Fluor Corporation

session will follow management's presentation. A replay of today's conference call will be available at approximately 1030 a.m. Eastern Time today accessible on Floor's website at .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 .floor.com. At this time for opening remarks I would like to turn the call over to Jason Landgamer, Vice President Investor Relations. Please go ahead Mr. Landgamer.

Thank you operator and welcome to the Floor's 2024 fourth quarter earnings call. David Constable, Floor's chairman and chief executive officer, Joe Brennan, Floor's chief financial officer, Jim Brewer our chief operating officer, and John Regan our current chief accounting officer and soon to be CFO are here with us today. Floor issued its fourth 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 2024 form 10k which was filed earlier today. During this call we will discuss certain non-GAAP financial measures. Reconciliation 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 .floor.com. I'll now turn the call over to David Constable, Floor's chairman and

good morning everyone and thank you for joining us today. Please turn to slide three. I would like to start by discussing the CEO transition announcement issued earlier this morning. It has been just over four years since we launched our building a better future strategy and set our long-term financial targets. In 2024 we achieved the goals under this strategy with strong cash flow and a robust capital structure supporting a backlog that is not only majority reimbursable but one that reflects our portfolio approach to our end markets. Importantly we have met and in most cases exceeded our strategic targets bringing the fix and build portion of our strategy to a close. Consistent with our long-term succession plans and with the full support of Floor's board it is now the right time for me to transition into the role of executive chairman and pass this chief executive officer role on to Jim Brewer. Starting on May 1st in my new role I will be supporting Jim as he builds upon his relationships with clients and engages more fully with our stakeholders. In Jim's new role he will be focused on developing the storylines for the next chapter of our strategy which is thematically refocused on grow and execute. This will include revised growth targets and a laser focus on project delivery. We look forward to sharing our view of the markets over the next four years at our upcoming strategy update event on April 2nd at one of our major ATLS sites. On a personal note back in 1982 when I first started Floor as an engineer in our Calgary office I had no idea of the incredible experiences and opportunities that awaited me and my family over the next five decades. I'm filled with gratitude for the experiences traditions and proud moments that have defined my journey with the corporation and I'm really looking forward to seeing our new management team build upon Floor's legacy. Now please turn to slide four. Our revenue for the year was 16.3 billion dollars marking a 5.4 percent increase from 2023. In 2024 we recorded new awards totalling 15.1 billion achieving a book to burn ratio of just under one. New awards for the year were 150 basis points above new award margins last year and well supports our established margin corridor of four to six percent. Importantly our 2024 net gross margin book to burn ratio was a healthy 107 percent. Through our discipline contract pursuits 85 percent of new awards for 2024 were reimbursable and our total ending backlog is now approximately 80 percent reimbursable. Moving to the new U.S. administration and the rapid pace of announcements that are coming out of the executive branch we're tracking the executive orders closely. While it's still too early to be definitive about the long-term impacts we are focusing on the broad economic themes of the administration's agenda which are to promote capital investment and job creation. Considering the underlying themes of pro-domestic energy key minerals production and AI infrastructure development in the executive orders we see these directives as favorable to nuclear and thermal sources of energy, favorable to LNG exports and expedited permitting, favorable to increasing domestic mineral production and favorable to significant data center build-outs. Therefore we see positive elements across all of Floor's business segments and stand ready as we always have to support our clients. Before I turn the call over to Jim I want to thank Joe for partnering with me through this journey and for playing an instrumental role in strengthening our financial stability and positioning Floor for long-term success. Jim will now take us through the fourth quarter highlights and prospects for 2025. Jim.

