Do it. Okay. We're going to get going here with the next session here. Welcome all. I'm Andrew Whitman. I'm the Senior Engineering and Construction Analyst here at Baird. Thanks for joining me. Thanks for joining us at Baird here on the third day of our conference. Really happy to be joined by Fluor here in this session. Joe Brennan is the company's CFO. Jason Landkamer runs investor relations for the company, and we're here to learn more about the company, so in order to do that, Joe, I just thought maybe if you could just take a couple of minutes for people who maybe are less familiar, just talk a little bit about who you are and what you do. Sure. And then I'll start. I always set these things up. I take about half the time. I try to keep it pretty general for people who don't know. And then in the last half of our time together, I'm going to drill in a little bit more and talk about the people who want the more higher-level class. So anyway, Joe, why don't you get us going? Perfect. Thanks. Good morning, everyone. Fluor Corporation is a company that's been in business for over 110 years, principally in the engineering, procurement, construction management space, driven in large part initially through the oil and gas sector. But over the years, we've diversified into currently three separate focus points through our Energy Solutions model, through our Urban Solutions model, and through our Mission Solutions model. Within the construct of that, I think Urban Solutions is the most diverse. We run through Infrastructure, access to Advanced Technology and Life Sciences, Infrastructure, and TRS, and certainly. Mining and Metals. Mining and Metal, sorry, and in the oil and gas sector, we're focused on Production and Fuels, upstream, downstream, LNG, and power, and on the Mission Solution side, we have a pretty diverse set of businesses, but we have, as Jason likes to say, we're kind of the index fund relative to the industrial space. We've got exposure to a number of different industries, and as I said, been in business for 110 years and certainly in a good position relative to where we are in front of the markets that we have today. Yeah. I think it'd be remiss not to talk about the fact that your capabilities as a full EPC company is becoming a little bit more rare, certainly in the public market. It's interesting. As we were kind of going through this transition over the last five years and kind of reinventing ourselves, we had a fairly robust debate relative to keeping construction and what that meant for us moving forward. And construction, as we were moving through the previous five-year time, had created some challenges for us. And as we shifted our risk model into a more reimbursable model, 80%, where we were 80% lump sum, as we've transitioned out of that, what we found is construction has become really quite a competitive differentiator for us. There's very few companies in our space today that can actually take you from concept to startup and commissioning and handover. And so that's really allowed us to get into a situation where we have a much more controllable competition and competitive base. And it's allowed us to have better control over what those terms and conditions will look like as we enter into contracts. And we're getting back to a much more fair and balanced view of the world. The shift that we made to get from an 80% lump sum to an 80% reimbursable company has occurred over the course of three and a half years. And that's a significant shift. And in the face of that, we've grown our backlog upwards of $32-$33 billion. So the shift in the strategy and our ability to execute to it, I think, has provided a very credible, stable platform as we move forward with the opportunities ahead, which I'm sure we're going to get into talking about what some of those markets look like going forward. But that shift and getting back to a much more consistent P&L, 80% reimbursable is a significant shift in our risk profile as a company. And it's where we were 10, 15 years ago. I'll never forget when at your strategy day, and I think it was 2021, I saw you guys say that you're going to be 75% reimbursable. And I will say at the time, I was like, there's no way. No way we're going to get there. Can't do it. It's not endemic. The market won't allow it. And it took some work. I mean, you guys had to ultimately, you ran the revenue down, cut it more than in half. The old backlog had to burn off and build it back up. And like you said, all those things are well off the bottom now. And you're starting to really demonstrate that you can be competitive with terms and conditions that are completely different than before. And essentially, one of the key elements of doing that is kind of focusing on our nontraditional industries, which is one of the stated strategies when we rolled out kind of Building a Better Future. And that really meant pivoting over into the urban solution side of the market, where we saw clients that were kind of in different stages of maturity relative to maybe how we would have worked with an Energy Solutions client that had been in the engineering, procurement, construction phase. We have clients on the urban solution side of the business that are much more reliant on the value that we can provide. And they're more reliant on not only our ability to deliver very complex, large projects, but also take it from a concept to a startup and commissioning. And it's very supportive of their time-to-market model. So it's allowed us to really shift in a very expeditious way, I would suggest, from a 20% reimbursable