Fluor Corporation Q2 FY2025 earnings call

Management Statement and Operational Highlights

• NuScale Ownership: NuScale will convert 15 million Class B shares into Class A securities in the next few weeks, seen as a positive for shareholders. Fluor is the largest shareholder and has NuScale EPC expertise.
• Revenue and Awards: Q2 revenue was $4 billion. Consolidated new awards for Q2 were $1.8 billion (72% reimbursable). First half of 2025 new awards were $7.6 billion with a book-to-burn PGM above 1. Total backlog remains around $28 billion, 80% reimbursable.
• Urban Solutions Details: Profit $29M affected by $54M net impact of cost growth on 3 infrastructure projects. Lower take-up on mining/metals and life sciences projects. New awards include Reko Diq and life sciences project.
• Energy Solutions Update: Segment profit $15M due to projects nearing completion and $31M arbitration ruling. New awards $549M. Prospects modest due to reduced CapEx, trade uncertainty, etc.
• LNG Canada: Achieved RFS on Train 1, joint venture reached COVID settlement, awarded FEED package for Phase 2 expansion.
• Infrastructure Projects: Increased operations oversight on 3 projects with cost growth; other projects like Chicago Transit Authority and Oakhill Parkway performed well.

Segment Performance

• Urban Solutions: Reported profit of $29 million in Q2. New awards for the quarter were $856 million. Ending backlog in urban now at $20.6 billion represents 73% of Fluor's total backlog. Results reflect a $54 million net impact of cost growth and expected recoveries on 3 infrastructure projects, with lower take-up on some mining/metals and life sciences projects.
• Mining and Metals: Fundamentals for capital spending strong, but immediate capital deployment tempered by global trade uncertainty. New awards include the full release for the Reko Diq copper and gold mining project in Pakistan. Opportunities include additional scope on Reko Diq, copper work in Canada, etc.
• Infrastructure: Experienced cost growth on 3 projects (Gordie Howe, 635/LBJ, I-35 Phase 2) due to rework, material costs, subcontractor default, etc. Other projects like Chicago Transit Authority Red Purple Line and Oakhill Parkway performed well.
• Energy Solutions: Segment profit was $15 million compared to $75 million a year ago. Results reflect reduced contributions due to projects nearing completion and a $31 million arbitration ruling. New awards for the quarter totaled $549 million. Prospects for the next few quarters are modest.
• Mission Solutions: Reported a segment profit of $35 million for the second quarter compared to $41 million a year ago. New awards of $363 million included short-term extensions at 2 DOE sites and additional funding for hurricane relief efforts. Ending backlog for the quarter was $2 billion.

Guidance

• Revised 2025 adjusted EBITDA guidance: $475 million to $525 million and adjusted EPS guidance: $1.95 to $2.15.
• Operating cash flow now ranges from $200 million to $250 million for the full year or $500 million to $550 million for the second half of 2025.
• New awards outlook: $13 billion to $15 billion, with revenue growth of approximately 5% to 10% compared against 2024.

Risks

• Market hesitation and uncertainty affecting client project decisions, leading to project cancellations or deferrals.
• Trade policy impacts on client sentiment, project costs, and supply chain rebalancing.
• Slowdown in Energy Solutions due to reduced CapEx budgets, trade uncertainty, and soft battery and chemicals markets.
• Infrastructure project cost growth and challenges in recovering costs from subcontractors.

Question and Answer

Q: Andy Kaplowitz on project decisions, trade policy, and NuScale conversion.

A: Jim Breuer and John Regan discussed trade policy impact on client decisions, NuScale's Class B to A share conversion, and revised guidance.

Q: Jamie Cook on NuScale, LNGC COVID claims, and $1.7B backlog adjustments.

A: Jim and John talked about NuScale conversion details, LNGC COVID settlement's impact on cash flow, and the $1.7 billion positive backlog adjustments.

Q: Andrew Wittmann on backlog adjustments, mining margins.

A: Jim and John explained backlog adjustment mechanics and mining project margin expectations.

Q: Michael Dudas on infrastructure projects, phase 2 LNGC.

A: Jim Breuer discussed infrastructure project status and LNGC Phase 2 prospects.

Q: Judah Aronovitz on EBITDA CAGR target.

A: Jim Breuer and John Regan talked about long-term strategy and EBITDA target expectations despite revised 2025 guidance.