Thank you David and good morning everyone. Let me start by saying that I'm very excited to assume the role of CEO in May and would like to thank the board for entrusting me with this responsibility and honor. Over my 31 years at Floor I've learned to appreciate and share the values that define this great company. I've seen firsthand the amazing work that we do around the world to support our clients and the many communities where we work. Through David's leadership during these last four plus years our company is healthier financially and poised to meet the demand-driven growth we see around the world. As Floor embarks on the next chapter of our strategy I look forward to working closely with our employees, partners and other stakeholders to continue to serve our clients through excellence in project delivery. Now moving to the results of the quarter and full year please turn to slide six. Beginning with Urban Solutions the segment reported a profit for the quarter of 81 million dollars versus 147 million a year ago. New awards for the quarter totaled 1.4 billion dollars and ending backlog for the full year grew by 20 percent to 17.7 billion up from 14.8 billion a year ago. Please turn to slide seven. In ATLS we received an incremental award of 243 million dollars for ongoing efforts at Lilly's LP1 project in Lebanon, Indiana. This project has grown from 200 to a thousand personnel in 2024 and continues to progress with the installation of the facility's central utilities building along with steel and concrete placement at the peptides, small molecule and tank farm areas of the facility. The workforce is expected to increase in size in the first half 2025. On the semiconductor front based upon our project performance a major semiconductor manufacturer in Arizona has awarded for more tool installation work. Growing our experience in tool install scopes like this one positions does well for future semiconductor opportunities in the United States. For 2025 we see a robust slate of opportunities including the next expansion phase of Lilly's Indiana project and another major peptide manufacturing facility in the U.S. In addition we've recently signed a master agreement with a leading technology provider and have received initial data center work under this agreement. This builds upon our extensive data center project experience in Asia and Europe. Specific to the data center market in addition to the opportunity I just mentioned we're in conversations or have agreements with the top four data center developers. We continue to see this market as a significant contributor to the grow and execute phase of our strategy. Please turn to slide eight. In mining and metals we received an award for a port the bottlenecking project in Australia for a major mining company. This project will support increased production capacity across the client's mines rail and related port infrastructure assets. The expected completion date is 2028. For 2025 we see a continued focus by our clients on developing additional capacity for key resources including copper green steel lithium and iron ore. We're currently tracking mining and metals opportunities that represent tens of billions in awards over the next few years. Please turn to slide nine. Our infrastructure business continues to make good progress on the Gordie Howe project. Construction is now 94% complete and handover of the U.S. port of entry is in progress. Substantial completion is targeted for Q3 of 2025. Next the LAX automated people mover project is now 93% complete and the forecasted substantial completion date remains on track for Q4 of 2025. On the I635 LBJ project construction is now 70% complete. Substantial completion is forecasted for Q2 of 2026. For this business line as legacy projects wrap up we are selectively pursuing opportunities in markets where we have strong client relationships and an appropriate risk profile. These include Texas, North Carolina and the Netherlands. Moving on to slide 10. Energy solutions reported a quarter segment profit of $63 million. A significant increase from the $26 million recorded in 2023. Quarterly results from last year included $33 million of cost growth for the penguins legacy project. In the fourth quarter new awards totaled $406 million which included additional scope on a revamp project in Sweden, full release on engineering for a regasification and power plant in Indonesia, and a front end award for the units three and four at the Chernoboda nuclear power plant in Romania. This award marks a significant milestone in Romania's efforts to enhance sustainability and energy security in the region. Ending backlog for energy solutions was $7.6 billion compared to $9.7 billion a year ago. During the quarter we helped support key accomplishments for clients including the TCO project in Kazakhstan achieving first oil, the BASF project in China achieving 50 million hours without a loss time injury, and the recently completed lithium hydroxide project in China for Albemarle which was named a 2024 global best project by engineering news record. At LNG Canada the project has surpassed the 95 percent completion mark overall with 771 of 838 systems having achieved mechanical completion. Additionally the main refrigeration compression systems on train one are in final commissioning in preparation for cool down. The project is experiencing some challenges with the installation of insulation on piping and additional skilled labor has been mobilized to site in order to expedite completion. However we are on track to support the client's target to ship first cargos by middle of 2025. This project continues to track to management expectations. To date our joint venture and the client have not yet fully resolved certain outstanding issues for related impacts to the project. We believe that the client and our joint venture will resolve these items fairly and equitably during 2025 similar to resolutions reached on previous changes on the project. Looking ahead to 2025 our energy solutions business will be focused on reloading with front-end engineering and design packages to support future UPCM work including large chemicals facilities in the Middle East, carbon capture and decarbonization. We're seeing opportunities in the LNG space including additional interest in mid-scale LNG facilities. On the power front we are actively deploying our strategy in both nuclear and thermal solutions to support additional energy demand from data centers and other broad power needs. Lastly on new scale we continue to negotiate with our strategic investor to reach an agreement on a long-term monetization and revenue stream to floor while moving new scale closer to commercialization. We believe our current path is the best way to bring value to floor shareholders and maximize our long-term investment in new scale. Moving to mission solutions please turn to slide 11. Mission solutions reported a segment profit of 45 million dollars in the fourth quarter compared to 31 million a year ago. New awards for the quarter were 429 million dollars

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included an eight-month extension for the Portsmouth decontamination and decommissioning and FEMA task orders for Florida, Georgia and Virginia. Our ending backlog for mission solutions was 2.7 billion dollars compared to 3.9 billion a year ago. And as a reminder backlog does not include approximately 5 billion in annual revenue for projects related to our equity method investment where we don't fully or partially consolidate our results. Finally, we're well positioned with our Department of Defense and Department of Energy customers on recompete or extensions of existing contracts including work for the Army on our Law Cap 5 contract in Africa and at the Portsmouth site. With that let me turn the call over to Joe for the financial update.