company to an 80% reimbursable company. Yeah. And just to put that a little bit more clearly, in the Energy Solutions or your oil and gas segment mostly, those customers have their own engineers, whereas. They do, yeah. You don't have a big engineering staff at a life sciences corporation that can build a building or a production facility. Yeah. Getting into the granularity, it's interesting. When you get into a, and I don't want to call out ExxonMobil, but when you get into a project with ExxonMobil, the org chart has two ExxonMobil individuals to one Fluor individual. So trying to operate in that environment is a little bit more complicated, but it also is a reduction of the value that you're providing to the client. And that has an impact on the margins, and it has an impact on your total scope at the end of the day and your responsibilities. As we pivot over to Urban Solutions, there's a much heavier reliance on our ability to do that. And as such, we're able to, I think, draw better margins and better valuations moving forward. You've mentioned Urban Solutions enough times that I think we should probably drill in a little bit more. Yeah. Let's talk a little bit about so what are the key areas of growth? Because there are a lot of things. You mentioned you said mining, you gave us a lot of things. But what are the real key drivers in terms of awards in the next year or so that you think or have happened in the last 2024 that are demonstrating the growth drive? Yeah. I'll start with that. When you look at the three business lines in Urban Solutions, infrastructure, Mining and Metals, and Advanced Technologies and Life Sciences, infrastructure has been historically some of the mega marquee bridges. We've finished up Gordie Howe Bridge in Detroit, did Tappan Zee a few years ago in New York. We've pivoted that model away to really focusing on what I'd call traditional infrastructure projects. So I think what you can expect from our infrastructure group over the next 12 months is probably that we see some opportunities out there specifically with TxDOT. I have a great relationship with them down there. And that's kind of consistent with our risk model. Because remember, everything in infrastructure is fixed price. So we're going to be very measured in terms of our opportunities there. You pivot to Mining and Metals. Historically, we've been, you go back 10, 15, 20 years, iron ore, and copper. Well, you look at where Fluor is at today and our clients are at today, still copper. In fact, on our earnings call last week, we announced that BHP has given us the award for Minera Escondida. This is going to be a mega project for us. And we're going to kick off the finalization study of that, if you will, this quarter, which means the full EPC award is going to be perhaps end of next year, early 2026 on that. But that's right in our wheelhouse in terms of the large projects that we've executed for them in the past. We have some more debottlenecking also for BHP. That's going to be more near-term, Andrew, on that. And then also in the lithium space. So this is a mineral that clearly has seen a considerable amount of interest, even with the waning of EV adoption here in the United States. We've been working on projects for Albemarle in China, some facilities in Europe. And then there's a large lithium mining contract in Nevada that's received their final permit. So we're hoping to talk more about that over the next few months. So that's probably how I would frame that on the mining side. And then lastly, on Advanced Technologies, life sciences, this is definitely the leading area of focus when you look at our investor base and engagement throughout this year. What we're working on there, a great example is earlier, Q1 of this year, we got phase one of Eli Lilly's GLP-1 production facility in Lebanon, Indiana. We also said on our call last Friday that we got some early engineering work for phase two. So I think that's something that we'll be able to talk about more as we get into 2025. We've done a lot of work in the past for Novo Nordisk, also GLP-1 related. And then you also, we have some large projects finishing up, potential additional work later on down the road when you think about Fujifilm. That's another life sciences client that you don't hear a lot about. And then lastly, on the Advanced Technologies piece, we do work right now for Intel. So we have had three projects with them. One of them was canceled, but we're still proceeding on some smaller projects for them in Phoenix and then also in Malaysia. And I think there's some additional semiconductor opportunities as you progress throughout 2025. And then on the data center side, I kind of leave that for last. We talk about our engagement with select clients in that space. And it's really working towards one of those master service agreements to where you're one of maybe a couple of contractors that has the ability to go bid globally on not only colo data centers, but the hyperscale data centers, which is really catching the eye of Wall Street clearly in 2023 and 2024. And what I would say to that is we're positioning to win that work and really starting in 2025. Listen, and just to highlight, getting through that kind of MSA so you can qualify for, say, Microsoft opportunities moving forward, the amount of companies out there in terms of competition for us that can take you from FEED to startup and construction are very limited. And I've heard it described as an arms race relative to data centers. And there's going to be, from our perspective, a significant amount of opportunity that