Fluor(US:FLR)2022-11-04 18:20Financial Data and Key Metrics Changes - Revenue for Q3 2022 was $3.6 billion, an increase attributed to the ramp-up of execution activities on refinery projects in Mexico and a recently awarded reimbursable LNG project [39] - Segment profit decreased to $31 million from $116 million a year ago, primarily due to $107 million in legacy infrastructure project charges [39] - Adjusted EBITDA for the quarter was $26 million, with diluted adjusted EPS at $0.07 [40] - Operating cash flow improved to $118 million, with cash and marketable securities balances at $2.6 billion [42][43] Business Line Data and Key Metrics Changes - Urban Solutions reported a segment loss of $54 million due to infrastructure cost growth on legacy projects, with new awards approaching a one-to-one book-to-burn ratio at $929 million [15][39] - Mission Solutions reported segment profit of $29 million, consistent with expectations, with new awards including a $4.5 billion extension with the U.S. Department of Energy [26][27] - Energy Solutions segment profit was $59 million, reflecting an embedded derivative loss and declines in execution activity for nearing completion projects [29] Market Data and Key Metrics Changes - New awards for Q3 totaled $9.7 billion, improving backlog to $25.4 billion, with reimbursable backlog at 58% [42] - The company is tracking $131 billion in high-quality new award prospects, with 40% related to energy transition [14] - The outlook for Mission Solutions is optimistic with upcoming renewals and new work opportunities [28] Company Strategy and Development Direction - The company is focusing on fair and balanced contract terms, with 91% of new awards being reimbursable [13] - A strategic priority is driving growth across the portfolio, particularly in the Urban Solutions segment with the retention of Stork's North American operations [16][17] - The company is narrowing its infrastructure focus to regional road and bridge work, declining to bid on approximately $28 billion in infrastructure work that did not meet risk mitigation criteria [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledges recessionary pressures and inflation but expects capital spending to remain strong among key clients [70][71] - The company anticipates continued backlog growth and improved margins, particularly in reimbursable work [75] - Management is optimistic about the energy transition projects and the potential for significant new awards in the chemical sector [57] Other Important Information - The company is actively engaged in formalizing entitlement positions on legacy projects to seek relief for cost growth and delays [12] - The company plans to retire $145 million in debt maturing in March 2023 using available cash [47] - The fourth quarter adjusted EPS guidance is set at $0.50 to $0.60, with expectations for revenue exceeding $4 billion [49] Q&A Session All Questions and Answers Question: Prospective award potential in semiconductors, mining, and energy - Management discussed strong relationships with clients like Intel, with expected CapEx increases and upcoming mining projects anticipated to convert to full awards in the next quarters [54][56][57] Question: Update on infrastructure project completion dates - Completion forecasts for LBJ 635, Gordie Howe, and LAX projects were provided, with LBJ expected to complete in Q2 2025 and LAX in Q2 2024 [64][65] Question: Expectations for Urban Solutions margins and performance - Management indicated confidence in achieving a 4% margin in Urban Solutions for Q4, with expectations for improved performance as challenged projects are resolved [81][82] Question: Impact of inflation on LNG Canada project - Management stated that procurement is complete for the LNG Canada project, with inflation risks largely mitigated through project labor agreements [90] Question: Cash flow generation improvement timeline - Management confirmed that improved cash flow generation is expected in 2023, with potential sources of cash from key projects [96]