Joe? Thanks Jim and good morning everyone. This morning I'd like to discuss an overview of our financial performance and provide an update on the progress we have made in strengthening our capital structure. Please turn to slide 13. For the full year floor reported revenue of 16.3 billion dollars and a net income of 2.1 billion dollars or 12.30 dollars per diluted share. Results for the year reflect the favorable impact of the new scale deconsolidation and subsequent fair value accounting. During the quarter we recognized a 116 million provision related to a jury verdict against a floor joint venture on an infrastructure project completed over 12 years ago. The client sued over alleged incorrect designs performed by a subcontractor. We believe that the jury verdict does not accurately reflect the evidence at trial and we are evaluating all options may eliminate most if not all of the provision taken. The provision does not reflect any offsetting recoveries that we believe are owed to the joint venture. Our 2024 form 10k filed today contains additional discussion on this matter. Segment profit for the year was 635 million dollars and adjusted EBITDA was 530 million. On an adjusted basis our 2024 results were $2.32 per diluted share. Corporate GNA expenses for the year were 203 million dollars compared to 232 million dollars a year ago. The improvement over 2023 can be attributed to an ongoing focus on overhead optimization and a reduction in performance based compensation. For the full year we reported net interest income of 150 million as our cash management team invested floors cash and high quality interest bearing assets which more than covered the $46 million in low cost fixed rate interest expense on our outstanding debt. Please turn to slide 14. Cash and cash equivalents combined with marketable securities were $3 billion representing a 14% increase from 2023. Our operating cash flow for the year of $828 million dollars including meaningful distributions from two large joint ventures and IRS refunds but also reflects strong core cash generation. This was our best year for operating cash flows since 2015. During the year legacy projects required 81 million in funding. We believe that these late stage legacy projects will require up to $200 million of funding in 2025. Over the course of 2024 we communicated our intent to restart our capital allocation program. Based on our strong financial footing and confidence in sustained cash flow generation we started our share repurchase program with $125 million dollars or 2.3 million shares purchased in the fourth quarter. Under this initial phase of our share repurchase program we are targeting an additional $300 million in repurchases during 2025. Changes to our plan for share repurchases will hinge on potential proceeds from further monetization activities. Our performance over the past four years provides flexibility on capital allocation including reinvesting in the business organically, the size and timing of our share repurchases, reinstating a dividend and the ability to make select bolt-on acquisitions to support the continued growth in the business. Before we discuss our guidance for 2025 I want to review a few additional items. Please turn to slide 15. Last year we purchased $57 million dollars of our outstanding 2028 notes. We will continue to chip away at these notes opportunistically at or below Last month we closed the sale of our STORK UK operations which essentially completes our transition to an asset light model. Led by our transaction of STORK and right sizing our office in Houston we have been able to reduce our real estate footprint by more than half to 3.7 million square feet. Next our investment in New Scale was deconsolidated in October of 2024 resulting in a $1.6 billion pre-tax gain. Subsequent mark to market gains based on its prevailing stock price through 1231 resulted in an additional pre-tax gain of $604 million for the fourth quarter of 2024. Since this will be my final earnings call I wanted to introduce John Regan as my successor. John has worked side by side with me over the past four years and was a key part of the finance leadership team that led to the rebuilding of Flora's capital structure. John I'll turn the call over to you.

Thanks Joe. What Flora accomplished with the first chapter of our strategy has restored investor confidence and established the foundation for the next chapter. I am excited to support the business as we pivot to the grow and execute phase. Back in December I had the opportunity to speak with the head. Please turn to slide 16. Looking to 2025 our EBITDAW guidance is 575 to 675 million which lends itself to an operating cash flow range of 450 to 500 million dollars. Our estimated cash flow reflects the underlying operational performance and working capital needs under a largely reimbursable profile. We expect our full year EPS to range between two and a quarter to two dollars and seventy five cents per diluted share. We currently don't see any material items that need normalizing from our gap earnings other than FX and new scale which is now mark to market to their screen price across our 126 million shares. These expectations are based on our ability to successfully execute our strategic priorities as well as capturing the demand for our services across the end markets we serve. To provide a bit more granularity on the outlook for 25 our assumptions include a new awards book to burn ratio well above one, revenue growth of approximately 15 percent, net interest income of approximately 80 million dollars, G&A expense of around 180 million, and despite a potentially wide range of outcomes we also see an effective tax rate of approximately 30 to 35 percent. Our expectations for 2025 segment margins are approximately four to five percent in urban, three and a half to four and a half percent in energy, and five to six percent in mission. For 2025 we expect the normal shaping of quarterly cash flow. For EBITDA we expect an acceleration in the second half of the year as we ramp up execution activities particularly on our urban solutions portfolio. As a housekeeping matter we'll file an S3 later today solely to refresh our ability to capitalize on expedited financing opportunities in the future. Lastly once new scale files their 10k we will file an amended 10k to incorporate their financial information into ours as required under the security laws. Operator with that we're now ready for our first question.