will, once you pass through this first MSA and you've qualified through the contracts, I think will be more on a sole source basis, on a negotiated basis. There'll be the types of contracts that we would onboard relative to our risk profile. But we think the opportunity slate is going to be quite substantial. As I understand it, these hyperscale, when you're talking one or two gigawatt data centers, these are really substantial projects. They're really substantial. They're multi-billion-dollar facilities. But the interesting part, too, is you start looking at how you're going to power them, what types of solutions can we provide to that relative to maybe a small modular reactor solution to conventional nuclear, even through some of the thermal and combined cycle opportunities. And that's part of the skill sets that we can offer relative to a more holistic solution in terms of supporting their time-to-market opportunity. And you think these things can be done under terms and conditions that are largely reimbursable for you guys? Yeah, yeah. Now, listen, what we're seeing certainly on the Urban Solutions side is a shift to a carrot-based model as opposed to a straight stick-based model, even within the construct of reimbursable. Meaning, if I am able to execute within schedule and budget, I have an opportunity to earn a larger fee at the end of the day as opposed to getting penalized for the same progress, and I will get paid for my efforts beyond maybe missing those milestone dates. So it is a carrot-based model, which is exactly where we want to be because we believe we can deliver within the framework, and it's not a stick-based model. So that is going to be certainly helpful in terms of opening the aperture to the number of opportunities that we can go pursue in that space. What are the things that slow down data center construction? Is there permitting? I mean, everybody's like, you mentioned power. Power is like one of the key limiting factors. Power is going to be part of that. Water limiting factor. There's a lot of limiting factors, but sometimes it's just as simple as getting a permit for all this stuff. Because maybe you need the power plant that has to go under, or you need the utility to want to share and give you a transmission line that's going to power. I think permitting has always been a problem. I'm not sure how the new administration is going to look at regulations and how permits flow through. We're hoping that there's a little bit of easing in that regard and it can support more of these time-to-market investment opportunities for our clients, but I think that's too TBD. You're right. Today, we suffer quite a bit of some of the delays that we would see relative to permitting and just the regulatory environment, but as we believe that may look slightly different, maybe more favorable to business potentially, that it will be beneficial to us moving forward. Yeah. I would say the only thing to add to that too, Andrew, is also one restriction might be labor availability. Because where these data centers are located, they tend to be in locations where there's maybe some stranded megawatts that can be absorbed. And to that answer, Ellen, if you look at the data centers Fluor has built in the past, we've done that in some cases on a modularized basis. And we talked a little bit more about that in terms of there might be ways to help alleviate some of that labor or lack thereof availability to help still progress the project. Because anytime you have a project like a data center that is not bespoke, in a lot of cases, it's a similar design that you're constructing time and time again, there are opportunities to take labor off-site and modularize and reduce the burden of trying to staff to 10,000, 15,000 folks. So those are all strategies we've deployed across the rest of our portfolio, and we would do the same here. You've been doing that for energy. We've been doing it for energy for years and years. But if you're doing, do you have the fab yards today, or do you need to invest in the fab yards? I would suggest that the fab yard is not really consistent with the business model that we've created moving forward, and I personally don't believe I need to have a fab yard to be more efficient in terms of being able to deliver a project. I need fabrication. I don't need to be the owner of a fab yard. Got it. That's where my head is. You're saying you could subcontract that out to a fab container. For sure. I mean, we're going to put the right oversight within the fab yard to ensure the right deliveries, the right quality, and owning a fab yard to get that same benefit when I don't need to own the fab yard is the discussion that we're internally having at this point. I get you. Okay. Yeah. Because this did come up on your conference call. You kind of tossed it out there, and we didn't have time to fully explain. Yeah. It's not part of an asset-light model owning a fab yard. It is counterintuitive and contradictory to that. Yeah. So just let's talk about the other part of ATLS, which is the semiconductor part of the business. I just want to drill into this. You said you had three sites. One of them got canceled. You're still doing small work on the other two. Intel's been an important customer. Obviously, they're challenged. I'm not going to have you guys sit here and say that Intel is challenged, but it's well challenged. You do have other customers' shots on goal, I believe, here as well. Can you just talk about the likelihood or the ability to put other customers in your semiconductor mix as well? Yeah. I would say kind