requests, which includes everything from pre-feed and studies to large EPCM programs. This flexibility also supports our diverse pipeline of opportunities in advanced technologies and life sciences, mining and metals, production of fuels, and more broadly, energy transition. Moving to our business segments, please turn to slide six. Urban Solutions, our most diverse segment, reported $105 million profit in the second quarter. Results in this segment reflect increased execution activities on multiple advanced technology and life sciences projects, and the effect of a change order on a legacy infrastructure project. This change order covers many of the matters that gave rise to the charge we recognized in the second quarter of 2023. New awards for the quarter were $2.4 billion compared to $2.3 billion a year ago. Ending backlog continues to reflect the strength of our end markets and now stands at $19.6 billion. This represents an increase of nearly 70% over the past 12 months. Now please turn to slide seven. During the quarter, mining and metals received a $1.1 billion incremental award for an aluminum rolling facility in Alabama. Clients in this space continue to have a steady long-term vision for their CAPEX plans. Over the next few quarters, we are preparing for new awards to support rare earth refining, iron ore port de-bottlenecking, and a lithium project in the United States. Moving to slide eight, advanced technologies and life sciences continues to ramp up to meet sustained client demand. New awards for the quarter included phase one of the Northvolt's large-scale lithium-ion battery manufacturing facility in Germany for $361 million. Northvolt, headquartered in Sweden, manufactures batteries for consumer and industrial products, electric vehicles, and solutions for energy storage systems. During the quarter, our ATLS business line formed an alliance with Topso and ABB Limited to streamline construction of state-of-the-art electrolyzers for effective production of green hydrogen. We look forward to providing EPC support for this key energy transition effort. We continue to see strong investments in the semiconductor space, where the outlook is supported by the CHIPS Act, funded here in the United States. From smaller tool install opportunities all the way up to large fabrication facilities, there's over $5 billion in potential prospects over the next 12 months. Over the next few quarters, the ATLS business line is pursuing opportunities in data centers and additional phases on large life sciences projects. In the data center market, we're building our relationships with large tech companies that are taking a disciplined approach to capital expenditures. In infrastructure, productivity remains strong across the portfolio. During the quarter, we completed the DEC connection on the Gordie Howe project. This bridge is the longest cable-stayed bridge in North America and the longest composite steel and concrete decked cable-stayed bridge in the world. The team is currently focused on completion and handover of both ports of entry. On the LAX Automated PeopleMover project in Los Angeles, our joint venture has reached a settlement with the client that covers already completed extra work dating back to August 2018 and a longer than anticipated construction timeline. We will continue to work with the client while we seek final approval of the change order with the City of Los Angeles. While we recognize a $39 million improvement to our previous disclosed position for our portion of the settlement, this project remains in a lost position. Finally, Plant and Facility Services secured a $533 million renewal from a large consumer products manufacturing client where we are providing ongoing construction management services. Moving on to slide nine. Mission Solutions reported segment profit of $41 million for the second quarter, compared to $40 million a year ago. New awards for the quarter were $63 million and included various task orders for FEMA. Ending back up for the quarter was $3.8 billion. During the quarter, our Paducah contract was extended for two years through June 2027. We have also received a notice of intent to extend our Portsmouth and DUF 6 contracts for up to one year through September 2025. I'm pleased to report that the F.E. Warren Nuclear Weapons Storage and Maintenance Facility is substantially complete. The project represents the last legacy project in the Mission Solutions portfolio. In early July, notices to proceed were issued to two joint ventures in which Fluor has minority ownership interests. As previously mentioned, the NNSA awarded the Pantex M&O contract in Amarillo, Texas. Based on all three of the five-year contract options being exercised, The contract will span 20 years at an estimated funding level of approximately $30 billion. The protest period on this project has passed and transition from the incumbent is underway. Also, we were notified in July that the protest for the incumbent on the Air Force test operations and sustainment contract was denied and transition on this project is underway. Because we are a substantial minority partner in both joint ventures, our portion of earnings will be recognized as equity method income and not revenue. With the additional contributions from these two projects accounted for under the equity method of accounting, this segment is currently managing over $5 billion of additional project scope annually that is not reflected in our revenue. Other prospects for mission solutions include the Hanford Tanks project, which we have won but are awaiting conclusion of the protest process. In addition, we are positioned to do additional work in the intelligence services space. Before we move to Energy Solutions, I want to highlight a new 50-50 partnership with Worley to pursue opportunities that support the Australia-UK-USA Trilateral Security Partnership, formerly known as AUKUS. The partnership brings deep maritime, defense, and nuclear competencies required to build and maintain a nuclear navy capability while also enabling the uplift of Australia's sovereign defense industrial base. Please turn to slide 10. In energy solutions, segment profit was $75 million for the second quarter, compared to $89 million a year ago. Results for the quarter reflect several large projects in the late stages of execution. During the quarter, we recognized a modest charge on a construction-only subcontract with our joint venture entity in Mexico. With this recognition, we are close to reaching an agreement with our client on the cost to complete this project. New awards for the quarter totaled $582 million and included incremental work for a petrochemical facility in Canada and an engineering study for Aramco. The Energy Solutions team had a number of accomplishments in the second quarter. First, we moved our lead Energy Solutions office from our longtime location in Sugar Land, Texas to a fit-for-purpose location in Houston's Energy Corridor. This location optimizes our real estate footprint and increases exposure to a tremendous concentration of industry talent for our expected growth. Next, we opened a second office in India to support our global execution platform and to position us for significant in-country market growth. Finally, Energy Solutions' only legacy contract, the Penguins FPSO project, was turned over to the client and towed to its final destination in the North Sea. Shifting to LNG Canada, our team celebrated a major milestone with the final weld on Train 1. The weld took 48 hours of continuous work from teams of welders working in shifts. More than 380 pipe welders have worked on the project since construction began in 2018. To date, we have turned over one-third of the systems to the client and will be ready to import refrigerants in mid-August. This week, we announced a key contract award for the next phase of engineering and design for Rho Power's small modular reactor facility using NuScale Power's industry-leading technology. As a reminder, Fluor has a development agreement with NuScale where we have a preferential right for work related to SMR opportunities. For the remainder of 2024, prospects are led by traditional refining and battery manufacturing. After a six-year cycle of delivering on large-scale programs, including LNG Canada and TCO, we are now seeing this mature EPC backlog replaced by higher margin pre-feed and feed opportunities that set the stage for new large-scale projects. With respect to the nuclear industry, I recently had a call with Energy Secretary Granholm about the importance of nuclear, and SMR specifically, and how Fluor can play a key role in supporting a transition to low-carbon power in the United States. I'm optimistic that the recently passed Advance Act will increase the aperture for nuclear opportunities that the company is well positioned for. Finally, for fiscal year 2025, the House Energy and Water Appropriations Committee recently added $8 billion to the $900 million in fiscal year 2024 to fund the completion of the Advanced Reactor Demonstration Program, as well as an SMR demonstration project. While not law, this is a critical step to making advanced nuclear power a reality by the end of the decade. With that, let me turn the call over to Joe for the financial update. Joe?