Thank you the floor is now open for questions. If you have dialed in and would like to ask a question please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question simply press star one again. If you called upon to ask your question and are listening via loudspeaker on your device please pick up your handset and ensure that your phone is not on mute when asking your question. We do request for today's section that you please limit to one question and one follow-up. Again press star one to join the queue. Your first question comes from the line of Michael Dudas with Vertical Research. Please go ahead.

Good morning gentlemen. Morning Mike. Good morning Mike. Congrats Jim and well done David. First maybe for David or Jim as you've put together your outlook for 2025 and some of the cross currents that you've highlighted in your prepared remarks you know the on the book the bill that could be well above one maybe a little bit more thought on timing and the areas certainly highlighted energy solutions reloading but you know in the urban side which has really been a big driver the last couple years maybe some you know a little bit more visibility on how that will be booked and the margins that you're seeing on some of these opportunities in the urban solutions area relative to the mixture business.

Yeah good morning Mike. Maybe I'll start and ask Jim to comment as well. You know as you look at the backlog at the end of the year in 24 obviously we've seen urban solutions kick up dramatically as we had laid out and planned for in our in our strategy to drive growth across the portfolio. So you see that backlog sitting at 17.7 billion energy solutions coming down as we expected as well and mission solutions holding firm. So we expect that to continue. We do see a book to bill significantly above one in 2025 just to emphasize that and the margins we have guided we're comfortable certainly comfortable with. So you know where it's coming from specifically Jim some comments on that please.

Sure thanks David and thanks Mike for the words there and looking forward to working with you and the your colleagues going forward. Yeah so the book to bill significantly above one a lot of good opportunities in ATLS if you look at pharma and the market that we've we've been very successful on in previous years it's going to continue to be a good growth market for us. If you look at what we call the advanced technologies projects that include semiconductors and data centers data centers as a market we're focusing on very strongly and we've already had some recent success on that in addition to building on our experience that we had in Europe and Asia. Mining has a significant slate of opportunities some of them in front end work some of them converting to EPCM and then of course in government we have a very strong position in with DOE and we expect some of those significant awards to come from from that client. So it's it's urban and it's mission primarily with a lot of front end work and energy preparing for subsequent years.

Yeah just to Mike just to kind of big picture support what what Jim has just mentioned we've got about in the next 12 months we've got prospects just in the larger EPCM project arena not the not the front end work but just the the full EPC awards prospects of about 46 and a half billion dollars with again urban being about almost 24 billion of that and then evenly split between energy solutions and mission for the other you so that kind of you know supports the where we're where we're heading with our bookings in the coming year.

And Mike just to add you asked a little bit about timing I think it's encouraging to see some of the announcements through the mining group this early in the year and also through kind of the data center activity that we're we're kind of we've got some inroads at the beginning of the cycle so it should help and support the burn curves as we move through the year.

Maybe how when you look at the maybe upcoming data center cycle relative to say your let's say life science or semi-cycle and like where are we in maybe early innings or what innings are in and the magnitude and scope of what you would be providing and what those numbers would look like when you convert those kind of prospects.

Mike we missed the sorry what was the specific area we missed the beginning of that.

No I'm sorry I apologize on the data center site maybe compared to like your life science or semiconductor electronic space and what inning we're in and what when you convert those prospects what type of size of projects and what scope that you'd be providing as you move through this looks like a long cycle of build out on the AI front.

Yeah thanks Mike I'll start that this is Jim. We're in early phases if you look at the projections by just the big five data center hyperscalers here in the United States. They're talking about several hundred billion dollars worth of announced investments and I think given that given that the size of these projects is growing they lend themselves to Fluor's project delivery expertise and model. Now we're going to remain diligent and methodical and taking on this work but building on our track record of recent data center projects like I said in Europe and Asia we believe we're well positioned for this big wave of data centers that is projected for the United States and as I said in the prepare remarks we signed a major we signed a master agreement with a major data center company. We're kicking off the initial stages of the first project under this agreement. This project is a co-location data center which is on the smaller scale call it between half a billion and a billion dollars in scale but this agreement allows you to build and work on data centers of all sizes including hyperscalers that now you're talking about multiple billions of dollars. Now those jobs take a little more time to mature and and develop but the neat thing about this agreement is that it allows us to build a longer term relationship with this client on multiple projects and therefore take advantage of the benefits of replication of efficiencies lessons learned on previous projects. So I think we're in the task to answer specifically your question we're on the early stages of the cycle. We're going to approach the market methodically and with the proper project and we're going to pursue discipline but we do believe that data centers will be a significant engine for our growth in this next chapter of the strategy.