of one of the clients that would come top to mind is we're tracking what Micron is doing. Because they've talked about a facility in upstate New York. And I believe they've talked in the past about doing something in Idaho as well, too. And so that's something that we would be interested in. There's a lot of semiconductor construction going on right now. And so it's, again, it kind of pairs off well with some of the stuff in data centers that we talked about in terms of similar skill set required. Because you need that construction acumen to build these facilities. And it's clean room, right? Clean water, clean air, a bunch of tool install, right? But it's more complicated than that because the supply chain required to build something at this scale really pairs off well with Fluor's resources and talent base. So it's something that we're going to continue to be engaging in that market. Because again, to Joe's point, similar terms and conditions, it's about time to market. In the case of semiconductors, especially, it's going to be supported by CHIPS Act funding. Yeah. No, go ahead. I guess just to kind of handicap this one, where do you guys believe we are in terms of the curve on semiconductor investment? There's been some really big plants that have been under construction already here in the U.S. There's been some scope that you've already done a little bit. We're seeing some stuff fall out of the pipeline for various reasons. Are we later in the game on chips, or is it still early, Joe? I think there's a pause at this point in terms of what's going on through some of the hyperscale and some of the more advanced semiconductor chips. So I think we're at a bit of a pause to see how Intel and Micron get through it. And I think hopefully in a year, we'll have a little bit better view into that. But we do believe that the reshoring concept is still in play and that that semiconductor work will continue to be constructed in the U.S. It may have a little bit of a delay and a pause. But the nice thing about what's going on within advanced technology and life sciences is we see a little bit of a pause and a delay there. We see a significant growth opportunity running through AI and the power supply there. And certainly, the amounts of opportunity that we're seeing on the life sciences side, we continue to, I think Jason just laid out some fairly sizable programs there, too. So the mix will allow us to onboard semiconductors a little bit later in the cycle. But overall, we still see a significant growth cycle through ATLS. Okay. We just used about a third of our time on that segment, which is important. I'm glad we drilled into it. But I want to move on to talk about the Energy Solutions segment a little bit next. And specifically, so in the quarter that you just reported, you talked about, I guess, some delays in revenue recognition on some of your larger projects that were part of the reason for the shortfall. And I guess I was just hoping you could explain that in a little bit more detail. I mean, these are some projects that I'm guessing are in the very final stages. This is. I guess from the outside, I think it's just a little surprising given that these things should become incrementally more predictable as you get in these final stages to see a delay in this. I just thought maybe you could go into this. Yeah. The characterization of where we are on that large project, I mean, I think everyone's pretty familiar. It's in North America. It's a multi-billion-dollar lump sum turnkey project, which is over 95% complete. And as we're driving to the end of it, there are always elements of a $16 billion project that need to be settled out. We have stated that the job is completing within management's expectations. But the quicker we can turn that facility over, the better opportunity there is for some improved results as we move through the project. We're not speaking from the standpoint of outside of management's expectations in terms of how we bid the project. But there are opportunities to get this job closed out in a way that could be more creative as the job concludes. And so we're working our way through the tail end of that. It's just a bit of a timing issue to make sure that we're able to kind of finalize the dates. You move a week here or there is not a big deal in the grand scheme of things. It is in terms of indirects and costs and how your contingencies are being allocated to support those. Fundamentally, we're right on schedule relative to management's expectations. We're seeing a slight slip in terms of delivery, but not out of the scope of what the client's expectations are. Are there milestones that you need to deliver to be able to recognize? It's handover. We've got gas. The flare started. We've introduced the coolant. We've got the first LNG tanker coming in mid-December. No, everything is a green light go to get it done. And we've said first half of or the first quarter of 2025. And that's well within the client's expectations of mid-2025. I think in terms of awards now for Energy Solutions, there's been a lot of talk about a second phase on that project. Are there other things that we should be kind of tracking from the outside as awards that we could be looking at either in fourth quarter in 2025 that are notable? For Energy Solutions. Energy Solutions segment. I think what we've stated on our previous earnings call is that we're kind of in a reloading stage in terms of some FEED activities. We're seeing good strength in chemicals, and we'll have a number of different opportunities there. We're seeing some in our