Yeah and just adding to that Mike right as Jim said a significant contributor to our grow and execute phase not only for the in the facilities data center facilities themselves but also where floor can add value on the power demand side of the equation right. Our expertise in power generation both you know thermal and nuclear is going to play a key role in supporting our clients needs and we're already you know currently ramping up our capabilities further on the power side. You know the numbers are just astronomical for power demand for data centers. We've got 26,000 megawatts installed in the U.S. right now that's going to go to 90 they say 92,000 is required by the end of the decade and then the numbers are even larger globally but the U.S. is about 40 percent of the market so a big focus here on data centers combined with power generation which is obviously in our wheelhouse.

Excellent thanks gentlemen.

Thanks Mike.

Your next question comes from the line of Sangeeta Jane with KeyBank Capital Markets please go ahead.

Thank you so much for taking my question. If I can ask one on youth scale I believe that there was a due date to execute a true sheet strategic bar so I'm just wondering if that is still the case or if there's a change in your thinking on the timing of the monetization.

Good morning Sangeeta thanks for the question as Jim mentioned in his prepared remarks you know we're in detailed negotiations right now with our strategic investor to reach reach an agreement on a long-term monetization and revenue stream to floor while at the same time moving new scale closer to monetization commercialization and you know we continue to believe that our current path is the best way to bring value to floor shareholders to the strategic investor and also to new scales and for that the business strategy of success we need all three parties to win so the timeline to monetization has been lower than desired however as you can as you can imagine anything in the nuclear space that is in startup pre-commercialization mode does take patience and you know we want to get this right for decades to come not just for the next few years right so the overarching objectives are threefold here first to ensure the the successful commercialization of the new scale technology with our strategic investor and then second to drive maximum value for floor shareholders monetization and third ensure fliers project execution services are are considered for a new scale installations on a global basis wherever we can add value to an opportunity so on a related note as you i think you may know fliers executing front-end design work for row powers smr project romania that is utilizing new skills you know still industry-leading technology and and jim also talked about conventional work in nuclear power which you've probably seen in the news recently we've just kicked off with our joint venture partners on some front-end design scope for conventional nuclear power which is our scope on that program is being executed on a reimbursable basis so work continues and we're positive about new scales monetization in fact we'll be personally in a in a meeting later this week to to continue the discussion so we'll give you more information as it comes available

great i appreciate that and i know you guys mentioned in your prepared marks regarding the new administration and the eos but there's also been a lot of confusing news regarding spending pieces so maybe you can give us an update on where you stand with your federal government contracts whether it's fema or nsa or the department of defense and if you're seeing any movements there

yeah i'll also ask jim to to comment here from what we can see because we've primarily in the mission solution space and based on uh our you know where we play in department of defense and department of energy two of our key clients plus fema at this point which is still in place so you when you're talking about national security and energy and nuclear cleanup plus nuclear support of of the in the nuclear deterrent space all that work that we're doing in mission solutions really is top priority and we've we've got indications that uh you know most of the work that we're focused on will will continue because of of that type of work uh that we do for the for the uh for the country jim anything else you know i know you're right

uh you're right david i think we believe that the project work we do and the support work we do for the government is tied to their very critical missions on these respective missions so we we expect the work to continue yeah there there has been a lot of uh news coming out of washington zangita but it seems like a lot of it's been updated and refreshed soon thereafter so i think when it's all said and done uh these programs are going to continue because they are mission critical and we feel good about uh continuity to them and we feel good about our our future opportunities and mission also with these two big departments with fema and other civil agencies that we're pursuing work for

appreciate that thank you so much

your next question comes from line of jamie cook with truest securities please go ahead

hi good morning and congrats jim uh david and joe um i guess my first question just on um lngc um you announced cost increases i think last week in conjunction with their earnings and you mentioned some stuff in your prepared remarks so can you just give us more color there were there any cost increase uh that you guys incurred in the quarter associated with that project and your margins for es next year are three and a half to four and a half percent so at the low end you know the margins are are lower than what you're expecting this year at the low end of the range so that reflect lngc and then just my second question on the guide for the year i think you mentioned that it would be more uh back end loaded um if you could just help us you know how we think about first half versus second half just so this street calibrates estimates correctly thank you

morning jamie thanks for the questions and i um i'll ask jim's been spearheading uh all of our uh discussions at lngc and uh i'll ask him to comment on that and then joe could comment on the es margins and and and reagan can talk about the back end load and how we see the ramp up for the year

yeah thanks david uh hello jamie so as everyone knows lng canada is obviously an important project for us and we're working closely with our jd partner and our client in this final stretch uh the commissioning efforts as i said are progressing well and are very advanced uh and as i indicated train one is in advanced stages of commissioning and preparation for cooldown now despite the fact that we have had to expend additional resources on the installation work uh we are still on track to meet the client's objective of first cargo middle of this year uh the project continues to jimmy tracking to management expectations uh and we we expect it to be a very successful project when it's all said and done um we continue our conversations with the client on the on the final commercial resolution uh we've we've had some good fruitful discussions in in recent weeks and days and again we're confident this is going to be a successful project at the end of the day tracking to our expectations

so uh joey you want to comment on how that weaves into margin guide for energy solutions

yeah um jamie thanks for the question yeah if if we look at kind of um the burn off of of some major programs flowing into kind of a reload um uh situation with for energy solutions around feed work what you're seeing is kind of the pivot of a lot of those resources as we move over to the demand driven growth side of the the model so you'll see a little bit of a a drag in the beginning of the year and i think you'll see better strength in that margin performance as we get to the end of the year but really this is kind of the pivot as we as we shift over to the urban solution side of the model in terms of where we see the demand driven growth and the types of teams that we need in order to support that and open the aperture to that that uh opportunity within grout and our backlog growth so it that's really where it's at right now it's kind of the the trail off of the projects that we're executing and as we pivot into pivot some of those resources over to to the urban solutions out of the business very

good and i think a little bit of a testimony to the portfolio approach that you know as as you're coming off these big projects in the es you really see a ramp in the in the urban side in the back half of the year so um you know i'm not going to give you too much color on the shaping but uh you know i'll say you know we'll see a really high exit velocity from from an ebitda as we get into the second half of the year

thank you

thanks jamie

your next question comes from the line of andy whitman with baird please go ahead

yeah great and thanks for taking my questions maybe joe one for you just kind of looking at the the cash flow guidance here 455 hundred that's at or maybe slightly above the net income guidance which is pretty good outcome i think particularly concerned here you've got uh i guess 237 million of burn associated with these legacy projects yet a pretty good ocf number so i guess my question is got a couple parts to it which is what are the offsets that are are leading to maybe you know considering you've got this this burn for legacy what's the offset on the positive side are there more jv cash distributions that are kind of propping up the the ocf guidance that you give here um are you expecting that in 2024 you came into the year expecting to burn a lot more on the legacy projects than you actually did because during the year you got some you got some relief on those projects i'm thinking about gordy i'm thinking about lax some of those things i think helps offset some of the cash prints are you looking for some of these offsets in 25 to deliver this number or can you just talk maybe about some of the moving parts inside of that thanks

no no i think i think you laid it out um pretty correctly you know as we're looking at you know the the the bar that we set relative to the funding of the legacy projects at the beginning of the year we had a similar number in 2024 and we drove that number down um this is what the planning basis has laid out for us so the 450 to 500 cash flow guide that we're providing absorbs that 200 million into that discussion and we will fight obviously as we did in 2024 to to bring that number to the lowest possible common denominator and i would suggest there's maybe 20 to 30 percent of that guide that is wrapped up into some of the additional dividends that we're repatriating in not so much from mexico but principally probably from from our operations up in in in canada at this point but yeah there's a piece of it it's probably a smaller piece 20 to 30 percent i would suggest the 450 to 500 probably represents is a better representation of what the ongoing business is going to present and and generate over the uh over the course of the planning um period coming up

yep okay appreciate that and then i guess maybe david uh one for you he talked about the um the potential to attach power generation including thermal to the data center and being a more holistic solution i think obviously that makes a lot of sense and stands to reason just just as it relates to the thermal side i mean this is a business obviously you guys have had a long history you mentioned that but from investors point of view this was a business that was kind of shut down because of the fixed price nature of the business i would imagine that the the experts that you had in the company might not any longer be with the company how how do you position the business rebuilding a team presumably you'd only do it on a reimbursable basis how do you credibly rebuild that team to deliver that solution and can you just as part of the answer that question can you just talk about how advanced any discussions on the power generation side are for you on the thermal side thank you