Production and Fuels, but they're smaller type FEED activities. There is good strength not only through chemicals, but what's going on in Saudi Arabia. I know we had the, I think we talked about the Liquids-to-Chemicals program in Saudi. Aramco's come back to us and provided us some work to keep bridging. And that will be an opportunity moving forward. I think that'll fall out of the framework of 2024 and probably fall more into the 2025 time frame. But again, as the new administration comes in and their policies towards oil and gas could change slightly, our views moving forward. But we would see this as a reloading period here with a lot of FEED activity. And at the same time, and I think when we move into the Energy Solutions side where we see the growing opportunity slate over the next 12 to 18 months, it is the pivot of those resources in an efficient way so that we can capture that market share as we look out into 2025. Got it. Okay. Let's see. Where do we want to go next here? Cash flow. I want to talk about cash flow. So you just raised your guidance for, I think, the second or third consecutive quarter for the 2024 cash flow. You now are saying cash from ops around $700 million, which is far in excess of what your net income is for the year. Construction company cash flows, notoriously lumpy, super great for 2024. I'm going to start turning the page to 2025. Are there unusual things? Unusual. Are there large chunks either that need to go out the door for working capital or that could come in the door that could continue to keep your free cash flow or cash from operations above net income that we should be thinking about? No, I wouldn't suggest. I think we're going to get down into the 65%-70% OCF conversion. I think the work that's been done over the last four and a half years to clean up the cap structure and get all the overhang off the balance sheet, and with, I think, our fab yard as the last piece of this to work our way through, that we've created a structure that will be a lot more linear in terms of how our EBITDA is generated and what that looks like in terms of cash flow generation. Okay, so 65% to 75% is a conversion rate off of EBITDA. Off of EBITDA. Yeah. That's where we're headed. Okay. All right. And then a question from the audience is everyone's favorite topic, which is NuScale small modular reactor. They own a technology. They own half this company. And you've stated that you've wanted to exit this business and retain the ability to construct one of these small modular reactors in the future. And you've been negotiating with a strategic partner, just summarizing this all for background. And still no deal, I guess. And so the question is, the stock has gone up a lot. And does that change anyone's motivation either on your strategic partner's side or on your side to get something done sooner or later? I think we laid out on the phone call here recently that we are going to be doing something to capture value within 2025, the beginning of 2025. The term sheet that we have with the strategic expires at the end of January of 2025. But what I will say is over the two-year period, two-plus year period, it's been a journey to lock in kind of what their strategy was and is today. And what that's created is kind of an aperture to some value creation. They have aligned themselves with AI. It is a very good fit for their technology and providing carbon-free power. And I think that's being reflected in the stock price. And they're still trading 20 million shares a day, and you don't see the volatility in the pricing. So we were glad to continue. We invested in the company for 15 years. Now, the minute my lockup went out, am I going to transact all those shares and kill the very asset? And we didn't. We stuck with it. We worked our way through the strategic. There's been a better alignment of that strategy. And lo and behold, today we're sitting on a $3.3 billion asset as Fluor's ownership. And time is of the essence. And we have said that we are going to lock in value in a way that's accretive to Fluor and accretive to the SMR shareholder at the end of the day. Yeah. Interesting. Sounds like there could be a banker involved to hedge out your exposure there. Listen, I'll let you draw your own conclusions. I just. But yeah, I mean, yeah, I'll let you draw your own conclusions. But listen, the last thing we want to do is go in and pull the rug out from a company that has now finally got some traction and a strategy. It would seem self-destructive. From my seat, it's like you guys believed in the technology, invested in it, built it, and your endorsement, if you were to exit quickly, would be revoked, potentially seen by the market. You've got big endorsements from hyperscalers who say they want to build SMRs. Google, Amazon are now saying, "This is real," so you've got a lot of other endorsements besides yours, arguably more important ones because they're the actual customers that want to do the technology. Now, whether it's SMR or something else, that's another discussion, but there's an endorsement of the concept now. There's an endorsement of the concept. But the reason the concept is important to us is not only for the $3.2 billion that we have sitting off the balance sheet as an asset, but it's the future revenue stream and supporting the construction and development of these SMRs going forward. Yeah, absolutely. Okay. We're almost out of time. So I appreciate your time and sitting up here with us and coming back to our conference. We wish you the best of luck. Sure. Thank you. Great. Thank you. Appreciate it. Yep.