thanks andy good morning thanks for the question you know it's exciting the utilities tell me it's exciting and electric times in the uh in the power generation world right now everyone out there is is scraping and scratching for for where they can get power generated you know including coal to gas fired smrs and thermal uh thermal power i had the opportunity to run our power business back in the mid-2000s had a great run there uh with um with thermal power build up down and some clean coal facilities as well so definitely uh we do know how to to execute that was all fixed price back then but you're you're right uh we want to move into this space um uh strategically and and follow our our uh risk processes risk management processes as we as we look to uh to build a power generation uh to support to support uh you know the broad power demands uh going forward so uh we're rebuilding the capabilities you know when you see our traditional i think of our traditional clients the likes of uh chevron and exxon mobile get just announcing this this cord or both of them that they're developing power solutions for data centers and we've got our traditional clients looking at that so which helps us obviously with our relationships and how to get involved with those projects but we do need to look at a deal shaping and um and either reimbursable or hybrid models uh where the risk is put in the right places uh on these on these generators so i'll ask jim to comment a little more because he's close to it having a chief operating officer working closely with energy solutions and what they're doing to to get ready

no thanks david yeah um and you uh you brought on some interesting points in your question stuff that we are discussing internally to make sure uh we are approaching this the right way let me just first say we've not forgotten the lessons of the past and when we pursue power work we're going to be very deliberate uh in our approach to the market i think there are great opportunities out there driven by data centers but in general just driven by greater demand for power uh for a variety of reasons today we're currently involved selectively in several power projects both nuclear and natural gas uh we've entered these projects early at the front end working closely with our clients looking for the best technical solutions and during the front end we're shaping the e p c e p c m phases to a commercial profile that makes sense for everyone so we are doing that today both like i said nuclear and thermal and we're going to follow the same process for future opportunities as david said we're in discussions with several utilities about their project needs and we believe we have a lot to add there in terms of our execution and project management capabilities uh and let me add our expertise in supply chain so much of the success of a project today is driven by supply chain not just the main equipment but all the other ancillary equipment and making sure all that gets delivered on time both for engineering and for the construction so i think there's a lot of fluid can add value in this market without having to go to a competitive lump sum bidding process late conversions partially reversible hybrids there's a lot of models we can implement and the clients today are more amenable to follow these more innovative created models given that they know there's limited capacity out there and that project delivery certainty is is what they need

yeah there's a lot of uh the existing power e p c service providers are stretched stretched right now in their execution capabilities so uh that that brings opportunity for floor uh as jim said we need to be very very uh careful and have patience right uh one of the bigger issues in this in this space is that the turbine the turbine oems are sold out 2028 so that's uh that's another challenge that we've got on our projects to to uh make sure we can we can get the supply chain right and the timing right but uh we're going to be very very careful and measured in this space

thank you

thanks andy

your next question comes from the line of stephen fisher with ubs please go ahead

so thanks good morning and congratulations to uh to all with the new roles um just wanted to follow up on the the new scale uh discussion i'm just curious david i mean has anything changed uh in terms of of the negotiations i mean are you actually making progress uh i know investors are kind of sitting a little bit anxiously hoping you're able to lock in some of the value and in marketplace so i understand it's probably hard to discuss negotiations that are ongoing but i'm just wondering if there's any other comfort you can offer investors that that you are actually making tangible progress uh towards towards some monetization

yeah more steve um as you said we're in the go since we're in negotiations uh not a lot i can say other than we're those these are discussions and uh which as i said i'll be participating in later in the week so as i said it takes patience in uh in the nuclear space and you know we're at the very front end we're in the first inning on on smrs uh and commercialization of the new scale technology but the demand and the interest in in that type of business model going forward is is really off charts the uh you know as soon as uh as soon as some some power purchase agreements get get signed up uh you know i really think the floodgates are gonna gonna open up wide so i i'm very positive uh on on the uh the opportunity for floor and for our strategic investor and for and for new scale supporting with their technology uh and like i said we're in we're in detailed discussions and hope to have some news for you soon

okay that's helpful and then just to follow up on james question about the energy solutions margins i guess i'm still a little unclear why the the first half at least is a little bit low given that sounds like the mix should be uh much higher in terms of engineering services which should be higher margins is it it was the point that you basically there's just an under absorption of the project management uh resources and staffing that you have and that offsets the higher engineering mix and then i guess more broadly david i think during a lot of of your tenure the uh the message has really been about a focus on putting higher margins into backlog and i'm wondering if uh you know if that uh under uh jim and john is that is that going to be sort of still the ongoing message here or is anything kind of changed in that regard

yeah i'll talk a little bit about yes maybe maybe what i'm trying to describe is the pivot as we came off the back end of some of these bigger programs we have a significant amount of infrastructure that was in place to support those big programs and as they start to trail off and we pivot to demand-driven growth there is a little bit of friction in that process as we get the right people in place in order to open the aperture into what we see is a a fairly robust opportunity slate within urban solution so it's just a bit of the friction that's going to occur in the beginning of the year through the first quarter into a portion of the second quarter but as that starts to shift you'll start to see better leverages coming through energy solutions and you'll start to see better backlog growth into urban solutions and that'll help normalize your margin profile across the the spectrum of the segments that we have

right and then on um on higher margins and the focus on higher margins and healthier backlog going forward and also moving to a primarily reimbursable backlog as part of that you know our strategic priorities which we'll talk about in april with you have not changed we've got a little more focus on on projects project delivery because we're growing and we we have to make sure we cover all our bases and execute with excellence as we grow and not get stretched so the strategic priorities are are pretty well the same you'll hear about and and when we talk about fair and balanced contract terms and and getting paid properly for the value we provide that is still firmly in place going forward and again that's what you'll be hearing more about here in april so i guess i should turn it to to jim and reagan because uh you've asked them the question as well jim

that's right david the there's going to be a focus on the proper returns on the risk adjusted basis the fact that the the portfolio is majority reimbursable helps with that um yeah there is a there is a pivot in energy solutions and that's a market i know well because i ran that business for several years and we're reloading with a lot of significant work including the power discussion we had a minute ago but there's other opportunities lng and and decarbonization and downstream and chemicals so we expect that market probably in the 26th time frame to start picking up in the meantime urban is going to be our primary edge in the growth so yeah there there is a lot of focus on on margin but there's also a lot of focus on on risk and making sure the margins we are getting are proper for the risk profile so the priority is going to be the same in a in a vertical in a rigorous

manner yeah on any comment like that i just echo that it'll continue to be a focus i think the phenomenon of the absorption issue that you raise is real i think as jim pointed out normalize as we get closer to 2026 and we'll see some of the leverage to the margins and in es as as we get into that latter half of the year so your question was intuitive and a bit leading but i think you you've heard us all echo the continued focus on on the margins coming into backlog

terrific thank you very much

thanks your next question comes from the line of brent failman with d.a davidson please go ahead

hey thanks good morning congrats as well to everyone um i just had a question on the financial guidance inputs and specifically just around um the interest income expectation of 80 million in 2025 i think you realized 150 in 2024 it just it can you bridge the difference there are there any other cash outflows you need to be aware of understand you're going to have some share repurchases in there but just want to understand that

yeah good morning thanks for the question friend um so as as you think about it your your intuition is again spot on um you are seeing a will remain you know in progress in earnest across all of the 25 um the biggest thing that maybe you're you're not thinking about is the cash that we've held at a couple of our significant joint ventures notably in canada and in mexico and so we had significant repatriation of those dollars back into flur corp and out of the jv and so you wouldn't have necessarily seen that cash but it has now come back into to the corporate portfolio and so we were kind of generating interest on cash you couldn't see because of the nature of the jv accounting so the biggest the biggest difference there in addition to a little bit lower interest rates across the balance of the year but the biggest thing is really the the jb cash that has now been redeployed back to the jb partners yeah

okay and we're and we're returning and we're returning shareholder yes and and we're buying back shares too right so

understood yeah and i guess just to follow up in a little conversation around the um the stronger book to burn i think well understood urban solutions is going to continue to be a nice driver here i guess i'm more curious on the timing and energy solutions as we advance through 2025 are you cautiously optimistic or optimistic we we might see an inflection in this kind of downward trend and backlog that's developed more recently and just trying to get a sense of when you think some of these these opportunities start to accelerate

there yeah bren this is jim yeah 2025 is the reloading year so and and look we we don't always control the timing of awards we we can get ready for the projects we develop the teams the proposals the execution plans sometimes these front end efforts dragged on because the clients it's interesting the clients in the energy market have been a little more careful and prudent in launching their fids than the clients we see in other markets that are more time to market and are willing to jump the gun earlier so when you ask when when will the inflection point turn upward it depends a little bit on these fids i would say 26 is a higher chance for sure than 25 but perhaps even the second half of 26 so we're doing everything we can to set up the projects for success doing quality front end work helping the clients maneuver the challenges of the supply chain helping them maneuver the challenges of potential tariffs and other issues so there's a lot of good work that happens on the front end to set these projects for success the exact timing of them it's up to the clients and specifically to your question i'm probably looking at a 26 time frame very good thank you thanks brent

due to time constraints this concludes our q a session i will now turn the call back to david constable chief executive officer for closing remarks

thank you operator and many thanks to everyone for participating on our call today you know as we close out the 2024 financial year really pleased with our cash generation trajectory on our and our ability to return capital to shareholders in addition we've you know we have significant near-term prospects that will support further revenue growth and and broad-based industry diversification for the company so we appreciate your interest in fluor corporation and thanks again for your time today

this concludes today's conference call thank you for joining you may now disconnect